From Grow Houses to Heat Pumps: Arcata Considers Repealing a Tax Born in the Marijuana Boom

Buds of marijuana grown indoors. [Photo by Kym Kemp]

At the June 3 Arcata City Council meeting, councilmembers discussed the future of Measure I, the city’s Excessive Electricity Use Tax, which was approved by voters in 2012 and took effect in 2013. Originally sold as a way to curb indoor cannabis cultivation, reduce fire risks, free up housing, and lower community energy consumption, the tax now finds itself in an entirely different economic and cultural landscape.

Councilmember Stacy Atkins-Salazar noted that concerns about the tax may now be working against efforts to encourage electrification. “[T]here…is kind of a notion that’s circulating out there, whether it be true or not, people might be hesitant to move towards electrification,” she said.

The council directed staff to seek input from the city’s Energy Committee before making any recommendation on repeal. Councilmember Alexandra Stillman recalled former Councilmember Michael Winkler’s role in championing the measure.

“Michael Winkler is still on the energy committee, and it would be interesting to get his thoughts on that because that was his big, big push,” Stillman said. “I was on the council with him when that happened.”

Then came a remark that neatly summarized an era many Humboldt residents remember well.

“A lot of people too were making enough money that they didn’t care they had to pay 45% tax too,” Sarah Schaefer added. “I think I knew some of those folks.”

In Humboldt, a lot of us knew some of those folks…

Today, that issue can seem amusing and nostalgic, but in 2013, there was far less humor attached to the issue and a lot more rage.

At the time, Arcata officials openly acknowledged that indoor marijuana cultivation was a primary target of the tax. The measure imposed a 45 percent surcharge on residential electricity consumption exceeding 600 percent of baseline usage,  roughly equivalent to the power used by three average homes.

Then-Councilmember Michael Winkler, who is currently on Arcata’s Energy Committee, was blunt about the intent.

“If people are doing this illegal activity, and that’s what’s causing them to have higher energy use, I would like to see them shut down their operations in Arcata and leave, because this is illegal and it’s undesirable,” Winkler told the Fort Bragg Advocate-News in 2013.

In the same article, former Arcata City Manager Randy Mendosa said the city hoped the tax would reduce indoor grow operations, free up housing stock, and improve neighborhood safety.

“If it’s successful, it will go down to zero and eliminate the problem,” Mendosa said at the time.

The concerns were not imagined. Throughout the 2000s, Humboldt County cities grappled with a surge in indoor cultivation. Grow houses consumed enormous amounts of electricity, altered homes with dangerous wiring modifications, and were frequently blamed for fires, mold, neighborhood deterioration, and housing shortages. Neighborhood residents who’d had no issue with the occasional grow house here and there were alarmed to experience near-total takeovers of some residential blocks. And with the grow houses came vehicles coming and going at all hours, unkempt yards, and unfriendly residents with large dogs.A 2009 research project by Eureka Fire Department Battalion Chief Christopher Jelinek described indoor marijuana cultivation as a growing fire hazard throughout Humboldt County. The study found residential grow operations often overloaded electrical systems and created significant fire risks. It cited estimates that roughly 1,000 of Arcata’s 7,500 residences were being used for indoor cultivation and noted that homes containing indoor grows were estimated to be 24 times more likely to experience a fire.

The report also captured complaints that became common during the height of Humboldt’s indoor growing era: neighborhoods “going dark,” homes converted into commercial cultivation sites, increased crime concerns, and soaring rents driven by growers willing to pay premium prices.

Back then, a 45 percent electricity tax was viewed by many residents as a reasonable tool for addressing what they saw as a community crisis. The idea was to take cannabis cultivation out of the law enforcement domain and temper its excesses via land use regulation. The alternative approach was applauded by police, who were able to devote their resources elsewhere. 

Today, Arcata’s challenge looks very different.

The cannabis industry that once fueled Humboldt County’s economy has largely collapsed under the weight of legalization, oversupply, taxation, and falling wholesale prices. Many former cultivation sites sit vacant. Arcata’s once-promising Cannabis Innovation Zone, meticulously crafted by planners to help Arcata take part in the cannabis boom, flopped. Entire communities that once depended on cannabis income are struggling economically. Property values in some cannabis-dependent areas have fallen, and tax revenues tied to the industry have declined.

Meanwhile, state and local governments are increasingly encouraging residents to switch from fossil fuels to electric appliances, electric vehicles, and heat pumps — all of which increase household electricity consumption.

That shift has created an irony that likely would have seemed unimaginable when Measure I was passed.

A tax originally designed to discourage unusually high electricity use may now be perceived as discouraging exactly the kind of electrification that current climate policy seeks to promote.

No decision has been made. The Arcata Energy Committee is expected to review the issue and return with recommendations following its June 15 meeting.

But the discussion offered a snapshot of how dramatically Humboldt County has changed. Eight years ago, city leaders worried about houses consuming enough power to grow marijuana.

Today, they’re worried residents might hesitate to install a heat pump because they’re afraid of getting taxed. Back then, city leaders were trying to stop people from using industrial amounts of electricity to grow cannabis in part for environmental reasons.

Today, they’re trying to convince people to use more electricity to save the planet.

And more ironically still, in the marijuana boom years, people used large amounts of electricity to grow fortunes. Now Arcata is debating whether a tax created to stop them still makes sense in a county where many of those fortunes have long since disappeared.