Retail marijuana study touts economic impact

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The argument regarding retail marijuana rages on in Colorado Springs, fueled most recently by an economic study paid for by cannabis advocacy group, Citizens for Safer Neighborhoods, which showed tens of millions of dollars in tax revenue would be generated in the city if recreational marijuana sales were allowed.

The other side insists the social costs outweigh any economic benefit.

It’s been a community discussion since the state’s voters passed Amendment 64 in 2012, legalizing retail marijuana in Colorado. And while some cities — including Denver and Pueblo — have embraced the burgeoning industry, elected officials in the Springs and El Paso County have resisted.

“Nobody’s going to change my mind about this,” said Colorado Springs Mayor John Suthers, adding, “I suspect I won’t change a lot of people’s [minds].”

Jack Strauss, the University of Denver economics professor behind the study, said he was unbiased in producing a report that stated more than $25 million a year could be generated by allowing recreational pot sales in the Springs.

The numbers used in the study are inflated, Suthers said.

The Springs has 132 licensed medical marijuana dispensaries, which produce about $2.6 million in city revenue through taxes and licensing. Suthers pointed out that Strauss calculated licensing fees at $7,500 each while the city just raised its fee to $2,600 on Aug. 1 for medical pot dispensaries; that’s a difference of $646,800. And Strauss included an additional 3.5 percent tax — as Denver charges — that would have to be approved locally by voters. Also, Strauss’ report assumed all 132 dispensaries would convert to retail shops, which wouldn’t be allowed, Suthers said.

Strauss also failed to mention that the Taxpayer’s Bill of Rights would prevent excess tax collections going to the city unless approved by voters.

Still, Strauss told the Business Journal, “Allowing retail marijuana establishments would solve nearly all of the Springs’ revenue problems in the next several years.”

Suthers disagreed, though he acknowledged that allowing approximately 15 retail marijuana stores could add about $8 million in tax revenue each year — less than half of what he’s asking for annually to help eradicate the city’s stormwater problems.

BLACK MARKET MONEY

Mike Elliott, an attorney and longtime cannabis industry advocate, says the Springs would clearly benefit from retail marijuana sales.

“Since 2012, we’ve seen that this works,” Elliott said. “The state of Colorado just hit the $500 million mark in tax revenue [generated since 2014] the last couple of weeks. The parade of horribles that was predicted just hasn’t come about.”

Not true, said Suthers. He says the black market has flourished in the Springs and throughout the state since Colorado legalized weed in 2012.

“It’s not working so far,” he said. “Why would Colorado Springs legalizing recreational [marijuana] put all these Cubans and Venezuelans and Laotians out of business? I just think they’re here because they like the legalization umbrella; it confuses things for the cops. I think the [Drug Enforcement Agency] estimates right now that probably half of the marijuana being grown is not subject to the regulatory system. And there is still going to be that out-of-state market.”

“We’re the solution to the black market,” said Elliott, a paid consultant for Citizens for Safer Neighborhoods, a group formed two months ago and funded by the medical marijuana industry.

“Right now in Colorado Springs it’s legal for people to possess it and consume it, but they don’t have a legal way to purchase it in the city, which means the black market gets to largely be in control of it,” Elliott said. “The idea we’re trying to get out here with the economic study is that $20 million in tax revenue can go to the city and pay for stormwater, more cops, parks, potholes or it can go into the hands of those criminal organizations. It’s one or the other.

“There is no [scenario where] marijuana isn’t bought and consumed and sold; we tried that for 80 years and it hasn’t worked. Marijuana has been illegal for 80 years. But it hasn’t disappeared. We have a way of making it safer and letting the city prosper by bringing it out of the shadows and into the light.”

‘EASY ECONOMIC CASE’

Strauss says his economic impact study was straightforward.

“I examined the five largest cities that allow retail marijuana sales — Denver, Fort Collins, Boulder, Pueblo and Aurora — plus Adams County,” he said. “It was an easy economic case to make, which is why many cities in Colorado and other states allow retail marijuana sales.”

Again, the mayor disagreed.

“Everybody’s talking about how flush Colorado is, and we can’t even widen I-25,” Suthers said. “Our schools are hurting. So this is not the savior everybody thinks it is.”

Suthers argues there are other drawbacks — namely that retail marijuana shops would be detrimental to youth and would hinder new business development. That offsets the 1,500 jobs Strauss says will be created by retail marijuana shops.

Lynnette Crow-Iverson, who served on the Springs’ first marijuana task force and also owns a drug-testing business called Conspire, agrees with Suthers.

“I think it’s a double-edged sword,” she said. “Any time you create jobs, it’s good. On the flip side, look at all the problems Pueblo has. Does the social cost outweigh the economic gain?”

What keeps her up at night, Crow-Iverson said, is worrying about kids having easier access to marijuana.

Suthers said, “I’ve been working with this problem going on 40 years and what I know is that adolescent use of a drug is relational to their perception of risk. If their perception of risk is low, they have higher use rates. We have driven the perception of risk so low that we now have 12 percent of our 12- to 17-year-olds smoking in the last month. That’s 75 percent above the national average. If you start smoking pot at 12, 13 years old, that’s not a good harbinger of your future. That’s what I’m concerned about. Everybody says we don’t sell it to kids, but it gets in kids’ hands easier.”

Crow-Iverson, whose company tests business employees as well as sports teams and schools for drug use, said failed tests have increased since 2012.

“It’s much harder to hire than ever before, especially for construction companies,” she said. “We’ve seen a big increase for marijuana positives since 2012.”

The Colorado Springs City Council could bring the issue before voters but won’t likely do that until 2018, if at all.

Council President Richard Skorman, citing the tax revenue Pueblo collects from retail marijuana grows and shops, said, “I think we should get the money from recreational marijuana, because right now it’s being bled to other communities like Pueblo and Manitou Springs. I’d like to see it put in front of the voters, like they did in Pueblo, to have the opportunity to make recreational marijuana legal to sell in Colorado Springs so we could capture that tax revenue. It’s revenue we should be getting, and then we can regulate it well as a business, too.”

2 COMMENTS

  1. Newell Ledbetter

    Of course Mr. Suthers would be against legalized marijuana. He’s been prosecuting people for 40 years because he works with the law. That is what he does. I wouldn’t expect anything different. Thus he has blinders on and can’t see the trees for the forest. He doesn’t seem to understand that the black market is reaping the rewards of not having recreational marijuana regulated in Colorado Springs. Marijuana is being consumed in Colorado Springs even without regulating recreational marijuana sales. Regulate it and we will reap the rewards that the black market is currently experiencing.