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Almost One-Fifth Of California Consumers Still Buying Illegal-Market Marijuana, Report Finds

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California’s experiment with marijuana legalization is proving extremely popular, but high taxes mean consumers still have a robust appetite for criminal-market cannabis, a new industry report claims.

Eighty-four percent of Californians say they are “very satisfied” with the legal market. However, 18 percent of California marijuana consumers bought cannabis from an unlicensed business or supplier in the last three months, according to the analysis, and say they will do so again as long as taxes remain high.

The report, “The High Cost of Legal Cannabis,” was published on Wednesday by Eaze, a San Francisco-based software company that facilitates marijuana deliveries.

It is also the first such analysis to be published following disappointing, lower-than-expected sales figures in the first few months of California’s legalization era.

California voters legalized recreational marijuana for adults 21 and over on Election Day 2016, and sales at licensed retail outlets began on January 1, 2018.

Earlier this year, Gov. Jerry Brown (D) estimated that excise tax revenue from marijuana sales would total $175 million. The state collected $34 million in excise tax revenue during the first quarter of 2018, leading the state Legislative Analyst Office to predict a lower haul for the year.

With sales and cultivation taxes included, the state collected $60.9 million in marijuana-related tax revenue through the first quarter of 2018, the California Department of Tax and Fee Administration reported in May.

Marijuana purchases in the state are subject to a 15 percent excise tax as well as state sales taxes. Localities like cities and counties can also apply a local tax. With these, on top of a $9.25-per-ounce cultivation tax, taxes on legal cannabis in the state can reach 40 percent or more—the highest in the United States.

And most cities in the state ban commercial marijuana sales outright. According to the San Jose Mercury News, retail cannabis sales are allowed in only one out of every seven cities.

“High prices, taxes, and lack of access to legal cannabis continues to fuel a thriving illicit market,” the Eaze report’s executive summary says. “Simply stated, California has done a good job of telling consumers that cannabis is legal but has a long way to go in making it easy to get safe, legal and affordable cannabis.”

Other findings in Eaze report include:

*Reducing cannabis taxes by 5 percent “could drive 23 percent of illicit market supporters into the legal market.”

*Properly labeled and tested cannabis is popular with 85 and 75 percent of consumers, respectively.

*The most common consumer complaints were high taxes (47 percent), the inability to use credit or debit cards for payment (36 percent) and overpriced products (32 percent).

*The average cannabis user in California is 38 years old. Eighty-five percent of Eaze users are college-educated, and 33 percent are parents.

*And nine out of 10 marijuana consumers say that cannabis has a medical application.

Eaze’s analysis was based on 1,750 online surveys submitted by its users between July 6 and July 12.

Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.

Chris Roberts is a reporter and writer based in San Francisco. He has covered the cannabis industry since 2009, with bylines in the Guardian, Deadspin, Leafly News, The Observer, The Verge, Curbed, Cannabis Now, SF Weekly and others.

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Marijuana Trade Group Demands Action Against Unlicensed Los Angeles Dispensaries

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Unlicensed marijuana dispensaries abound in Los Angeles, and a major cannabis trade association is calling on the local prosecutor to step up enforcement efforts.

In a letter sent to City Attorney Mike Feuer, the United Cannabis Business Association (UCBA) says it is concerned that “illegal retail cannabis operations are continuing to flourish and proliferate” and that existing medical marijuana dispensaries “are struggling financially in the face of competition from illegal dispensaries.”

The group, which represents licensed medical cannabis dispensaries throughout the city, requested information about how the local government is handling the situation.

Via UCBA.

“The UCBA is looking for answers and actions from City Attorney Feuer to ensure safety for workers and residents across the city and to protect the city’s much needed revenue,” UCBA executive director Ruben Honig said in a press release this week. “We are greatly concerned that illegal cannabis dispensaries continue to operate and proliferate in Los Angeles and urge him to crack down on rampant illegal cannabis operations.”

Of course, cracking down on the hundreds of unlicensed dispensaries operating in the city is easier said than done. And the city attorney’s office has moved to enforce local marijuana ordinances in waves this year. In September, for example, the office announced that more than 500 people were charged for running 105 illicit dispensaries.

It’s not quite as simple as shutting down unlicensed marijuana shops, though. Cannabis laws are constantly evolving in Los Angeles, and keeping up with the latest regulatory policies has proved challenging for many previously licensed dispensaries.

The National Cannabis Industry Association (NCIA) said it agrees that the city attorney’s office should “enforce the law and the new regulatory structure,” but that enforcement “should be transparent, and should focus initially on the traditional criminal element more than on currently unlicensed businesses that have been operating for years without incident in compliance with the old system.”

“This is a perfect example of the problem with arbitrary license caps,” NCIA media relations director Morgan Fox wrote to Marijuana Moment in an email. “I’m not extremely familiar with the LA licensing scheme regarding existing businesses, but I’ve heard that it was very restrictive, very limited and resulted in the exclusion of many smaller and/or minority-owned companies.”

Marijuana Moment reached out to Feuer’s office for comment, but a representative was not immediately available.

Marijuana Dispensaries Reduce Local Opioid Overdose Rates, Study Finds

Photo courtesy of Chris Wallis // Side Pocket Images.

Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.
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Nearby Marijuana Shops Make Homes And Rentals More Valuable, Studies Show

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When a shop selling marijuana opens (or closes), there’s a direct impact on housing and rental prices in the surrounding area, according to a pair of recent studies.

Housing prices for new homes increase by 7.7 percent on average if they’re located within a quarter mile of a new dispensary.

A study published in the journal Contemporary Economic Policy evaluated how the price of new homes in Denver, Colorado, changes when a cannabis dispensary opens up nearby. Researchers compared the prices of homes before and after a dispensary opened within .25 miles, .25-.5 miles and .5-.75 miles.

Contemporary Economic Policy

When new dispensaries opened within .25 miles, housing prices jumped 7.7 percent on average. There was still a 4.7 percent increase for homes located within .5 miles, but the effect “disappears entirely” for houses that are further than .5 miles from a new dispensary. The researchers also found that the effect was slightly more pronounced if the dispensary was the first to the area.

“Our results suggest that despite potential costs, legalization is capitalized as a net benefit in housing prices,” the researchers wrote.

Interestingly, new dispensaries seem to have about the same impact on housing prices as new grocery stores, the study found. But the “mechanisms through which grocery stores affect housing prices are more obvious than dispensaries.”

“If public sentiment surrounding marijuana is positive, homebuyers may also prefer to select into neighborhoods with more dispensaries for convenience. Ultimately however, our data do not allow us to directly determine the underlying mechanisms driving this result, so these potential explanations should be considered speculative.”

Losing a marijuana coffeeshop causes a three percent decrease in Airbnb rental prices.

Amsterdam’s famous cannabis coffeeshops are known tourist attractions, but what happens when one shuts down? For his master’s dissertation, doctoral student Igor Goncalves Koehne de Castro identified at least one collateral effect: Rental costs on Airbnb drop by about three percent on average if the closure was within 250 meters of the lodging.

If the coffeeshop was further than 250 meters, rental prices didn’t change significantly.

Via USP Digital Library.

There were plenty of examples for de Castro to study, which spanned from 2014 to 2017, because several coffeeshops have closed in response to new laws in recent years, including one in Amsterdam that prohibits the shops from operating within 250 meters of a school.

After controlling for other possible factors, de Castro developed a series of models based on Airbnb data on rental prices over time and their proximity to recently closed coffeeshops. The study revealed that these shops “present a positive impact” on rental prices for lodgings close to the shops—presumably because people who rent through Airbnb are “tourists” who are “sensitive to distances.”

“The findings of this study suggest that, for the city of Amsterdam, the de facto legalization of cannabis actually has a positive externality,” de Castro wrote. “This result puts new evidence to the debate of drug laws and policies, a matter that still lacks data and research.”

Marijuana Dispensaries Reduce Local Opioid Overdose Rates, Study Finds

Photo courtesy of WeedPornDaily.

Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.
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Major Alcohol Association Briefs Congress On Marijuana Legalization

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One of the nation’s leading alcohol industry associations held a briefing on Capitol Hill on Friday to tell lawmakers and congressional staffers about its position on marijuana legalization.

The Wine & Spirits Wholesalers of America (WSWA) became the first major alcohol association to call for the end of federal cannabis prohibition in July. At last week’s briefing, the group reaffirmed that stance, emphasizing that the federal government should allow states to legalize marijuana without interference.

A representative from the group also suggested that the cannabis market could take lessons from the current regulatory approach to alcohol, including when it comes to distribution and quality control testing, one person who attended the event told Marijuana Moment. There was also a conversation about developing technologies to detect active impairment from marijuana on the roads.

In a one-sheet overview distributed at the briefing, WSWA wrote that the industry’s regulatory structure “should ensure product safety, discourage underage access, create an effective tax collection regime and encourage innovation and choice for consumers, while at the same time eliminating diversion of cannabis to other states.”

WSWA then outlines a series of recommendations—from implementing impaired driving standards to testing product formulas.

Read WSWA’s full list of marijuana policy recommendations below:

Via WSWA.

For the most part, the recommendations align with existing regulatory models in legal states. Where the alcohol and marijuana industries might have disagreements, though, is with WSWA’s opposition to vertical integration, under which one company manages more than one area of production and distribution that could otherwise be delegated to other businesses.

The alcohol industry generally operates under a three-tier system in the U.S., through which separate operators handle production, wholesaling and retail sales. Some have suggested that the alcohol industry wants the cannabis market to adopt its approach so that existing businesses like beer, wind and liquor distributors can profit from legal marijuana as well. But Dawson Hobbs, WSWA senior vice president of government relations, denied as much when the association made its initial announcement earlier this year.

“No, what we’re talking about is just creating a pathway for states to have federal recognition of legalization by enacting appropriate regulation that creates a safe and reliable marketplace,” Hobbs said at the time.

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Photo courtesy of Chris Wallis // Side Pocket Images.

Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.
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