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Will Cannabis Growers Who Paid Their Dues Get a Fair Shake?

Small fraction of those who signed up with the county are getting a spot in line

Bird Valley Organics owners Terry Sardinas (left) and Manny Alvarez say they gave up on the manufacturing side of their operation after legalization because of the permitting hassle. PHOTO: TARMO HANNULA
[This is part two of a two-part series on Santa Cruz County’s cannabis industry. — Editor]

Bird Valley Organics owners Terry Sardinas and Manny Alvarez moved from Florida to the Aptos hills in 2011 to tap into the burgeoning medical cannabis market.

There, they lived in a tiny trailer and cultivated cannabis on a 10-acre farm, in addition to producing and marketing CBD oil. Their products could be found at about 80 dispensaries throughout California. Most of their neighbors, they say, were also in the cannabis business.

Things changed for them in 2015, when it became evident that a new legal marijuana market was on the way.

Sardinas and Alvarez moved to a 20-acre parcel in Watsonville after realizing that new local rules under Proposition 64, approved by voters in 2016, would mean the end of their business.

They are now back in business, but only with a cultivation permit after they gave up on CBD oil and the manufacturing side of the operation.

Still, they were some of the lucky ones.

Out of the 750 or so growers who paid hundreds of dollars to put their names in a county registry of hopeful cannabis entrepreneurs during the legalization process, only a handful could meet the requirements. Many have been driven out of business.

As GT reported last week, Santa Cruz County Supervisor Ryan Coonerty says the county hopes to register 102 growers by 2021. That’s just 13% of those who threw their names in.  

“We really were very fortunate to get in, because out of 750 registrants, we’re one of the very few that are left,” Sardinas says. “I pinch myself every day.”

In the wake of Prop. 64’s passage, the Santa Cruz County Board of Supervisors hashed out a series of rules they say were designed to bring growers out of small mountain plots and into areas zoned for commercial agriculture. 

Sardinas and Alvarez quickly realized that their farm was no longer going to pass muster.

Among other things, growers would be required to have roads big enough for fire engines, in addition to setbacks from neighbors and inhabited dwellings. The rules have eviscerated many cannabis grows in mountainous regions.

“It’s squeezed out a lot of people,” Alvarez says. “Not everybody can make it through the shift, through the storm. If the storm lasts longer than you have resources for, you’re out in the cold.”

And moving was no small task, especially now that the newly legalized cannabis industry has increased the price of farmland.

“There is only so much commercial agricultural property, and it’s all located in Watsonville,” Alvarez says. 

Luckily, they found a property owner willing to lease their property.

Alvarez says he declined to get a manufacturing license for the new location to avoid the onerous application process for additional permits.

Back in 2016, the cost for a manufacturer or cultivator to put their name on the cannabis registry was $500, but many of those who got farther along in the application process have since found themselves in a far deeper hole. 

Santa Cruz cannabis attorney Ben Rice says that only a fraction of those who paid thousands of dollars to submit the extensive application to cultivate cannabis will get approved.

“They were led to believe the county was going to embrace them and bring them into the legitimate market,” he says. “Instead, we have all these folks who are either forced to stop altogether or stay under the radar.”

The new framework, Rice warns, bolsters the black market, while leaving legitimate growers unable to navigate the county’s onerous requirements and prompting them to move elsewhere.

“Those jobs and that tax money is going elsewhere, and it’s really a failure of the leadership of our Board of Supervisors in my opinion,” Rice says.

All of this is harming an industry that has existed in one way or another for decades, he says.

“Many people are trying to continue an activity their parents and grandparents were doing,” Rice says.

He predicts that the legal picture will improve as the county gets used to a legal market and the county changes its calculus of how to regulate the industry.

Jim Coffis co-founded Green Trade Santa Cruz, a coalition of local cannabis businesses and organizations. He questions why many growers started receiving visits from the cannabis licensing office after they turned in their application.

“Is the sheriff going down the list, or are they really going on complaints from neighbors?” he asks. 

Santa Cruz County Chief Deputy Sheriff Steve Carney, who runs the law enforcement wing of the county’s cannabis licensing office, says that authorities use the information from the applications to confirm whether grows are legit.

“We only check the records when we see criminal activity,” Carney says.

Robert Zaremba provides services for the cannabis industry, such as distribution, packaging and labeling. He says the county’s seen an exodus of growers, particularly from the mountain communities, dealing an economic blow that stretches far beyond the cannabis industry.

“Every grow that was in this community is now considered illegal,” he says of the Santa Cruz Mountains. “They created a path for licensing, but they made the path impossible.”

Zaremba says hydroponics stores that provided supplies to the growers have closed around the county, and that hardware stores have seen a drop in business as well. “The industry has absolutely been devastated by these new rules,” he says.

The upheaval also scuttled potential cannabis tourism before it was able to launch, Zaremba says, negating an economic opportunity for Santa Cruz County to draw cannabis tourists the same way that Napa County attracts wine aficionados.

But fears of heavy-handed enforcement removed the underpinnings for such ventures before they got going, Zaremba says.

“Many bigger operators and innovators and good players bailed from the county,” he says. “They said they couldn’t risk it, and packed up and left.”

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