State's pot crop worth $14 billion, dwarfs wine grapes

The "Follow This Story" feature will notify you when any articles related to this story are posted.

When you follow a story, the next time a related article is published — it could be days, weeks or months — you'll receive an email informing you of the update.

If you no longer want to follow a story, click the "Unfollow" link on that story. There's also an "Unfollow" link in every email notification we send you.

This tool is available only to subscribers; please make sure you're logged in if you want to follow a story.

Please note: This feature is available only to subscribers; make sure you're logged in if you want to follow a story.


As cash crops go, marijuana is a whopper.

The value of California's 8.6 million-pound pot harvest is about $14 billion, dwarfing wine grapes at about $2 billion, according to state reports.

Making it legal, as Proposition 19 on the Nov. 2 ballot proposes to do, presumably would allow banks to lend money, businesses to hire workers and create distribution and retail networks.

"There's definitely a positive economic impact," said Robert Eyler, Sonoma State University economics department chairman.

But the catch, as Eyler and others point out, is that no one knows how the ballot measure — the handiwork of Oakland marijuana entrepreneur Richard Lee — would play out.

Would the federal government stand by as acres of pot are planted in California? U.S. Attorney General Eric Holder announced this week that authorities would continue to enforce federal marijuana laws in California.

Would cash-starved California cities and counties engage in a "race to the bottom," setting tax rates low to woo pot commerce?

Would growers, suddenly confronted with taxation and bureaucratic regulation, elect to remain in a "black market" mode of operation?

"It would tax even the sharpest mind as to what this thing is going to look like," said David McCuan, an SSU political scientist.

In marijuana-rich Mendocino County, anticipation of a lucrative marijuana tourism trade may conflict with the specter a colossal crash in the price of pot, possibly by as much as 80 percent.

"We have the reputation for the best pot in the world," said John Pinches, a Mendocino County supervisor and rancher who has advocated legalization since 1995.

Eying the latest report on shrinking county sales tax revenue and the layoff of 376 county workers in the last four years, Pinches said taxing pot is a "no-brainer."

But Ukiah businessman Ross Liberty said the county's affection for marijuana cooled as strangers poured in to grow the weed and pot garden violence flared. With pot prices already falling, Liberty said, the county is due for an economic hit, as well.

"I love Johnny to death," he said of Pinches. "But I think he's all wet."

Marijuana is presumed to account for half to three-quarters of the Mendocino County economy, taking the place of dwindling logging and fishing industries.

Pinches, who grew up in Laytonville, said he watched people turn to pot farming as the sawmills shut down. "It was just a natural evolution," he said.

Liberty, who personally favors marijuana legalization, said Proposition 19 would worsen the county's economic woes.

Experts are at a loss to detail the measure's economic consequences, but they agree on one thing: prices will plummet and pot use will increase.

A RAND Corp. study released in July said the post-legalization retail price of marijuana would fall, likely by more than 80 percent, to as low as $38 an ounce, including retail markup.

Consumption likely will swell beyond the 4.2 million Californians now using 500 tons of pot per year, but the researchers said it is hard to pinpoint the increase, largely because no modern nation has ever sanctioned commercial pot production.

Increases in consumption of 50 percent to 100 percent or more couldn't be ruled out, the report said.

"California would be stepping into uncharted territory," said Beau Kilmer, lead author of the RAND report.Proposition 19 itself promises "billions of dollars" in annual revenues to "fund what matters most to Californians: jobs, health care, schools, libraries, roads and more."

But officials aren't banking on it.

The state Board of Equalization, which collects state sales tax, has disowned its estimate of a $1.4 billion state tax bonanza from legalized pot.

Proposition 19 "leaves too many unknown variables to develop a credible statewide revenue estimate," board Chairwoman Betty T. Yee said.

The $1.4 billion mark was based on Assemblyman Tom Ammiano's legalization bill, which included a $50 per ounce marijuana excise tax. Ammiano's bill died, and Proposition 19 includes no tax specifics.

A $50 an ounce excise tax would more than double the post-legalization price, creating a significant incentive for tax evasion, the RAND report noted.

The ballot measure allows possession and cultivation of small amounts of marijuana for personal use, but leaves commercial pot operations entirely up to the discretion of cities and counties.

Critics cite that vagueness as a major defect in the ballot measure, allowing dozens or even hundreds of local government standards for commercial marijuana.

The measure allows up to 25 square feet of pot cultivation for personal use, and RAND estimated that a hydroponic marijuana garden that size could yield 10.5 pounds a year, enough for about 50 users.

The growing cost would be about $225 a pound, or $14 an ounce, the report said.

The state Legislative Analyst said it was impossible to tell how many local governments would permit commercial pot production and sales, or how the federal government would react.

"Consequently, the magnitude of additional revenues is difficult to estimate," the analyst's report said.

However, if a commercial pot industry came about in California, state and local governments "could eventually collect hundreds of millions of dollars" a year, it said.

Eyler, the SSU economist, speculated that Mendocino County and Ukiah, where pot is plentiful, are likely to opt for taxation.

Sonoma County and its cities probably will weigh the social and moral considerations "before they just jump in headlong."

Still, Eyler said, under Proposition 19 "the sky's the limit, and when you open the door generally a lot of people run through."

Please read our commenting policy
  • No profanity, abuse, racism, hate speech or personal attacks on others.
  • No spam or off-topic posts. Keep the conversation to the theme of the article.
  • No disinformation about current events. Claims of "Fake News" will be delayed for moderation
  • No name calling. "Orange Menace", "Libtards", etc. are not respectful.
Send a letter to the editor

Our Network

Sonoma Index-Tribune
Petaluma Argus Courier
North Bay Business Journal
Sonoma Magazine
Bite Club Eats
La Prensa Sonoma
Emerald Report
Spirited Magazine