Bay Area marijuana growing business still awaiting policy changes to ease industry woes

By John Ramos

November will mark 10 years since the passage of Prop 64, which legalized recreational marijuana in California. But rather than celebrating a thriving industry, one North Bay cannabis grower says hard lessons were learned about the realities of politics in the marketplace.

On Monday, rain was falling at the 3-acre farm in Glen Ellen in Sonoma County. Inside a greenhouse, Erich Pearson examined the 30,000 seedlings that just sprouted five days ago. The owner of the SPARC cannabis company began growing medical marijuana on the down-low in 1998.  

So, when Prop 64 passed in 2016, legalizing weed, he considered it a great cause for celebration.

“It was, at the time,” he said, laughing. “You know, it’s been a challenge. But all in all, it had to happen, right?  It needed to happen because it also gets people out of jail, which is the foremost important thing.”

But as a business, it simply hasn’t panned out the way insiders thought, or hoped it would.

“I think we had bigger eyes than the reality of it,” Pearson said. “Everybody, from the investment folks coming out to invest in the industry, to founders who were in business, had bigger plans than the regulations would allow.”

First, there were the regulations, which allowed counties to drag their feet on permitting farms and dispensaries. Then, of course, there were the taxes.  

Prop 64 was sold to the voters as a cash cow of revenue for schools and services. But as more competition came into the market, the price dropped dramatically. With taxes staying fixed, the growers struggled to survive with that added cost. Of course, that only fueled the black market, which didn’t have to pay the taxes.

“They say 60 percent of all cannabis in California still goes through the illicit market,” Pearson said. “They still produce cheaper, they have less regulatory burden, they have no taxes. We need to see tax reform still, until we’re going to see more consumers in this legal market.”

“It is my goal to look at tax policy to stabilize the market,” said Governor Newsom at a budget news conference in 2022. But because the taxes were written into Prop 64, they can only be changed by another vote of the people. At one time, cannabis was selling for as much as $1,300 per ounce. Now it’s bottomed out at about $300, and many growers have given up and dropped out of the market. But Pearson sees that as a good and necessary thing. Just like during the dot-com bust, the easy investment money is all gone, leaving only those with a solid business plan to carry the legal industry forward as the price rises.  But that doesn’t solve the tax problem.

“Had the legislature been able to vote for the same legalization that said, ‘We’ll control the tax,’ I don’t think we’d have a problem right now,” Pearson said. “I think the legislature would have reduced the tax. The governor supported reducing taxes. He just can’t. You know, going to the voters is a whole other level.”

Like the Grateful Dead said, it’s been a long, strange trip. Still, just like every other farmer, Pearson is looking forward to a brighter day.

“I’m optimistic. You have to be, otherwise work is no fun.”