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A special series by Sarah Reith about the financial realities of Mendocino County governance.

Reporting error and Cannabis Department budget overages "very concerning"

A brown-haired woman in blue speaks into a microphone in a county government chambers.
Mendocino County YouTube station
Mendocino County YouTube station
Mendocino Cannabis Department Director Kristin Nevedal at the March 14 Board of Supervisors meeting.

Supervisor John Haschak said he was "very concerned" about the Cannabis Department's projected budget overage of $662k, and a multi-million reporting error in a $17.5 million state grant.

During the mid-year budget review at the March 14 Mendocino County Board of Supervisors meeting, the Board learned about a multi-million dollar reporting error by the Mendocino Cannabis Department that may have been based in part on a misunderstanding by state officials.

Five county departments are projected to come in at more than $200,000 over budget. The mid-year report notes that the Cannabis Department is in the lead by far, with projections of being over budget by $662,000, due to shortfalls in revenues from cannabis fees

The Sheriff’s Office is the second-highest over-budget department, with a projected overage of a little more than half a million dollars. Animal care, facilities, and the Executive Office are also over budget.

The most recent sales tax report, for July-September of 2022, shows that the county’s sales were down 5.2%. The only two sectors that have brought in an increase of sales tax are hotels and motels, at just a little over 6%, and gas stations by just over 7%, probably due to higher gas prices. Long-time cannabis attorney Hannah Nelson commented on the 42.1% decrease in garden and agricultural supplies, which the report says is “Due in part to the decline in the Cannabis industry.” Nelson called it a “House on fire indicator…Here we have a preview of things to come that are going to trickle down further and further at an alarming rate.”

Nelson then remarked on the reporting error that Cannabis Program Director Kristin Nevedal had made regarding the Local Jurisdiction Assistance Grant Program (LJAGP) funds. Nevedal recently told the Mendocino County General Government Committee that she wants to use the majority of the over-$17 million grant she secured from the state to cover Cannabis Department expenses, including $75,000-80,000 in county counsel fees.

Nelson reported that on Monday, Nevedal testified during the California Senate Business, Professions and Economic Development Committee hearing on cannabis issues that she had made a $3.2 million reporting error in her state report on the grant. Nelson asked if the Board and the CEO’s office were aware of what had transpired.

CEO Darcie Antle replied that she had learned about the matter at 1:30 on the day of the Board of Supervisors meeting, which would have been about an hour before Nelson addressed the Board.. “I didn’t know that statement had occurred,” Antle said, adding that two of her deputy CEOs have been working with the Cannabis Department on its budget regularly for several weeks. “One of our questions was about that grant, and how that money was being spent,” she concluded, inviting Nevedal to offer further clarification.

Nevedal assured the Board that none of the money from the Local Jurisdiction Assistance Grant Program has been spent. The error, she said, was a failure on her part to zero out a table in a form she filed to request a budget amendment. “I did not zero out the last table, which is the indirect and other expenses for the 2021-2022 year, because we had applied for a budget amendment,” she explained. “I wasn’t aware until I read the Senate Oversight Hearing background that they had assumed that we had spent down $3.1 million and a little bit of change. So I corrected that with the State yesterday.”

Supervisor John Haschak was more perturbed about the projected $662,000 overage in the Cannabis Department’s budget. That money is now a general fund obligation, though Acting Deputy CEO Tim Hallman said he was meeting with the department later in the afternoon to figure out how much of its expenses can be covered by the Local Jurisdiction Assistance Grant Program grant. He is also working on a time study to quantify how much time staff from the Executive Office and Code Enforcement are spending on cannabis department issues. Haschak persisted. “The Cannabis Department is under the purview of the Board,” he acknowledged. “This didn’t come to light until the Executive Office found the issue. This is a budget of $1.2 million. To be now over 50% off…It’s concerning to me. And it’s concerning that we didn't know about this issue of the $3.2 million in the LJAGP grant. You know, that’s a $17.5 million dollar budget. I’m just very concerned about the capacity of the department to handle that budget.”

Nevedal said there were several good reasons for the department’s failure to generate revenue, including a much smaller number of Phase III applicants than was originally expected. “We also reduced our revenue projections because we had no idea when we planned this budget that we’d be doing fallowing,” which significantly reduces fees from appeals. “We scrapped that out of the budget,” for transparency reasons, she said. She also did not expect the large bills from County Counsel. The department’s move from the campus in Ukiah to the Justice Center in Willits was also not in the budget. “So there’s a number of things that we could not have planned for in this budget because we don’t have a crystal ball and we didn’t know it would be the will of this Board to ask us to take on additional tasks that would push back revenue-generating tasks,” she concluded.

“Well, it seems like it’s the Board’s fault, then,” Haschak replied.

Local News
Sarah Reith came to Mendocino County in 2008 and worked as a reporter and freelancer, joining KZYX as a community news reporter in 2017. She became the KZYX News Director in March, 2023.