Arcata Collects First Grow House Taxes (Updated)

A grow rom ablaze with lights.

A grow room ablaze with lights.

Kevin L. Hoover
Mad River Union

ARCATA – The City of Arcata has received its first payment from PG&E of monies collected under the Excessive Energy Use Tax. It’s a lot less than expected.

For the October, 2013 billing cycle, just 96 of Arcata’s roughly 9,500 residential meters qualified for the tax, resulting in a 45 percent surcharge on those residences’ electricity bills and a payment of $50,159 to the City from PG&E.

The 2011 figures on which the tax’s financial projections were based tallied 633 households using excessive electricity, defined as three times normal residential use. The current number of homes in that category – presumed to be mostly cannabis grow houses – is less than one-sixth the 2011 figure.

Still, those homes are responsible for some 366,972 kilowatt hours of electricity use, an average of 3,833 kw/h per household. PG&E lists average residential household energy use as 963 kw/h in 2009, less than one-fourth the rate of the high users.

The tax was passed as Measure I in November, 2012 by a two-to-one majority of Arcata voters. It’s not clear whether the impending tax or cannabis market factors caused the decline in electricity superusers.

APD Det. Sgt. Todd Dokweiler said the Special Services Unit which he heads up, and which tracks illegal grow houses, has been receiving far fewer tips and complaints in recent months.

Other City officials were happy to declare victory in flushing out the neighborhood nuisances and getting Arcata’s Greenhouse Gas Reduction goals back on track.

“It’s safe to say that is has had the intended consequence,” said Mayor Mark Wheetley.

“It’s been a huge success in reducing electricity use in the residential sector,” said Karen Diemer, deputy director of Environmental Services.

That success comes at a price – the potentially prolonged recouping of the $650,000 the City expects to be billed by PG&E for implementation of the tax.

The utility took 11 months from the time Arcata voters passed the tax to incorporating it into its billing system – a source of frustration over lost revenue for City officials.

It would take 13 months for Arcata to break even at the October rate, but it will probably take longer. The City expects the tax to continue to drive more excessive energy users out of town over time, which will further reduce tax revenue.

“We were very conservative in our approach of discussing one to two years,” Diemer said of the expected reimbursement period. “Over 12 to 18 months, we’re still on course for recouping the costs of implementation.”

“I recommend against extrapolation from one data point,  no matter what the issue or analysis being looked at,” cautioned Environmental Services Director Mark Andre. “We will be developing FY 2014-15 budgets and looking at revenues this spring. A one-month dataset is not something I am going to be concerned with.”

He suggested that the first month’s numbers may not represent the ongoing picture.

“I have no idea if there is a seasonal flux to the high energy use in Arcata and also no idea if there are more residential meters now between 400 to 599 percent of baseline,” Andre said. “It is the total electricity use of Arcata that matters in terms of greenhouse gas impacts.”

Wheetley wonders whether the City should have waited to implement the tax in order to share implementation costs with other cities, suggesting it may have been rushed to be part of the 2012 election in which three other City Councilmembers were running for re-election.

“City Councilmember Michael Winkler, an energy conservation specialist, said Measure I’s placement on the 2012 ballot helped its chances of getting passed. “It was an election year opportunity to get the message out to people,” he said. “In an off-year [non-presidential] election, people would be more resistant to taxes.”

He is surprised and a little skeptical by what is apparently more than a five-sixths reduction in the number of indoor grows in Arcata. “I don’t have a control group, but it’s hard to believe we’d have that substantial a reduction,” Winkler said. “I expected that we’d have a considerably smaller reduction that would take longer.”

He says that the 45 percent tax surcharge made the decision to leave Arcata a simple matter of economics. “Basically people in this [cannabis] business are businesspeople who are in it for a profit,” Winkler said. “What we’ve done is changed the economics.”

Now, concerned about the Arcata tax driving growers into their communities, other entities such as the City of Eureka and County of Humboldt are  considering a tax similar to Arcata’s. Those areas could pay a much lower implementation rate, since Arcata will have paid for PG&E’s new billing system to be set up.

“We could have brought other cities into the fold,” Wheetley said. “Everyone else gets the benefit of the groundwork we laid here.”

Pragmatic Winkler doesn’t blame them. “If I were Eureka, I wouldn’t pay any more than I have to,” he said. He hopes other area communities do adopt something similar. “I also wanted to see this as an example to other portions of the county, so we aren’t just shifting the problem,” he said.

Still, PG&E has not yet billed the City for calculating and collecting the Excessive Energy Use Tax, and Wheetley holds out hope that the entire burden won’t fall on Arcata.

“I was hoping that PG&E could develop some equitable repayment plan now that this is playing out the way it is,” he said. Wheetley hopes the initialization costs of what may prove to be a popular program can be “spread out among other cities.”

 

Note: Below is last week’s originally posted story, since expanded above. – Ed.

Kevin L. Hoover
Mad River Union

ARCATA – The City of Arcata has received its first payment from PG&E of monies collected under the Excessive Energy Use Tax. It’s a lot less than expected.

For the October, 2013 billing cycle, just 96 of Arcata’s roughly 9,500 residential meters qualified for the tax, resulting in a 45 percent surcharge on those residences’ electricity bills and a payment of $50,159 to the City from PG&E.

The 2011 figures on which the tax’s financial projections were based tallied 633 households using excessive electricity, defined as three times normal residential use. The current number of homes in that category – presumed to be mostly cannabis grow houses – is less than one-sixth the 2011 figure.

Still, those homes are responsible for some 366,972 kilowatt hours of electricity use, an average of 3,833 kw/h per household. PG&E lists average residential household energy use as 963 kw/h in 2009, less than one-fourth the rate of the high users.

The tax was passed as Measure I in November, 2012 by a two-to-one majority of Arcata voters. It’s not clear whether the impending tax or cannabis market factors caused the decline in electricity superusers, but City officials were happy to declare victory in flushing out the neighborhood nuisances and getting Arcata’s Greenhouse Gas Reduction goals back on track.

“It’s safe to say that is has had the intended consequence,” said Mayor Mark Wheetley.

“It’s been a huge success in reducing electricity use in the residential sector,” said Karen Diemer, deputy director of Environmental Services.

That success comes at a price – the prolonged recouping of the $650,000 the City expects to be billed by PG&E for implementation of the tax. The utility took 11 months from the time Arcata voters passed the tax to incorporating it into its billing system – a source of frustration over lost revenue for City officials.

It would take 13 months for Arcata to break even at the October rate, but it will probably take longer. The City expects the tax to continue to drive more excessive energy users out of town over time, which will further reduce tax revenue.

“We were very conservative in our approach of discussing one to two years,” Diemer said of the expected reimbursement period. “Over 12 to 18 months, we’re still on course for recouping the costs of implementation.”

Wheetley now wonders whether the City should have waited to implement the tax in order to share implementation costs with other cities, suggesting it may have been rushed to be part of the 2012 election in which three other City Councilmembers were running for re-election.

Now, concerned about the Arcata tax driving growers into their communities, other entities such as the City of Eureka and County of Humboldt are  considering a tax similar to Arcata’s. Those areas could pay a much lower implementation rate, since Arcata will have paid for PG&E’s new billing system to be set up.

“We could have brought other cities into the fold,” Wheetley said. “Everyone else gets the benefit of the groundwork we laid here.”

Still, PG&E has not yet billed the City for calculating and collecting the Excessive Energy Use Tax, and Wheetley holds out hope that the entire burden won’t fall on Arcata.

“I was hoping that PG&E could develop some equitable repayment plan now that this is playing out the way it is,” he said. Wheetley hopes the initialization costs of what may prove to be a popular program can be “spread out among other cities.”

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  • ghostown

    fair enough but it’s kind of funny to hear Wheetley rethinking their timing. Victim’s of their own success now suck it up and pay the price.

  • Clint Notestine

    ive seen many a house pulling 5k and even up to 10k while i was replacing meters

  • RT

    So it just pushes the grow houses out of Arcata and into places like McKinleyville neighborhoods? Thanks for the problem Arcata……..not!

    • Kevin Hoover

      Absolutely. That was openly the plan from the very beginning – push them elsewhere. Then other communities can, and are, adopt the same kind of tax.

  • DM

    The County needs to look at a similar tax, or else McKinleyville and other unincorporated neighborhoods will (or have) become the new homes for grow houses. Until then, Arcata’s thought that its agreement to pay PG&E $650,000 for implementing this tax should be altered and that amount spread over other cities in the area is ludicrous. It is inherently unfair that I would have to pay for that fee without receiving any benefits from that fee, and have my community altered negatively because of Arcata’s tax. Come on Arcata….. you should have (and probably did) receive projections that the tax would either reap a large tax amount for the city, or very little because people would move their grow houses. It looks like the initial calculations evidence the latter. Either way, its your fee, and you should pay it.

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