How one Colorado county is using its marijuana profits

A county in Colorado has begun spending its tax windfall from the sale of legalized marijuana. A look at where the money's going and whether it's an example for other cash-strapped cities to follow.

Legal marijuana brings new revenue to cash-strapped counties, but may cost them, too

Colorado state and county coffers are flush with revenue from marijuana sales taxes but there's uncertainty about its long-term potential to help cities with their cash woes. (Associated Press)

Once a month, Anita Garcia meets individually with the marijuana retailers of Colorado's Pueblo County to collect the local taxes from the booming, new legalized drug business.

The first-ever marijuana licensing specialist for the county, located south of Denver, books a courthouse conference room for the legal transaction, which is monitored by a security guard and her supervisor.

"It's pretty simple," said Garcia about the formal get-togethers. "The longest part is counting [the cash]… If they're coming in with $20 bills that can take a while."

Most retailers show up with wads of cash, a quirk of the budding trade because banks won't open accounts for them. They fear prosecution since selling pot is still a federal crime even as some states begin to decriminalize it.

To help speed up the process, the county ordered a $300 cash-counting machine.

So far, that machine and Garcia's new licencing job are the only expenses paid for by the county's new-found infusion of cash since stores in Colorado began selling marijuana for recreational use on Jan. 1.

The county, however, is expecting that taxes and fees from the sales will add $1 million to its coffer in the first year.

"One million dollars is a lot of money to us," said Pueblo County commissioner Cal Pace.

"Like most local governments for the past four or five years, we've been dealing with a very difficult budget crisis," he says. "This is the first new infusion of revenue for our county in a while of a significant amount."

Stores triple, revenues rise

Other cash-strapped municipal governments, including those in Washington State where pot retailers are slated to open doors in June, are closely watching Colorado's experiment, and the financial benefits of the decriminalization.

"People are paying attention to what we are doing," says Pace. "We recognize that the eyes of our country and of the world are on us, so we want to do it in the most robust and appropriate way possible."

Every month, new marijuana retailers are opening their doors in Pueblo County, one of Colorado's more populous counties with 160,000 residents.

In January, only two stores were in business. Now, there are six retailers, with one more conditionally approved.

The county may soon reach its self-declared maximum of 10 stores for this year.

Three potential sellers are currently wading through the arduous application process, which requires them to submit everything from a floor plan specifying the location of the cash register to background details about each store investor.

As more pot outlets open, revenue for the county is rising.

In March, the county estimated it received nearly $60,000 from both the county's 3.5 per cent tax and the state tax, a portion of which is given back to municipalities, from the marijuana sales.

That's a 40 per cent revenue hike from the month prior. Pace says the county is already pinpointing ways to spend the money.

The biggest beneficiary of the marijuana tax revenue will undoubtedly be the struggling public education system, as the state has earmarked $40 million for school construction.

But for counties like Pueblo, roads, bridges, public safety initiatives and addictions treatment top the local wish list.

Costs may rise, too

Though it's heady days for this new cash infusion, officials are still treading carefully. No one knows what the exact pot revenue might be in the coming years or even months.

In February, Colorado Gov. John Hickenlooper initially predicted a windfall of $134 million.

He reduced that projection by $20 million in early April. Even then, the figure is far higher than then $65 million anticipated by legislators when marijuana was legalized.

A Moody's report released last week acknowledged that tax revenues from recreational marijuana in Colorado exceeded expectations. Still, it cautioned that the amount remains a "small fraction" of state and local budgets.

For example, tax and licencing revenue from pot only amounts to 1.4 per cent of the state's general funds.

The credit-ratings company also said policing costs may reduce "moderately" though the "net effect is still uncertain."

Pueblo County Police Chief Luis Velez, however, laughs off any suggestion that enforcement costs will fall.

The local force is ramping up its officer training to spot those driving while high and expects the future might bring added costs, such as detection devices for drivers once they come on the market.

"[The legalization of marijuana] means that we have to react to more drugs on the market whether it's dealing with people who are driving high or whether it's dealing with the costs of the injuries and the deaths that will result from that," said Velez.

'Not a road map'

In the end, Moody's warns that Colorado is "not necessarily a road map for other states" because the revenue potential isn't clear.

Pot prices will likely shift over time as supply and competition increase among legal growers, making it hard to project how much states might ultimately take in.

Adding to uncertainty is that the sale and consumption of marijuana is still against federal laws, though the U.S. Department of Justice appears to be focusing its attentions on states where the drug is still illegal.

As for Garcia, she's hopeful that demand for her job will continue.

She points out that, as with any industry, some businesses fail while others flourish, meaning new licensees will always be coming her way.

Also, America's first legalized marijuana experiment involves a lot of ambiguities for retailers as the state and local governments iron out administrative details. That's kept her busy.

"I answer a lot of questions" from retailers, she says. "A lot of people are in a rush to get their doors opened and to start cultivation, [but] it does take time."

For now, the former elections clerk is enjoying being part of a grand experiment – and the attention and challenges that come with that.

She says she asked her dad, "'When I was born, did you ever think you'd have a daughter who was licensing legal marijuana stores?' He just laughed and said, 'Nope, not in a million years.' " 


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