Mendocino County Board of Supervisors Approved an Ordinance to Slash Cannabis Taxes

The Mendocino County Board of Supervisors approved an ordinance to slash cannabis taxes, enroll delinquent taxpayers in a payment plan, and offer amnesty on penalties and interest. The minimum cultivation tax of 2.5% will be cut in half for this year and next year.

There is no way of knowing at this time how many people will take the county up on its offer, but cannabis advocates spoke during last week’s regular Board of Supervisors meeting to thank Supervisor Maureen Mulheren for crafting the plan.

Two hundred seventy-nine applicants have been deprioritized, or sent to the back of the permit processing line, most of them for not paying taxes, though many complain that they have been wrongly deprioritized. Mulheren estimated that if the growers who have stopped paying taxes return to the program, the county could recoup over $4 million. She addressed the greater impacts to the economy that she believes the measure will have.

“Because of the way that our ordinance is written, if some Phase I farmers don’t get through their local and state licensing, those properties would no longer be able to cultivate cannabis,” she said. “They are allowed to cultivate because they had historically used it for that purpose…the intention of this item is to be able to keep operators in a legal, regulated market and keep those properties within our system for property tax and cannabis business tax, and TOT (Transient Occupancy Tax) and every other thing that cannabis contributes to this community.”

The item did not contemplate refunds to those who have already paid their penalties and interest. Some commenters said they would rather see the tax based on gross receipts than the current system of square footage, saying cannabis farmers are taxed more onerously than other farmers. Growers frequently complain that they have to pay taxes on products they have been unable to sell, or that were destroyed, or never grown at all for various reasons. Mulheren signaled that, with the state offering to help streamline applications, a lot of changes are possible.

“Yes, we may have a reduced tax,” she acknowledged. “We may have more tax than we would have gotten otherwise. It is a bit of a gamble, but that two years of time would give the cultivators a little bit of breathing room, and it would give us some breathing room to figure out what we need to do moving forward. If the department still exists, if it exists in a smaller form, we don’t really know that right now. So I think that this is a more urgent need and we can certainly work on more renovations to the tax code at a later date.”

The Board voted 4-1, with Supervisor Ted Williams dissenting, to pass the new ordinance.

Property Tax

Before taking up the cannabis item, the Board learned that the county has failed to collect over a million dollars in property taxes.

A software system called Aumentum, which was supposed to be implemented two years ago, has not improved the efficiency of any of the departments that are supposed to be assessing and collecting taxes. Williams also flagged a projected loss of $311,000 in supplemental taxes, which is the difference between the new value and the old value of a property that has changed hands or been improved.

CEO Darcie Antle said collections have been spotty, going back to 2015. She reported that the $311,000 was from property tax settlements that were not collected this year. Last year, she said, “There was no collection of this as well,” due to the implementation of the property tax system and “some functionality within the elected offices of Auditor-Controller, Treasurer-Tax Collector and Assessor.” She said her team was unable to tell the Supervisors if all of the $311,000 would “fall off,” or be uncollectible, but there is a four-year period to collect the settlements. Williams asked her if any tax revenue has fallen off to date, and she replied that, “To our knowledge, it is $1.2 million, and it is for assessed years 2015-2017.” That is well before the implementation date of the Aumentum system.

IT Division Manager Tony Rakes said the supplemental bills were deferred until the new system could be implemented. But nothing seems to have gone the way it was supposed to. He told the Board that as soon as the county tried to bring the system online in early 2021, “It was very quickly discovered that between data inconsistencies and conversion errors and overall function of the system, that we couldn’t process those effectively and make sure the data was accurate.”

Auditor-Controller Treasurer-Tax Collector Chamisse Cubbison was more blunt, saying that Aumentum “made some very incorrect assumptions on how some of our data should be converted, and they kind of made a mess of some of our bills. We weren’t really able to process corrections until they were able to straighten them out. They actually took bills that were separate bills and combined them. Some of them were paid, some of them weren’t paid…unfortunately, it took us about a year and a half to get them to deal with that balancing project.”

Assessor Clerk Recorder Katrina Bartolomie added her staff was also “very frustrated with Aumentum,” partly because implementation kicked off during the pandemic, while her department was severely understaffed. Though she said the Aumentum vendor has been “very helpful,” sending teams to her office to help make corrections multiple times, she has had difficulties using the software to calculate the tax for properties under the Williamson Act, which offers landowners a tax break if they keep their property within strict guidelines for agricultural use. “We start working it, and Aumentum for some reason flips the improvement with the land value,” she told the Board. She sorted out that problem with a phone call, but her impression of the system is that, “It just seems like no matter what we do, we hit a brick wall, and then we have to back up.”

Rakes said that on February 6, his department launched a plan to “break through the backlog” by June 30th of this year, which is the deadline to collect taxes from 2018. If the bills don’t go out by the end of the fiscal year, those taxes will be uncollectible. Supervisor Dan Gjerde summarized the situation by saying, “The bills can go out by June 30, but because people may take more than 60 days to submit the bills, it won’t be accrued to this year’s budget. But that doesn’t mean we won’t get the money.”

Cubbison told him, “It’s likely they’ll pay;” but when Williams asked her if there was a chance they wouldn’t pay, she told him, “I’d say there’s always a chance.” If Aumentum is still not working by June 30, she said, “I think we have to look at the analysis that hopefully they’re able to provide us, and prioritize what we can.”

Bartolomie shared another strategy. “My staff is so tired, and so worn out,” she told the Board. “They’re doing everything they can to bring this forward. So we’re hoping and praying that we can go on.”