SUBMITTED BY: To:
Tammy Maygra The St. Helens City Council,
34319 Canaan Rd, And URBAN RENEWAL AGENCY OF The City of St. Helens
Deer Island, Or 97054
RESOLUTION NO. 1832
A JOINT RESOLUTION OF THE CITY COUNCIL AND URBAN RENEWAL AGENCY OF THE CITY OF ST. HELENS MAKING CERTAIN DETERMINATIONS AND FINDINGS RELATING TO AND AUTHORIZING THE SALE OF AN APPROXIMATELY 8.21 ACRE PARCEL LOCATED AT 1300 KASTER ROAD WITHIN THE CITY OF ST. HELENS AND LOCATED WITHIN THE ST. HELENS URBAN RENEWAL AREA
In February, state officials announced that 1.1 million pounds of cannabis flower were logged in the state's database.
If a million pounds sounds like a lot of pot, that's because it is: Last year, Oregonians smoked, vaped or otherwise consumed just under 340,000 pounds of legal bud.
That means Oregon farmers have grown three times what their clientele can smoke in a year.
Yet state documents show the number of Oregon weed farmers is poised to double ,without much regard to whether there's demand to fill.
The result? Prices are dropping to unprecedented lows in auction houses and on dispensary counters across the state.
Wholesale sun-grown weed fell from $1,500 a pound last summer to as low as $700 by mid-October. On store shelves, that means the price of sun-grown flower has been sliced in half from $8 grams, to $4 grams. A huge drop in the business’s financially sound stability.
But it has left growers and sellers with a high-cost product that's a financial loser. And a new feeling has descended on the once-confident Oregon cannabis industry: panic.
WW (Willamette Week) spoke to two dozen people across Oregon's cannabis industry. They describe a bleak scene: Small businesses laying off employees and shrinking operations. People losing their life's savings and are unable to declare bankruptcy because marijuana is still a federally scheduled narcotic.
Oregon Girl Gardens, received glowing profiles from Dope Magazine and Oregon Leaf. She has 12 years of experience in the medical marijuana system, a plot of family land in Clackamas County, and branding as one of the state's leaders in organic and women-led cannabis horticulture.
She fears she'll be out of business by the end of the year.
"The prices just never went back up," she says.
Another problem is The OLCC basically issued a license to anyone who qualified."
Chadowitz of Cannassentials blames out-of-state money for flooding the Oregon system. In 2016, state lawmakers decided to lift a restriction that barred out-of-state investors from owning controlling shares of local farms and dispensaries.
The root of the entire thing was allowance of outside money into Oregon," Chadowitz says. "Anyone could get the money they needed. Unlimited money and unlimited licenses, you're going to get unlimited flower and crash the market."
As of April 1, Oregon had licensed 963 recreational cannabis grows, while another 910 awaited OLCC approval.
That means oversupply, In 2016, Colorado saw wholesale prices for recreational flower drop 38 percent. Washington saw its pot drop in value at the same time Oregon did.
The state reeled in $68 million in cannabis sales taxes last yearbut it can't keep pace with supply. "Whenever you have these emerging markets, there's going to be a lot of people entering the market looking for profit," he says. "Once it becomes saturated, it becomes more competitive. This is not a phenomenon that is unique to cannabis. There used to be a lot of computer companies, but there's not so many anymore." Business owners can't make the low prices pencil out.
An individual Invested $250,000 in the structural build-outs, lighting, environmental controls and other initial costs to achieve a 5,000-square-foot, Tier I, OLCC-approved indoor canopy.
Ongoing labor and operational costs added another $20,000 a month.
Weed prices were high: The business forecasted a $1,500 return per pound. If they could produce 20 pounds of flower a week, they would make back their money and start banking profits in just three months.
October's bumper crop tore those plans apart.
By the start of the New Year, the business was sitting on 100 pounds of ready-to-sell floweran inventory trickling out to dispensaries in single-pound increments.
So they turned to a wholesaler, Cannabis Auctions LLC, which holds monthly fire sales in various undisclosed locations throughout Oregon.
Weed auctions operate under a traditional model: Sellers submit their wares, and buyersdispensary owners, intake managers and extract manufacturersare given an opportunity to inspect products before bidding on parcels awarded to the highest dollar.
The business sent 60 pounds of pot to the auction block in December. He had adjusted his expectations downward: He hoped to see something in the ballpark of $400 a pound.
It sold for $100 a pound. And even as low as $50 per pound. The price per pound that it costs us to raise this product is significantly higher than the hundred dollars a pound," they said. (A little light math points to a $250-per-unit production cost.) "Currently, we're operating at a $15,000-per-month loss.
Because the federal government does not recognize legal marijuana, the industry cannot access traditional banking systems or even federal courts. That means business owners can't declare bankruptcy to dissolve a failed dispensary or farm, leaving them with few options. They can try to liquidate their assets, destroy the product they have on hand, and eat the losses. Or sell to a bigger company at a fraction of the investment. It is illegal to sell across the state line. And can only do so if the feds allow it in the future.
Oregon does indeed have a glut of marijuana; there are over 1million lb’s of usable but unsold marijuana, according to the state tracking system.
1,824 marijuana-related business licenses have already been issued, including 981 production operations. Another 967 production licenses are in various stages of approval by the state and could come online later this year.
Above Information provided by Willamette Week, The Guardian and Forbes
Market Data
With the current data provided, one can assume that the market for pot growers is a highly competitive and uncertain business. With Federal involvement uncertain on the crux of this legally recognized business in Oregon and/illegal federally business, adds an additional black cloud surrounding the long term viability of yet another pot grow facility in Oregon.
Additionally the number of growers in the State of Oregon defines this as a highly competitive market and leaves little room for a sustainable profit. The law prohibits the sales of product outside of Oregon’s borders. In regards, the amount of product already surpasses the consumer needs of the state.
With this being said, the price of product has fallen below the initial cost to produce the product resulting in a revenue loss which deems it impossible for growers to stay in business, along with the million pounds of excess product being held because of over- production, the future continues to look weak for those growers who are trying to stay afloat. Let alone new startup facilities. We must also mention the overhead costs are exceeding the low rate of dollar return for the product.
Financing
Because the federal government does not recognize legal marijuana, the industry cannot access traditional banking systems or even federal courts. That means business owners can't declare bankruptcy to dissolve a failed dispensary or farm, leaving them with few options. They can try to liquidate their assets, destroy the product they have on hand, and eat the losses. So before the City of St. Helens decides to sell to ACSP LCC they need to do due diligence on who the finical backers are and if they are finically sound.
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RESOULTION CONCERNS
In the City of St. Helens Resolution to sell the property to between the City of St. Helens (the "City") and ACSP LLC (the "Lessee") for 9.5 acres of the Boise Cascade property for an industrial agricultural facility , I found two different amounts of acreage listed in the resolution, this needs to be verified and corrected. Variations/conflict- include the third Whereas and Section 6.
There is no verbiage declaring a guarantee in the resolution to protect the city’s taxpayer’s funds if any are used, in the event that the pot business fails . It must be so assured that there shall be a clause for compensation in a 75 % of repayment, the dollar amount must be matched at the rate of 75% and held in escrow, the initial costs borne by the taxpayers paid back to the taxpayers in the event that the business fails, or is sold.
Being said the money must be held in escrow and not depended on re-payment from the potential sale of the facility. Because the sale could take years resulting in even more loss of revenue for the taxpayers.
The city won’t be held responsible for any clean up or financial liability of said acreage or business. The ACSP LCC will hold all responsibility; if they sell to another company the responsibility of this agreement will follow to the next company here in and so forth.
There is no insurance/ bonding listed in the resolution which names the City Of St. Helens as beneficiary if the business ACSP LCC decides to close its doors to cover any outstanding debt which might be owed to The City of St. Helens.
The city shall not accept payments on this venture, the $3,489,859.58 or if negotiated in a larger dollar amount SHALL BE PAID UP FRONT. …depending on a monthly payment, Quarterly payment, bi- annual payment or yearly payment is not financially sound when attempting to be a co-dependent entity with a business in a highly competitive, and volatile market where failures are common. And a market which has been dropping significantly, in the dollar value of product since it was initiated.
In order to protect the taxpayer’s and the clear title impending sale of said property the City of St. Helens must and shall in good faith require the cash payment for the sale of said property to ACP LCC. In doing so it will ensure the taxpayers that ACP LCC is a finically strong and reliable company in which the City of St. Helens and the taxpayers can be assured a positive finical outcome.
The number of jobs being created from this venture shall be listed before signing any sale of the property to ensure the number of employees will be considered large enough for the stimulation of economic growth in the community. The wages of these said employees shall be defined as “ good living wages” and set beyond the average area wage, before- hand- to ensure the livability and economic growth of the community and be part of the successful revitalization of the Boise property and surrounding area.
Tammy
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