Learning curve

Four years ago, when backers of Colorado’s Amendment 64 predicted tax revenues on the marijuana industry would reach $100 million, many scoffed at the idea.

“It’s not a surprise that a report paid for by an out-of-state, pro-legalization organization, the Drug Policy Alliance, overstates the impact of legalizing marijuana for recreational use,” leading No on 64 advocate Roger Sherman told Westword, Denver’s alternative weekly, back in 2012. “This report triples the estimate from the state’s unbiased, nonpartisan Office of Legislative Council ….”

In fiscal year 2015-16, the state collected nearly $70 million in marijuana taxes—both sales and excise. And that’s not including local taxes and licensing fees, which reached $29 million in Denver alone. Nearby Boulder, with a population of about 100,000, has seen extra revenues to the tune of $2 million annually. It’s a significant amount of money, Boulder officials say.

“I’m not a tax expert, but it seems to vary between 2 and 3 percent of our overall sales tax,” said Mishawn Cook, licensing administrator for the city of Boulder. “That’s nothing to sneeze at. It’s been relatively substantial.

Boulder is a lot like Chico. It’s a college town, mostly white, with a median age of 28.7 (Chico’s is 28.6). Residents of the Colorado city that borders the Rocky Mountains skew Democratic and liberal, just as Chico’s voters do—though Chico has more registered Republicans at 30.3 percent, vs. Boulder’s 20 percent.

“One of the city’s initial focuses, and also our City Council’s initial focuses, was that we wanted these businesses to fit in to our city, not for our city to fit in with these businesses,” Cook said. Much like Chico, Boulder boasts a vibrant downtown area and takes pride in its open park spaces in the foothills of the Rockies. “It’s not a circumstance where you have marijuana location after marijuana location in a particular spot. It’s not allowed to perpetuate.”

This November, California is poised to join Colorado, Oregon, Washington and the District of Columbia in legalizing recreational cannabis. While a similar initiative six years ago failed to gain voter approval in the state, a recent poll by USC Dornsife/Los Angeles Times found that 58 percent of Californians support Proposition 64, aka the Adult Use of Marijuana Act (AUMA).

Prop. 64 would allow anyone 21 and older to possess up to 1 ounce of marijuana and 8 grams of concentrated cannabis for recreational use. The existing Bureau of Medical Cannabis Regulation would be renamed the Bureau of Marijuana Control and charged with licensing and regulating marijuana businesses on the state level. In addition, counties and cities would be empowered to set up their own set of rules, including taxes. The state would impose a 15 percent sales tax on pot and a weight-dependent excise tax on flowers and concentrates.

Money generated through taxes and licensing fees—estimated at tens of millions—would first go to cover the costs of enforcement and administration and then toward marijuana research, education and drug treatment programs. Local jurisdictions would have the authority to use collected revenue for their own purposes. For instance, in Boulder, the money goes to youth education programs and the county health department; the rest is deposited into the general fund.

To put this in perspective, in 2014, the California Board of Equalization had licensed about 1,600 medical marijuana dispensaries, according to its website. Those dispensaries brought in $570 million, translating to $45.9 million in state taxes. That money currently goes into the state’s general fund.

Just like in Colorado, medicinal cannabis will continue to exist. So, Prop. 64 does not remove or supercede Proposition 215. In the Centennial State, dispensaries for both medicinal and recreational marijuana exist. Some even occupy the same space. For lawmen like Butte County District Attorney Mike Ramsey, this poses a problem.

“The distinction between what’s recreation and what is medicinal is going to get extraordinarily difficult to determine,” he said recently by phone. “In Colorado, there’s an interesting gray market. You have stuff that’s grown legally for the recreation market but then sold on the medicinal market for no tax. How the regulators are going to keep track of that [in California] is going to be rather interesting.”

Colorado does tax medicinal marijuana, but at a lower rate than recreational pot.

Ramsey has long been a vocal opponent of legalization, both as medicine and recreation. He led the charge against several medicinal cannabis dispensaries that opened in the county nearly 10 years ago. All have since shut down. Some businesses do operate as mobile dispensaries in Butte County, however, occupying the current gray area MMRSA (the Medical Marijuana Regulation and Safety Act) hopes to eliminate by laying out specific permitting, licensing and operational procedures for commercial medical cannabis.

Ramsey walks the hard line, however.

“Why put another substance out there that people can abuse? There’s already enough out there: alcohol, tobacco …” he said. “I’m officially against it [Prop. 64]. My big concerns are that we’ll see, as we have seen in Colorado, a spike in adult use. And that legitimizes teen use, so that goes up. I’m concerned that we’ll see impressionable adolescents going down a road they probably shouldn’t go down.”

Data do show that adult past-month marijuana use increased after legalization in Colorado—63 percent, in fact, between 2011-12 and 2013-14. It’s a different story for kids and teens, however. According to data posted on the Colorado Department of Public Health & Environment’s website, young people’s pot habits have remained about the same since marijuana became legal. In fact, the percentage of middle- and high-schoolers who reported having smoked pot in the previous 30 days dropped from 25 percent in 2009 to 21 percent last year.

“Second,” Ramsey continued, “I’m concerned about adults driving stoned. We have way too many deaths already.”

That’s a sentiment shared by Chico Mayor Mark Sorensen. “One flaw [in Prop. 64] is a very serious flaw: They don’t define intoxication,” he said. “That is a glaring omission. Granted, we kind of lack the science. Even the .08 [blood-alcohol level] standard doesn’t work perfectly because alcohol affects different people differently.”

The states of Washington and Colorado have set a “drugged driving” limit at 5 nanograms of THC. A similar threshold has been proposed in California via Assembly Bill 2740. That bill is currently in the Assembly Appropriations Committee. Additionally, Colorado and Washington treat weed like booze when it comes to having an open container while driving. Smoking in your vehicle as well as in public is illegal.

Boulder is a good example of what the future of legalized pot would look like for Chico, as Prop. 64 is substantially similar to Amendment 64 (though the numbers are a coincidence).

Mayor Suzanne Jones says her city decided to allow marijuana businesses because a majority of local voters approved Amendment 64, which empowers local governments to regulate or ban such businesses.

“We needed to figure out how to make it work, not whether to make it work,” she said by phone. “We devoted a lot of staff and council time to figuring it out because it was important to make it right. What we ended up with was a pretty strict regulatory structure.”

Jones’ main concerns, which echoed many of her constituents’ concerns, revolved around youth access. “We wanted to make sure we regulated in a way that’s fair to businesses but also protects underage youth from an increase in accessibility,” she said. To that effect, Boulder adopted numerous rules regarding advertising—dispensaries can only display the name of their business, not sales or deals, in their windows, for instance, and they can’t have a booth at an event that is expected to attract a crowd made up of more than 30 percent of people under 21.

Locally imposed taxes also targeted protection of youth. In addition to state taxes, Boulder imposes a 3.5 percent sales tax and a 5 percent excise tax, says Licensing Administrator Cook. Last fiscal year, local taxes from 83 licensed businesses added up to about $2 million. To ease the transition, she said, they started with medical marijuana dispensaries, which were allowed in Boulder starting in 2010.

“We gave our medical locations about a six-month head start before we started taking brand-new license applications,” she said. “Plus, our City Council has decided not to have a license numbers cap. Instead, they’ve decided to sort of control numbers by virtue of distance from schools, density, etc. So, we can’t have more than three marijuana locations within 500 feet of each other.”

The tax revenue has more than paid for the administrative costs associated with regulation and enforcement of policies, Cook said. “Those dollars have been used to fund a marijuana enforcement [police officer], an additional fire inspector, and city licensing has also gotten an additional staff person,” she said. “We’ve also been able to fund things like youth education, and to award moneys to our county health department for campaigns on how to talk to your kids about marijuana use.”

Jones pointed to the city’s strict regulations as important in shaping the industry in Boulder. Those include mitigation measures to eliminate odors, sustainability requirements because indoor growing, for example, uses a lot of electricity, and safety concerns, “We don’t have a ton of room to grow and expand. One concern was that we not be overrun by marijuana businesses and growing [operations],” she said. “And because it was all brand new, we wanted to be sure to weed out the bad characters and end up with responsible business owners who met community values.”

Cook agreed. She said the city formed a multidisciplinary team, which she’s a part of, that meets every two weeks. “Marijuana is our project and our focus, and we’ve all been working together now for a number of years. That’s proven to be invaluable to us. What one person doesn’t know another one does. We’ve been strict with licensing and enforcing our city code, and that’s resulted in better, more compliant businesses—as opposed to folks who haven’t ever run a business but they gravitated toward the marijuana part of it.”

In addition to its employees working together, the city also has been proactive about communicating with the community. Early this year, the city put together an advisory board made up of city staff as well as those in the marijuana business, public health officials and regular folks. They spent six months hashing out the pros and cons and came up with a list of recommendations moving forward. The council will probably adopt most of them, Jones said.

“In my estimation, our local code has done many things well,” Cook said. “There aren’t secondary community impacts. So, people who have a business right next door to a marijuana grow aren’t going to be affected by odor and security issues. We tried to think ahead to sort of think of those things.”

Boulder, of course, is not the only place to buy pot in Colorado. But many jurisdictions have decided to opt out. Vail, for instance, does not allow marijuana businesses, citing a desire to remain a tourist destination because of its superb natural beauty and (non-pot-related) recreation activities. A recent article in the Aspen Times indicates, however, that views there might be changing—Vail already has created a working group to discuss the possibility of allowing such businesses.

“Honestly, they’re missing out on sales tax,” Jones said of jurisdictions that have banned cannabis businesses. “It was clear that we should allow recreational marijuana and figure out how to make it work. If other communities decided not to allow it, we would just get their business.”

Locally, DA Ramsey already has voiced his opinion on the matter and says he’ll continue to do so—to recommend that Butte County and its municipalities not allow marijuana businesses. Sorensen seemed more open to learning more about the issue.

“We’ve all gotten exposed to—or is it bombarded with—information,” he said. “I’ve certainly read many statements [from constituents]. Even among the marijuana industry, some of those folks are pretty upset about it; they’re not for it.”

Considering the changing nature of laws and the fact that Prop. 64 has yet to be put to a vote, Sorensen acknowledged he hasn’t done a ton of homework just yet. City Manager Mark Orme says staff is currently looking into the matter.

“Cities across the state are taking various approaches to this issue,” he said. “Some are looking to ban both medical and recreational uses; others are choosing to allow certain medical marijuana activities, including dispensaries, growing but maybe not delivery; others are allowing all uses permitted under state law, which, if Prop. 64 passes, will include recreational uses.”

He added that, should Chico decide to create a local tax on marijuana, it would have to be approved by a vote of the people. There is no scheduled discussion for council at this time.

“My advice to you is to make sure you have your own flow of money,” Jones said to the city of Chico. “That money should cover administrative costs—and that can be significant. Grows use a lot of electricity, and there are issues around smell. Go get these things inspected, follow up on enforcement and complaints, do background checks.

“Start with robust protections in place,” she continued, “then, once things get established, you can tweak them. Be in charge of your own destiny.”