Panning For Gold
Story by Jeff Gee
Sandwiched between the Pacific Ocean and the sprawling timber forests of south west Washington, the sleepy towns of Raymond and South Bend welcomed cannabis growers with open arms.
As many states throughout America adopt pro business and pro patient laws surrounding marijuana production and use, the lure of gold is in the air for many depressed rural towns. In this article, we profile at depth two nearby towns in Washington State to understand how things are shaping up.
Cannabis represents the largest industry to enter into this region in decades. Although these towns’ experience will be different than others, they provide an example of the recreational cannabis industry setting up shop in rural America.
Located along US Highway 101, the once thriving logging towns and fishing ports, Raymond and South Bend have had a generation’s worth of decline in both jobs and population. At a roughly combined population of 5,000, high unemployment and low job count takes a negative toll on all aspects of the community.
Two years ago, early entrepreneurs of Washington States’ initiative I502 arrived on the scene looking to become active in recreational cannabis production, processing and retailing. As the initiative became law, it provided a spark for a potentially new source of jobs, tax revenue and a growth industry for the two towns.
From 2013 – 2014 much has been written about this new industry entering north Pacific County. Now, we seek to find out what kind of impact the cannabis industry has had on the economy and community.
Of interest are the tax income for the city of Raymond, occupancy numbers, fees and capital improvements at the Port of Willapa, the financials of the I502 producers, processors, retail outlets and finally the effect on the local economy and community.
The Port of Willapa is the physical location that supports I502 growers and processors, I502 retail outlets and medical marijuana grow operations. Prior to I502, Port vacancy was approximately 60%. Today, along with the Port’s other tenants, there are eight I502 operations and two retail outlets and no vacancy. From an occupation of Port facilities perspective, the spark is now a fire.
Rebecca Chaffee, Port of Willapa Manager, says, “I get weekly calls looking for I502 space. We have no demand for anything but growing marijuana.“
The I502 production and processing facilities on the Port all sport the telltale cyclone fencing with razor wire a top and surveillance cameras all around. Outdoor grows block any view into the facility with black mesh material concealing the plants. I502 producers/processors range in size in both their tier licensing and the revenue they generate.
Of all the Port of Willapa’s tenants, BMF generates the most revenue. In fact, BMF as a producer/processor generates more revenue than any other producer/processor in Washington State. According to the Washington State Liquor and Cannabis Board’s February 2016 data, since August 2014, BMF has generated $8,089,732 in gross sales and $1,036,060 in excise tax.
There is risk for a producer or processor that finds itself in the position of misusing chemicals. Class action lawsuits from end users and retailers are not unheard of in American society. We’ve seen what has happened in the food industry with misleading organic labels and ingredients. It is only a matter of time before cannabis growers and processors become targets of end user scorn with untrue labeling or illegal chemical use.
On the medical marijuana front, the Port of Willapa has been leasing space to medical marijuana growers before I502 became law. These operations are much more discreet. This will soon change, however as Senate Bill 5202 forces medicinal marijuana growers to become I502 participants by July 1, 2016 and cease all operations.
One local medical marijuana producer, Good to Grow, is transitioning into an I502 producer. This will require them to make substantial changes. They also foresee significant opportunities. Christina McDowell, general manager, sees expansion as a great opportunity, “We have warehouse space in Raymond and in Grayland. This will really help us grow into I502 and expand our business. We expect to bring additional jobs to the area because of this, perhaps as high as 40 new openings.” Yet, as McDowell explains, the challenges are pressing, “We worry about our patients. They won’t have the same access to information at an I502 retail shop as they do here. Retail shops will not be able to make recommendations based on medical conditions.”
Raymond and South Bend have one retail outlet each, Mr. Doobees and Growers Outlet. Both shops are located on US Highway 101. In terms of visibility, the name Mr. Doobees speaks for itself. Growers Outlet is kind of tucked away.
At one point, Growers Outlet had an inflatable air dancer with the word Marijuana written on it in big letters. Although Growers Outlet obtained permission from the city of South Bend, the Port of Willapa and the Washington State Liquor and Cannabis Board, Pacific County’s prosecuting attorney didn’t like it and found a seemingly obscure rule to force them to remove it. The air dancer was located on a public right of way. As for Mr. Doobees, their first choice of name, RP Apothecary, was rejected as not being descriptive enough.
Despite this, Andrew Tessier, owner of Growers Outlet, says business is good, “Anywhere from 50% to 70% of our business is from tourists. We feel that we have made such a good name for ourselves that we’ve captured a good bit of the local market as well. This has helped offset revenue decreases during the tourist off season.” Yet, Tessier describes struggles, “Our federal taxes are much higher than any other business. Because this industry is not federally recognized and considered illegal, we are not allowed to take any deductions, none.”
When asked about the broader issue of chemicals and organic standards in cannabis production, Tessier believes there are problems, “Since this industry isn’t federally recognized, like the tax problem, the USDA will not recognize cannabis in their organics program. There are no organic regulations for this market and growers can say anything they want. It doesn’t mean it is true.”
The Port of Willapa is also home to two companies that provide agricultural amendments and fertilizer products, Ambrosia Technology, LLC and Pacific Gro.
Arthur Zeigler, owner of Ambrosia Technology, LLC and inventor of the product Sea-Crop, an agricultural soil amendment and animal mineral supplement, has been producing his product at the Port of Willapa for over 10 years. He believes there is tremendous value using this locally produced product with cannabis, “Our product has produced excellent results with increased dry weight, number of flowers per plant and most importantly cannabinoids. We enjoy serving the cannabis market both locally and abroad. Our product has been used in the Netherlands for 10 years.”
Jim Brackens, owner of Pacific Gro and longtime Port resident, echoes the same sentiment as Zeigler, “We ship a lot of our product to California, Colorado and Oregon for the cannabis and hemp markets.”, says Brackens. “Locally, a number of I502 producers use the product, but since their outfits are so small, it doesn’t really move the needle.” Regarding his new Port neighbors, Brackens says, “In all my years here I’ve never seen as many cars in the parking lots. In principle, this new industry is good for employment.”
In real estate, Heidi Keller of Harbor Realty indicates things haven’t measurably changed, “Rentals right now are tight, but the rental market here has always been robust. In real estate, the problem for the cannabis workers is they cannot get a rural loan like what the USDA offers because the federal government does not see this as legit income. The cannabis industry’s wages support home ownership in our area.”
Speaking on condition of anonymity, one local business person who has serviced the new cannabis businesses has found they have not provided benefit, “A very slight increase from the growers. Some of the growers are very disorganized both with their business and with their finances. A lot of the growers can’t even pay their bills so probably what I write off as bed debt will be about what I have made from the others combined. This has not been Raymond’s salvation for an economic boom by any means. Except for the smell you wouldn’t even know they existed.”
Jason Dunsmoor, chief of engineering at Pacific County PUD #2, indicates that the industry has brought value, “We’ve added 1.7 mega watts to the growers. These capital improvements have provided a new electrical back bone to the Port. Some growers also requested fiber optic services that we have provided as well. With this additional service, there is plenty room for expansion.” In comparison, the Weyerhaeuser saw mill in Raymond has a 6.5 mega watt service.
Even with the Port having no vacancy, their budget is still limited. “There are no grants from the state or feds to help build this industry. This makes capital improvements to grow the industry locally difficult. We use matching grants often. These grants help us make improvements, like the work done at the Tokeland marina.” For Chaffee, the new occupants came at the right time, “As our previous tenants, like HaloSource and Terra Firma, moved out, we were able to immediately lease these buildings to the growers.”
So, this leaves us with fundamental question. How many new jobs have been created since this all began? How much new revenue from these operations is staying local?
For Washington State Department of Revenue’s fiscal year 2015 (July 1 2014 - June 30 2015), Pacific County had a sales total of $4,924,707 with $1,231,177. This includes all producers, processors and retail outlets.
Combined, since November 2014, the retail outlets alone have generated $850,324 in gross sales and $272,825 in excise tax.
Unfortunately, very little if any excise tax collected by the State of Washington comes back to these cities. The cities of Raymond and South Bend collect Business and Occupation (B&O) taxes, but those rates are relatively small. Dunsmoor, who is also acting as interim Mayor of Raymond says that sales tax has been flat for years, despite the retail shops and new jobs. However, Dunsmoor states, “It is good to have these jobs. I’ve noticed an uptick in cars on the road. If we could get more jobs, everyone would appreciate it.”
The general consensus is this new industry has created about 70 new jobs. And, if other planned expansion on the last remaining Port property materializes, maybe the area could see another 100 new positions open up.
Two years into this, there are winners and losers. The winners are certainly those who receive reoccurring income like the Port of Willapa, the PUD, entities collecting taxes, contractors performing upgrades to facilities and ongoing maintenance as well as the general service sector.
Because federal law still considers this industry illegal, the employees and business owners participating in I502 loose out with the tax deductions for their businesses and other federal services singling them out. For the smaller players in the industry, coming out above breaking even may be the best hope. Sometimes the gold rush only yields copper.
What does this mean for new tows contemplating supporting this business? The industry has benefited this community. It is not a blight or a danger. Quite the opposite. Many of the growers and retailers donate and participate in the volunteer community. Some are locals, so they are behaving just as any other business in the community. However, there will be challenges without doubt. It is a young industry going from black, to gray to white market rules.
Yet, now that the dust has settled, at least for this community, one local resident has made his support clear. The new industry in Raymond and South Bend puts the green in the Evergreen State.