Cannabis prices to jump as recreational use becomes legal

Patrick Evans
Mad River Union

ARCATA – Medical cannabis patients and recreational consumers are in for a shock Jan. 1, 2018. Cannabis prices will jump as California’s cannabis legalization takes effect and the state begins collecting taxes on cannabis retail sales, cultivation and manufacturing.

The average cost of an eighth of an ounce of cannabis flower at Humboldt dispensaries will increase from around $40 after taxes to around $45 per eighth. Dispensary prices could rise even higher as cultivators and distributors increase prices to cover the cost of permits, lab testing and track and trace programs.

Proposition 64, the Adult Use of Marijuana Act (AUMA) was approved by voters in 2016, directing the state to begin issuing cannabis business licenses by Jan. 1, 2018. The vote prompted passing of emergency legislation, Senate Bill 94, to combine California’s Medical Cannabis Regulation and Safety Act and the AUMA regulations for cultivation, manufacturing, sales and testing under a new law known as the Medical and Adult Use of Cannabis Regulation and Safety Act (MAUCRSA).

Adult recreational cannabis users will be allowed to purchase one ounce of flower at a time, while medical patients will be allowed to purchase eight ounces. Individuals will be allowed to grow and dry six plants per residence in a locked enclosure out of public view.

Under MAUCRSA dispensaries will collect a 15 percent state excise tax on adult use and medicinal sales. Medicinal sales will be exempt from Calif.’s 7.5 percent sales tax. Adult recreational cannabis will be subject to state sales tax calculated on the price after the excise tax is applied, leading to a combined tax rate of 22.5 percent for recreational cannabis.

Cultivators and manufacturers will collect a state tax of $9.25 per dry-weight ounce or $148 per pound of flower sold, and a tax of $2.75 per dry-weight ounce or $44 per pound of leftover cannabis trim. Arcata will not create its own sales or excise taxes in order to compel black market growers to enter the legal market according to Community Development Director David Loya.

“The best way to move people out of black market and into the light of day is that you don’t establish a barrier to entry, the city wants to ensure that it’s as cost effective as possible to move into the white market,” Loya said.

Cannabis price spikes could hurt medical patients, according to manager Bryan Willkomm of Arcata dispensary Humboldt Patient Resource Center (HPRC). Many of HPRC’s several thousand patients are low income and seriously or terminally ill and will struggle to afford higher costs Willkomm said.

“(The price increase) is a big problem,” Willkomm said.

“Patients only have so much money to spend. These patients have set up monthly budgets on a fixed income to purchase a set amount of medicine,” he said.

Medical patients will be especially hard hit by state limits on concentrations of THC in edibles and tinctures. Edibles will be limited to serving-sizes of 10 milligrams of THC and only 100 mg in a single package.

“That is going to be the most shocking. For patients that are accustomed to receiving a 250 mg edible for 20 dollars, now that purchase may cost them 40 dollars because of the packaging (limit,) the food material limit, the lab testing as well, and the product will be less potent,” Willkomm said.

Patients will also be hit by lack of supply, as cannabis extract makers buy up bulk leftover trim used both in pre-rolled joints and extraction for oils used in vaporizers. Trim will be sold through a lottery system, favoring oil manufacturers whose focus is the recreational market.

“We’ve already seen that there is not enough material for our pre-rolled joints because extractors are purchasing it from the farmers, extraction provides a longer shelf life, so when people have large amounts of harvest they are incentivized to go into extraction,” Willkomm said.

A concern for medical patients and recreational users alike is the possibility that a majority of cannabis products produced in Calif. will not pass state laboratory testing.

MAUCRSA will require cannabis products to be tested for contaminants such as mold, salmonella bacteria, pesticide residue, heavy metals and solvents such as butane.

HPRC is a drop off for lab testing and sees many products failing due to pesticide contamination, according to HPRC Director Mariellen Jurkovich.

“These are people that are not expecting that they are going to fail, and they are still having huge failures,” Jurkovich said.

California could end up in a situation similar to Oregon in 2016 when strict testing standards disqualified most of the state’s cannabis products during the first year of legalization.

“There were literally empty shelves,” Willkomm said.

Jurkovich said the dispensary is already preparing to insulate its patients against the tumultuous transition period, and is discontinuing sales of products which will likely fail to meet state standards or are produced by manufacturers that have not obtained permits

“We don’t want our patients to be relying on the products that we absolutely know are not going to be available to them, we will try to find products that are comparable and will be permitted.” Jurkovich said.

Despite the difficulties ahead, Jurkovich and Willkomm see the legislation as a step towards improving the quality of cannabis as a medical service and an opportunity for research into better cultivation and dispensary practices.

HPRC’s neighboring dispensary The Heart of Humboldt is preparing for legalization by increasing its cultivation facilities. Heart of Humboldt received approval from the Arcata planning commission in November to open a storefront in an adjoining vacant building, formerly Zamora’s Furniture on the corner of Sixth and I streets.

Heart of Humboldt owner Danny Brownfield said the dispensary already produces 90 percent of its flower but needs to expand to meet the demand of the adult use market.

“We don’t have to, we prefer to. For complete control of cultivation, and for the quality of the end product,” Brownfield said.

HPRC and the Heart of Humboldt are currently the only dispensaries permitted to operate outside of Arcata’s Cannabis Industrial Zone (CIZ) on West End Road. The CIZ is an industrial zone hosting a mix of manufacturing properties, saw mills and the tumbled ruins of the former Humboldt Flakeboard factory.

Cannabis businesses in Arcata must pay a $2,500 application fee for a city Commercial Cannabis Activity permit in the CIZ and a $4,000 annual operating fee if approved. The city has received more than 40 applications for permits and approved about 20 of them, according to Arcata permit and code technician Edie Rosen

The city ban on cannabis sales in town will remain until staff completes amendments to the Municipal Code to define areas of the city where cannabis can be legally sold. While manufacturing and cultivating can be contained in the CIZ, sales of cannabis as an accessory product such as a coffee shop selling edibles or a massage therapist offering CBD ointments will depend on how the city interprets state buffer zones.

State law requires buffers of 600 to 1000 feet around schools, parks and other public property, creating a confusing map of intersecting circles that hamstrings city planners. At a Planning Commission meeting in November Community Development Director David Loya said Arcata could finish amendments to the Municipal Code by late 2018.


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