CA: County Enters Into Agreement With New Cannabis Authority

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Citing a strong need for reporting data regarding all aspects of the emerging legalized cannabis industry including cultivation sites, taxation and economic data, the Mendocino Board of Supervisors unanimously voted at its meeting this week to approve a joint powers agreement for a newly formed cannabis authority.

According to a presentation given by 1st District Supervisor Carre Brown, the California State Association of Counties Finance Corporation led an effort to establish an official organization, the California Cannabis Authority to further the needs of local governments relating to cannabis legalization in addition to addressing the significant issue of banking cannabis money.

A report posted on the Mendocino County website notes the new data platform can be used to ensure that adequate tax payments are being made, assist county departments by providing information updated in “real time” which will help the speed of compliance and provide public health officials with product information, including product origin and product flow, among other aggregate data of cannabis activity throughout the state.

“Combining this critical data into one location will not only make it easier to ensure public safety guidelines are being met,” said Brown. “But it could serve as a critical link to cannabis related businesses and help the longer term viability that is linked to our county’s future.”

In addition to the cannabis and finance tracking aspect of the CCA, Brown stated it’s also intended to help another big problem in the industry: the thorny issue of banking.

Brown said because of the existing federally prohibited status of cannabis, most banking institutions, charted and audited by the federal government are unable or unwilling to open accounts for operators in the cannabis industry despite its legality in the state of California.

The county’s report provides additional details about the agreement and notes that in order to work with cannabis related businesses (CBRs), financial institutions must comply with the rigorous monitoring requirements needed to potentially use banking functions.

“Institutions must make sure CBRs are not violating state laws or engaging in activities that the federal government consider law enforcement priorities,” said Brown, adding that for every cannabis customer, financial institutions including credit unions have to deal with onerous requirements which require expensive staff time including the completion of special money laundering and suspicious activities reports.

She added that a number of models were looked at including those in Colorado and Washington state, both of which faced the same issue to arrive at solutions relating to banking and other issues facing businesses.

According to Brown, providing financial institutions with comprehensive licensing and regulatory data on CBRs is the single most important step for California to take to increase banking among those businesses. Brown said the banking issue is huge because operators in the new industry place themselves and others at risk by having to operate with large amounts of cash,

The data platform will be developed and managed by the JPA, which is a contract between two or more public agencies to exercise, jointly, all powers common to each of them for the purpose of achieving specific mutual goals.

In terms of fees, Brown stated currently the California State Association of Counties has recommended that membership fees be paid by each city and county and will be dependent upon the total sales within its jurisdiction. The current recommendation by the CSAC would have each member agency pay a fee equal to 0.035 percent of sales or $3,500 for every million in retail and cultivation sales within their jurisdiction.

Second District Supervisor John McCowen moved to appoint Treasurer-Tax Collector Shari Schapmire as the county’s representative in the Authority and Brown as the alternate representative.

During the public hearing, Willits resident Ron Edwards said if the county is not making a profit on its cannabis program it should look into an alternate method to reflect accurate sales numbers and recommended CSAC look into consolidating information sources during its data collection process.

Third District Supervisor Georgeanne Croskey said she was in favor of the county joining the CCA, saying she thought it was important that Mendocino County gets in on the ground level with the other counties from the beginning, in order to have a strong voice rather than wait and come in later after decisions have already been made. Brown said she estimates the CCA would meet on a monthly basis, although those details are still being worked out.