Permitted Cannabis Farmers Win Case Versus Humboldt County Yesterday

Silhouette of marijuana plant at sunrise

Silhouette of marijuana plant at sunrise. [Image from CanStockPhoto]

Please note: The reporter for this piece was previously an employee of Attorney Ed Denson, one of the attorneys representing the permitted cannabis farmers in this suit.

Cannabis farmers have been on the edge of their straw bales for nearly four years, twiddling their green thumbs, as they patiently waited for the final ruling in Humboldt County’s amendments to the Measure S lawsuit. Good news for farmers, on March 11, 2021, the California’s First District Court of Appeals ruled in their favor on all issues.

The tentative opinion made late February was upheld. It states, “A group of challengers, including respondent Karen Silva, sued [Humboldt] County to overturn the amendments, and the trial court agreed that the amendments had impermissibly broadened the scope of the tax.”

In November 2016, 64.5% of Humboldt County voters supported the Measure S cannabis cultivation excise tax of $1 per sq. ft. on outdoor, a $2 per sq. ft. tax on mixed light and a $3 per sq. ft. tax on indoor, with the money collected going to the County general fund.

The Board of Supervisors approved Humboldt County’s amendments to Measure S on June 6, 2017 and again on April 3, 2018, which the plaintiff’s attorneys, Eugene Denson and Fred Fletcher who were later joined by Appeal attorney Jay Moller, argued was “illegal” essentially because those changes required voter approval.

County voters, taxpayers, and marijuana advocacy organizations joined together wit farmers–some still in the permit process–in a lawsuit against the County for cultivation taxes paid, that they claimed were not owed based on the Measure’s original text.

In respondent Karen Silva’s case, she paid $40,000 in 2017 for having a permit to cultivate, even though she did not grow that year. Silva is not alone, there are multiple permit holders who did not cultivate but still paid the tax.

The county maintained the tax was on the permit, for “the right to do business,” [Listen to former Humboldt County Counsel Jeff Blanck at minute marker 1:10 Kmud News Story] not on cultivation itself. Then the County taxed farmers for having a permit based on the square foot of the cultivation area, instead of the individual plant canopies. The county also billed landowners instead of permit holders.

The three issues raised in the lawsuit’s appeal are
…whether the amendments impermissibly broadened the scope of the tax by
[1.] extending its reach from cultivators to property owners,…
[2.] by expanding the taxable property from areas actually “cultivated” to all areas “permitted” for cultivation, …
[and 3.] whether the amendments expanded the scope of the tax by changing the time when the taxes start to accrue.

The county’s argument was, “The Board’s amendments did not impermissibly alter Measure S but instead merely clarified some of the measure’s ambiguous terms.”

The court disagreed.

The County stated it was necessary to alter the Measure’s wording to “allow efficient administration of the tax and to prevent fraud by cultivators who underreport the area of their grows.” They added that “such fraud would be difficult to prevent in a sprawling, rural and forested county like Humboldt.”

However, Judge Neel said the County’s claims are “without support in the record.”

Humboldt County brought procedural arguments for the first time on appeal on issues including standing and exhaustive remedies, but the court found none to be persuasive. (The court had previously ruled in favor of the County on two other issues regarding whether taxes were owed biennially v. biannually, in addition to the requirement for Federal compliance to owe the tax. However, the plaintiffs did not cross appeal those matters.)

The court ruled in favor of Silva et al. on all matters saying,

…the amendments impermissibly increased the scope of the tax by expanding its application from those engaged in cultivation to all property owners subject to a cultivation permit, by expanding the taxable areas from those under cultivation to the entire area covered by the permit, and by expanding its application to people who have obtained a permit but may not have started to cultivate marijuana under that permit.

So what does this ruling mean for permitted cannabis farmers? Will they get their taxes returned that they did not owe based on the original Measure S wording ? Should farmers rush out to calculate the area of walkways and companion plant canopies?

The roll out for potential refunds and the exact implications of this decision are yet to be determined. The County still may attempt to defeat Judge Kelly L. Neel’s ruling by asking the Appeals Court to take a second look, and/or by appealing to the California Supreme Court. They have 40 days to act and if they don’t, then the ruling is final.

Attorney Eugene Denson further elaborates on what to expect, “If the County does appeal to the California Supreme Court it could be months before the court accepts or denies the appeal. So we still do not know if the new ruling is the final ruling, or whether the County will voluntarily refund the illegally collected taxes if they finally exhaust their judicial remedies.”

Appeal Attorney Jay Moller seems optimistic though, commenting on the decision, “It’s official. WE WON. This was a near frivolous appeal… there’s no chance of overturning this bullet-proof appellate decision with a petition for rehearing, petition for review in the CSC, or cert petition in the USSC…Ed and Fred did a good job and Judge Neel wrote an admirable decision. The County should be ashamed for wasting so much money on this litigation.”

Note: Regarding the original petitioners/plaintiffs– HUMMAP, the Humboldt Cannabis Taxpayers’ Association, and the Humboldt Voters’ Association–all three associations later stipulated to dismissal from the action without prejudice.

Earlier: Judge Decides Lawsuit Over Measure S, the Humboldt County Cannabis Tax

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63 Comments
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Brown Shirt Bandejo
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Brown Shirt Bandejo
3 years ago

“The County should be ashamed for wasting so much money on this litigation.”

Why does it take so long to keep bad government in check?

Connie Dobbs
Guest
Connie Dobbs
3 years ago

They win by cheating and then rewrite the rules in their favor. Next question.

Third World County
Guest
Third World County
3 years ago
Reply to  Connie Dobbs

I”ll bet they appeal the ruling, they always do. They will spend our tax dollars fighting a policy any good attorney would have told them was illegal. We don’t have the brightest bulbs running the County making decisions.

VMG
Guest
VMG
3 years ago

Hey, Rex and Michelle are “small family farmers”, and there’s no advantage to being the County Supervisor, is there?

Corruption, Nepotism, Incompetence… The Holy Trinity of the North State!

AND:

By the time they straighten all this out, the new Greenhouse Farms sprouting everywhere else in California, from Kelseyville to King City and on down to Ventura and Oxnard will have taken over the Commercial business, and probably a large amount of the Pirate Market…

We hope that Humboldt, the biggest producer in the history of the entire universe, won’t be swept under the carpet of history, and completely forgotten, and man, I feel stupid because I don’t have a pot farm!

Did anyone else notice this!?
Guest
Did anyone else notice this!?
3 years ago

So what’s up with the adjusted excIse tax for the Consumer Price Index? It really isn’t $1.00 or $2.00 a square ft, but now about $1.10, $2.20. Did we vote on that? The CPI is usually used to adjust for PAYMENTS like pensions or other benefits, when you are having to spend on goods like food and fuel. Seems like growers have to spend along with inflation, and the price of weed doesn’t go up with the CPI, so…Ed, did I miss this in the language?

ED
Guest
ED
3 years ago

Yes.

Did anyone else notice this!?
Guest
Did anyone else notice this!?
3 years ago
Reply to  ED

Whoops ok there it is. Legal, but shitty. Well so just remember that everyone else! It isn’t really $1,2, or 3! It’s more. Maybe a good reason for an amendment.

Any lasts? Hmu
Guest
Any lasts? Hmu
3 years ago

Ooh that’s going to hurt if they are on the hook to return those payments.
Fu🏁 em.
Crooks.
All.

Thugs with Offices and Badges Nothing Else
Guest
Thugs with Offices and Badges Nothing Else
3 years ago

The Corporation of Humboldt County is inherently corrupt, a band of thieving, discriminating, racist, extortionists, violent, gun yielding, criminal organization which uses guns intimidation threats of violence and the strong arm of the “law” to accomplish their bully thuggish agenda of enforcing their rules by threat of violence against you and me. A more corrupt, disgusting and mentally deranged group of thuggish gangsters as exists within the ranks and files of employees of Humboldt County does not exist.
Thugs with Offices and Badges Nothing Else. A thug thief and bully is just a thug thief and bully. Nothing more

glen
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glen
3 years ago

I’m liking your style, here.

Canyon oak
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Canyon oak
3 years ago

Growers suck

Anonymous Humboldtian
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Anonymous Humboldtian
3 years ago
Reply to  Canyon oak

The county employees and officials suck.

J
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J
3 years ago

Where is the money really going?

seriously
Guest
seriously
3 years ago
Reply to  J

Best question that is not addressed anywhere here!

Puest
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Puest
3 years ago

The County should be ashamed for a LOT of things besides this, but sadly they are NOT!!!

For sure
Guest
For sure
3 years ago

In the current CLMP interview with John Ford (The Independent), he states that, concerning 2021 Abatements, they will be using their satellite imagery to go over every property, road by road, looking deeply at both permitted and unpermitted activity. It implies that they won’t just be looking at cannabis, but anything they can glean to be unpermitted, and either taxable or fineable. (Here we go again, folks!)
This is in advance of the Safe Homes Act, where they want everyone to get retroactive permits for every improvement they have made on their property over the years. This county seems more interested in punitive measures rather than supportive measures.

Notheone
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Notheone
3 years ago
Reply to  For sure

For Sure,
You are so right. I’m sick of this crap from the County.

Redwood Dan
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Redwood Dan
3 years ago
Reply to  For sure

Way to go Ed!!!
I think the Safe Homes Act 5 year grace period to get bulidings permitted without penalty fees is over at the end of 2022. Looks like the county is quietly waiting for that timeframe to expire so they can drop the hammer on every one.
Ed has been telling farmers to write “Paid in protest” on the tax invoice when they pay. I wonder if the county will have to refund everyone or just those who took Ed’s advice?

ED
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ED
3 years ago
Reply to  Redwood Dan

We believe everybody who was illegally taxed will get a refund, but haven’t delved deeply into the law yet.

Fndrbndr
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Fndrbndr
3 years ago
Reply to  For sure

Can you give a link to the article in the independent?

Guest
Guest
Guest
3 years ago
Reply to  For sure

This is a very serious and big issue coming towards us. When they take the satellite off of plants and apply it to all homes, barns, sheds, irregardless of cannabis this will be a Repeat of the code enforcement wars of the eighties, 90’s, and 2007-8. Please remember, an over-zealous planning department with 6 code enforcement officers and Fine happy is already established. Here we go again.

Scooter
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Scooter
3 years ago
Reply to  For sure

I have paid taxes on an unpermitted/off grid home for 40 years. Let them try to red tag me. I will sue for every penny of tax the HCTC has collected, then I will get mean.

Joshua Allen,
Guest
Joshua Allen,
3 years ago
Reply to  For sure

Local government has the most impact on personal livelihoods and is the most important to be involved compared to state or national. But only 20% of the local electorate bother voting. You get the government you deserve.

The supervisors are responsible for representation, setting policy, and oversight of government administration. They appoint the administrators of the government, such as CAO Amy Nielson who is not qualified for that position nor does she understand how to run local government correctly, John Ford who’s an authoritarian that oversteps his bounds constantly while moving the goalposts and making it easy for the good ol boys to get theirs, and self-appointed unelected Sheriff Hansol who acts like he’s above the law. You get the government you deserve.

Humboldt county is a race to the bottom. Any good people in government get pushed out have their careers ruined on top of the low wages they receive just working for Humboldt. That is the fault of the good old boys because the electorate voted them in and allow them to continue their corruption. You get the government you deserve.

DawnI
Guest
DawnI
3 years ago
Reply to  For sure

Re: Humboldt Environmental Impact Reduction) (HEIR) Team Abatement/compliance cases per the latest CLMP newsletter states there are a total of 972 cases.
Broken down by County Distriscts = District 1 = 97 cases. District 2 (SoHumb) = 709 cases; District 3 = 21 cases; District 4 = 0 cases (interesting!); District 5 = 147 cases which means most of the abatement money has been collected from SoHumb.
According to the report quoted, $3.8 million has been collected from abatement comliance agreements (at the time of the report July 14. 2020).
All the $$ collected from those agreements has been plowed into the General Fund which means the county decides how they want to use the money.
Look round Sountern Humboldt where a large portion of that money came from. Small businesses struggeling and infrastructures in bad shape. County government needs to be kept being accountable for more than the misdeed of the Measure S bondoggle. At the very least we need to get loudly vocal with the BOS that spending any more of the people’s money on fighting this issue is not in the county’s residents interest.

I like stars
Guest
I like stars
3 years ago
Reply to  DawnI

I agree with Dawnl.

It’s like being sent to cut your own switch for a whipping.

Meanwhile, I still can’t redeem my CRV items.

Brown Shirt Bandejo
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Brown Shirt Bandejo
3 years ago
Reply to  DawnI

This is simply the way unaccountable bureaucracy has operated for a very long time.

Nan
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Nan
3 years ago
Reply to  DawnI

that is outrageous! We need this information PLASTERED everywhere and get oversite into where this money is actually going!

Gazoo
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Gazoo
3 years ago

We the people.
Glad to hear this. The county has a habit of making the rules as they go, hope the people get their taxed monies back and some. You know like interest, it wasn’t their fault and need to be compensated as such.

pepperwood
Guest
pepperwood
3 years ago

We could have paved every county road with the money the county has lost in lawsuits.

Shame on county council

Pharmstheproblem
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Pharmstheproblem
3 years ago
Reply to  pepperwood

Right, what gives them the right to use our tax money to fight us with…. Disgusting.

Brown Shirt Bandejo
Guest
Brown Shirt Bandejo
3 years ago

Consent

Fndrbndr
Guest
Fndrbndr
3 years ago

This is a question for ED
I received a fine based on square footage while in the permitting process. I measured the actual canopy and it came out to be one tenth of the actual fined footage. Does this ruling apply to me?

ED Denson
Guest
ED Denson
3 years ago
Reply to  Fndrbndr

No, but that doesn’t mean you don’t have a case for a refund. The ruling applies only to taxes collected from the wrong people or in the wrong amount.

Concerned
Guest
Concerned
3 years ago
Reply to  ED Denson

I have a question as well. I am the cultivator and farm owner. I paid the taxes and have ever since I received my license. We were issued our licence in September of 2017 but still had to pay even though no cultivation had occured. The property owner signed up with your lawsuit but did not pay any of the taxes. How do I get my taxes back?

ED
Guest
ED
3 years ago
Reply to  Concerned

First the Courts decision in the case have to become final – there is a certain amount of time given to losers to appeal the decision. If I understood Jay Moller correctly the County might ask for a rehearing in the Appeals court, or ask the California Supreme Court to hear the case. I think they have 40 days to do it. The case could become final sooner if we reach a settlement agreement with them.

I go thru all this by way of explaining that no one is liable to get a tax refund while the case remains unresolved. Suppose the CSC took the case and reversed the Appeals decision? Then the taxes would be legal and they’d have to ask for the refund back.

HOJ in Training
Guest
HOJ in Training
3 years ago
Reply to  ED Denson

Mr. Denson,

Should/can we revoke our abatement agreements with the County, and tell those a-holes they no longer have permission to search our properties? I feel it is in the best interest of all growers to defy their abatement agreements and force this into the court system. I believe if everyone did this, the system would be so overloaded that we could possibly blow out the grows for 2 years or more before the case might be litigated, which would mean huge winfalls for so many growers!

I say fuck Humboldt County ‘s bullshit taxation laws and let’s all screw the court system to the point of shutdown!

I’m almost ready to go with over 2k babies. It’s time to make these DTF a-holes work their fucking asses off and still not put a dent into our possible yields!

Who’s with me?

Fndrbndr
Guest
Fndrbndr
3 years ago

Thanks ED
Are the farms that paid taxes for dirt in-between the plants due a refund? They would probably have to open a new case against the county. This may just increase your business. Thanks again for going the distance.

Sunshine
Guest
Sunshine
3 years ago

If the County can and has been using satellite photos to permit and look at permitted properties, then how can the counties main argument be that they need to tax the entire cultivation area permitted, not the actual cultivation area is because of concern for fraud from cultivators underreporting their grows and then them not being able to tax you enough? They either can or can not see your property, and they can!! Satellite photos of the permitted property is part of the process. That is also how they can see if you had done something like illegal grading, they present satellite imagery as evidence. Let’s start not making it so difficult to grow marijuana and have the county admit that the industry is totally overregulated. They should be accountable for overcharging and stressing people out with their increased demands for $$$! We should be an example of how to do things regarding cannabis not an embarrassment!! I agree that how punitive the County is also ridiculous. Please raise your voice to the Board of Supervisors and our representatives in the state that things are not going so well for cannabis farmers in the biggest and most well respected cannabis producing area in the world!!

Fndrbndr
Guest
Fndrbndr
3 years ago
Reply to  Sunshine

Most who have raised voices have been blackballed.

Joshua Allen
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Joshua Allen
3 years ago
Reply to  Fndrbndr

Word. Don’t forget ruined careers of those who get into Humboldt government to do the right thing get chased out by bad apples. But you guys keep voting in those dumbasses like Rex who only there for their own self-benefit.

Kym Kemp
Admin
3 years ago
Reply to  Sunshine

This Sunshine is not the Sunshine Johnston, Dry Farmer. That Sunshine is a friend and the person commenting did not use her correct contact info so I asked Sunshine Johnston and she confirmed she didn’t write the comment.

Sunshine is however a relatively common nickname and so I won’t disallow it’s use. I just wanted to clarify that this commenter is not the well-known cannabis farmer of the same name.

Perspective
Guest
Perspective
3 years ago

Checking permitted farms as well?? What a joke. I’ll leave it at that. Maybe this year the permitted shit growers will stop pulling water from the creeks, respect their neighbors and pay for the road they tear up.

I like stars
Guest
I like stars
3 years ago
Reply to  Perspective

But they almost certainly won’t, because they don’t have to.

Concerned
Guest
Concerned
3 years ago
Reply to  Perspective

We do not pull water from creek, add gravel to road every year, grow companion plants, encourage beneficial insect populations,bioremediate with mycelium, and are planting wild life hedges to feed birds and create habitat. I also donate vegetables, veggie starts,and help people develop their own gardens. Local cannabis farmers are employing people during this pandemic in a job where you can still maintain social distance and the minimum payment is 15 an hour with staffing companies. What do you do in town to make a difference for the future? This kind of blanket statement and ingnorance is why this crop is being over regulated and is actually encouraging large corporate Ag who can literally bypass the regulations with $$$ and are far more detremental to our environment and resilience of our local economy.

Third World County
Guest
Third World County
3 years ago
Reply to  Perspective

One permitted local farmer said to me“Once you are permitted there is absolutely no oversight they haven’t been back.”his place was really clean but I was just at one that had mounds of trash thousands of old soil bags piled high and a very nice looking diesel spill leaking outside the containment. The owner lives out of the area and could care less. All of the boxes were checked and they can now tax them, good to go with no oversight.

Predictably
Guest
Predictably
3 years ago

Absolutely ,my experience has been it is up to the Local residents to hold out of state corporations accountable ! Not to mention the local bad apples . The tax is the only thing the county cares to actually keep an eye on LOL.
.
Congratulations Ed et al.

Dave Sky
Guest
Dave Sky
3 years ago

Congratulations Ed!!! Well done!

JB
Guest
JB
3 years ago

It’s still astonishing to me how many municipalities (most?) have a local cannabis tax structure that is incompatible with the State method.

I’m not defending the State method as the best one, just that it was mandated before any municipality got involved so it could have been copied. Cultivators having to report 2 different canopy sizes (one State and one local) because the measurement requirements are different is just time consuming nonsense for all.

It should be like your State income tax return where it’s based on your Federal return. In this case, it should be based on the canopy area as measured by the State.

Just one of my many peeves with the regulatory/tax structure(s) in use across the State.

Fndrbndr
Guest
Fndrbndr
3 years ago
Reply to  JB

There are actually a few examples of cultivation areas in Humboldt being changed to reflect the state guidelines.
The problem I have been told is the difficulty when satellite imagery is used to determine sqft. If you have random placement of plants it’s a nightmare for the PD to use their measurement tool for each individual plant and crosscheck against permitted square footage.
State says 10′ in-between planted areas with definable rows, fences or walkways. Humboldt planning has accepted the state guidelines in a few instances. ie, if outdoor; put plants in rows with 10′ spacing between rows, if greenhouse; use beds. The walkways in-between rows and beds will not be calculated as your allowed footage.
Think of it like fruit orchards. Rows planted east to west. Stagger the next row to allow light to pass between rows. It’s a proven way to increase yield. Our plants are 8′ apart rows facing south, plants staggered to adjacent rows, rows 10′ apart. A south facing slope is best as rows will be more exposed to light.

Jeffersonian
Guest
Jeffersonian
3 years ago

The state dumped the regulation and taxation issue on the counties. And that set the stage for the various drones and supervisors to craft an unintelligible set of arcane rules. The counties want your money so they can finance their fat PERS retirement pensions. They are not friends of the taxpayers. The sales tax fraud is another example of their conduct. Have your roads improved. I know mine havent.

JB
Guest
JB
3 years ago
Reply to  Jeffersonian

The State dumped no such thing on the counties. There is a State cultivation tax and a State retail excise tax. There are State mandated regulations. These have literally zero to do with the local municipalities.

The local entities were given the *option* to add local taxes and regulations on top of the State taxes and Regs. There was absolutely NO requirement from the State that the locals add these layers.

All that was required of the locals by the State was to answer “Yes” when asked if the State applicant had local permission to operate in the cannabis space. Nothing more. If not for the CUP process, etc. CEQA would not have even been invoked at the local level (the state would have become the lead agency in that case).

Jeffersonian
Guest
Jeffersonian
3 years ago
Reply to  JB

That’s my point. The state gave the counties the option. Big mistake.

JB
Guest
JB
3 years ago
Reply to  Jeffersonian

Ok, what you’re saying is the local municipalities should have not been given the ability to fiddle. We agree. However, even the State didn’t have this option as 64 mandated it.

Voter initiatives have positives, but wow … they can also suck. 64 is a perfect example of the voters being sold something far too complicated for the average uninvolved voter to understand.

Treebones
Guest
Treebones
3 years ago

Trinity County taxes pounds sold using METRC as the basis for determination. Trinity County Agriculture Association was able to fight off other types of taxes and got theirs enacted. Tax rates are also tiered based on poundage sold. Way simpler and fairer than canopy size.

Fndrbndr
Guest
Fndrbndr
3 years ago
Reply to  Treebones

I agree. Tax product not farmed area as everyone has different yields. The best way would be to tax revenue just like everything else. The counties taxing sqft have a much harder time regulating. You would think this would have been recognized when the ordinances were drafted.

commenter
Guest
commenter
3 years ago

Congrats Ed.
This gives us a picture of how government, and maybe life, works:
They can do anything, say anything, change anything, even illegally, and if there
isn’t a watchdog or interested party like Mr Denson to push back, legally push back, then they will get away with it.
Very cynical, makes ya wonder what else they’re getting away with.
Once again, Good Job Ed and associates.

Work for my money
Guest
Work for my money
3 years ago

Fuck growers. They are all still pulling in cash under the table. Pieces of shit. They have ruined communities such as willowcreek etc.

Brown Shirt Bandejo
Guest
Brown Shirt Bandejo
3 years ago

I don’t think you can blame people who don’t think they have effective representation or options in a rigged landscape. Growers recognize that human nature lends itself to the wheels getting greased, roll the smoothest….all the way to the top of the food chain and back your lil podunk hole In the wall, backwoods town.

Jeffersonian
Guest
Jeffersonian
3 years ago

There is no question pot growing has ruined Humboldt county. It’s no longer a peaceful place and the environment has suffered greatly, arguably as much as done by the post war logging.

Local Farmer
Guest
Local Farmer
3 years ago
Reply to  Jeffersonian

An assertion that would be argued and questioned by any unbigoted and intelligent person.

Change.org
Guest
Change.org
3 years ago

Its bizarre to me that the people of humboldt just keep voting the same ignorant way again and again. At least southern humboldt barely smartened up !!!! But middle humboldt is stuck in sheep lovin mode for sure !!!!!

Smallfry
Guest
Smallfry
3 years ago

Big win! Congrats! It’s very disingenuous of the county. Its a good thing to be able to supply the county with some tax revenue on a reasonable scale. But the tax scheme the county has cooked up is outrageous. Same with the abatement scheme. It’s absolutely disingenuous. The only reason they want to tax sq ft is so they can justify their satellite spying technology.

Stephen Millard
Guest
Stephen Millard
2 years ago

Congrats to ED et al! But we always knew the story of Humboldt weed would be full of contradictory twists and turns, almost surreal, and hopefully eventually even humorous when seen from enough distance. I think we expect too much from elected officials. They have fucked up, but we growers are in no position to claim the moral high ground. Cheers!