What Ottawa can learn from Denver about regulating marijuana

As the City of Ottawa begins to wrap its head around how to regulate legal marijuana at the municipal level, it's turning to Denver for advice.

With increasing tax revenue from burgeoning business comes increasing costs, Colorado capital learned

A customer enters the Starbuds marijuana dispensary on Denver's Brighton Boulevard. (Solomon Israel/CBC)

As officials at Ottawa City Hall begin to wrap their heads around how to regulate legal marijuana, they're turning to Denver for advice.

City officials charged with finding the right balance between the needs of a new industry and the community around it have been looking closely at the lessons learned by the first North American municipality to tackle the issue.

Denver introduced regulations on Jan. 1, 2014, when 18 legal retail stores opened their doors to the public in the Colorado capital.

"My advice to Ottawa would be to get organized early," said Ashley Kilroy, director of Denver's department of marijuana policy. 

Today Denver regulates some 215 marijuana retail outlets, as well as 300 other businesses including growers, manufacturers and testing labs.

Business has been good — retail sales doubled in just three years to more than $288 million, and the city has reaped mounting revenue through municipal taxes, a share of state taxes and licensing fees.

"Right now we feel like our taxes are reasonable;" said Kilroy. "They allow us to have a high level of attention on regulation and enforcement that we need to with marijuana, and then it allows us to do some extra things with this money."

With rising revenues, rising costs

Denver's marijuana retail sales tax generated $10.6 million in 2016, according to the city's annual report.
Ashley Kilroy oversees Denver's department of excise and licences. (City of Denver)

Most of the money Denver collects goes into the city's general coffers, but one-third — revenue derived from a special Denver-only 3.5 per cent sales tax — is dedicated to four major areas: regulation, enforcement, education and affordable housing.

But as Denver's pot-related revenues have increased, so have the city's expenses tied to the burgeoning industry, from $4.7 million in the inaugural year to a projected $11 million in 2017.

The largest cost increases have been in the areas of policing and education.

Check out a graphic of Denver's expenses here.

The education component is heavy on helping teens understand the risks of consuming the drug, according to Kilroy.

While she noted it's still "early days," Denver's public health department hasn't seen an increase in pot use among young people, Kilroy said.

"One thing we see is a change in how youth perceive the risk," Kilroy said. "We know with alcohol and tobacco, when [the perception of] risk decreases, we have seen use go up, but so far not with marijuana."

Unintended consequence

One unintended consequence of the zoning rules aimed at keeping the shops away from schools and residential neighbourhoods is that they're now concentrated in industrial areas of the city that happen to be home to its lowest-income residents.

The issue became so contentious last year that a moratorium on new businesses was briefly introduced, then lifted when Denver introduced caps on the number of businesses allowed in saturated neighbourhoods.

Denver residents who find themselves living near a marijuana business can air their grievances at public hearings, Kilroy said — another practice Ottawa may want to follow in the future.