Among the four states to legalize recreational marijuana use and sales on Election Night 2016, a clear winner in the competition to cash in on tax revenue has emerged.
Voters in California, Maine, Massachusetts and Nevada approved cannabis legalization measures on the same night two Novembers ago.
Of these, Nevada was the first to record licensed and regulated retail sales in July 2017, a full six months before the first day of sales in California on January 1, 2018.
And since sales began, Nevada marijuana retailers have enjoyed a booming market—and with it, higher-than-expected tax revenue for the state, much of which is going directly to schools.
According to Nevada state marijuana regulators, taxable sales in the 12-month period from July 2017 to June 2018 are expected to exceed $500 million.
That’s 25 percent higher than official state revenue projections, which generally err on the side of caution.
And it absolutely destroys sales figures seen in Colorado and Washington during those two states’ first-in-the-nation early days of retail sales. In the first six months of 2014, Washington recorded $67 million, and Colorado $114 million.
The relative ease with which Nevada rolled out retail marijuana sales and their overwhelming success stands in stark contrast to the other states. In California, first-quarter sales fell well behind official state projections, in large part due to a highest-in-the-nation tax burden and cities and counties slow to adopt or outright to retail marijuana sales.
And in Massachusetts and Maine, a combination of local NIMBYism and government foot-dragging has meant that neither state has yet recorded a single sale.
“We are viewed by many others outside Nevada as essentially being the gold standard,” Nevada Taxation Department Director William Anderson told The Associated Press. “It’s an often-used term, but it’s appropriate here.”
At the same time, Nevada still has a long way to go before it catches Colorado’s current sales figures. In 2018, fueled by visitors from New Mexico, Texas and elsewhere, retail sales of marijuana in Colorado exceeded a staggering $1.5 billion, according to the Denver Post.
According to official first-quarter sales figures released by the state Department of Tax and Fee Administration, California raked in nearly $61 million.
That’s still on pace to miss Gov. Jerry Brown’s (D) prediction of $175 million in tax revenue from the first six months of the year. At the same time, more cities and counties—which must license retail dispensaries for them to operate—that were slow to allow for retail sales, such as Los Angeles, have come online.
In Alaska, which voted to legalize recreational marijuana sales in 2014, revenue from state marijuana taxes increased almost tenfold from year to year, with sales expected to continue to increase this year.
According to official figures released Wednesday, the Alaska Department of Revenue collected more than $11 million in taxes during the fiscal year that ended June 30—compared to $1.7 million the year before.
“I don’t believe the market has saturated and we haven’t seen exactly what capacity the state is going to operate in as far as cultivation and retail stores and the other facilities,” Kelly Mazzei, a tax official with the Department of Revenue, told NBC affiliate KTUU.
Marijuana Trade Group Demands Action Against Unlicensed Los Angeles Dispensaries
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.
“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.
Photo courtesy of Chris Wallis // Side Pocket Images.
Nearby Marijuana Shops Make Homes And Rentals More Valuable, Studies Show
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.
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.
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.”
Photo courtesy of WeedPornDaily.
Major Alcohol Association Briefs Congress On Marijuana Legalization
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:
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.
Photo courtesy of Chris Wallis // Side Pocket Images.