Green Gold

Colorado's pot boom brings in cash, but less than they thought

After Colorado voters approved the legalization of marijuana, observers wondered how the state would tax and regulate its sale.

"We realized very fast that we were the only ones in the world taking it on," says Daria Serna, communications director for the Colorado Department of Revenue.

The department asked state lawmakers to fund another communications position if Proposition AA, which called for taxing pot sales, passed in November 2013.

Voters approved the measure, and the new worker came on board. And as predicted, Colorado communications officials have kept busy, fielding media requests from all corners of the world. Serna, a former reporter, found herself educating representatives of far-flung countries about just how voters in a US state are able to legalize the sale of a plant that's still considered an illegal narcotic by the federal government.

"Other countries don't do things that way," she says.

The Great Recession choked revenues to governments across the nation. New Mexico has been slower than most to get out from that chokehold. When Colorado became the first state to legalize and tax pot, advocates here looked to the Land of Enchantment's northern neighbor with envy about the cash that recreational sales could bring to state coffers.

But is Colorado's weed boom really as green as it's made out to be? The first year of its great marijuana experiment offers some lessons.

State officials initially overestimated how much tax revenue Colorado would get from marijuana sales in 2014, due to a slower-than-anticipated rollout of recreational stores and the "difficulty in predicting the size of a brand-new market for a previously illegal product," wrote the state's Legislative Council staff in a December 2014 report.

Last year, according to a January Department of Revenue report, Colorado collected $37.7 million from the three sales taxes imposed on recreational marijuana sales. Meanwhile, according to the report, the state also collected $3.1 million in licensing and fees from new recreational-use businesses. (Serna says the department now estimates the revenue from the sales last year topped $52.6 million, but a breakdown of the exact revenue sources for the figure wasn't immediately available.)

New Mexico state Sen. Jerry Ortiz y Pino, D-Albuquerque, calls tax revenue like that a potential "shot in the arm" for New Mexico. The cash that Colorado collected, according the January report in 2014, constitutes 1.4 percent of the $2.6 billion in revenue New Mexico generates from all of its state taxes.

Ortiz y Pino points to other savings that could re sult in legalization. "We're spending so much money on enforcement and prosecution and court time and then in jail time and prison time," he says of marijuana-related offenses.

In Colorado, voters must approve state sales taxes, and Proposition AA asked them to pass a 15 percent excise tax on the sale of marijuana from growers to sellers, as well as a 10 percent sales tax on retail sales of marijuana at the counters of recreational shops. The first $40 million of the 15 percent excise tax is dedicated toward school construction projects. Yet, revenues for that part of the tax only reached about $10.3 million.

For every dollar, you're giving a dime to the state.

New small-business owners like Robert Schultz, who opened a recreational retail shop in Trinidad in November, also face local taxes. Schultz says the costs can add up for Trinidad's Higher Calling U, the first recreational shop to open in Las Animas County. "I'd say it's too high, especially at the state level," he says of the taxes. "For every dollar, you're giving a dime to the state."

Some point to evidence that overtaxing legal weed will drive customers to the black market if prices become too steep. That not only presents potential legal woes for buyers and sellers; the state obviously doesn't see any tax dollars from street sales.

Schulz, who also owns a construction company in the storied western town that's just across the New Mexico border on I-25, converted an old Pepsi distribution warehouse into a retail shop that currently sells recreational marijuana products. When it opened, Schulz hired 12 employees, he says, most of them in full-time positions. He sees other positive economic impacts of legalization, such as the tourism that it brings to Trinidad, particularly from nearby

ski areas. And he tells stories of travelers who move from states like California to work in Colorado's budding industry. The Denver Post's pot publication, The Cannabist, lists 384 businesses throughout the state on its dispensary and shop master list.

Legalization opponents argue that recreational marijuana might also have the impact of discouraging some potential tourists. They also point to new burdens placed on the criminal justice system, like preventing legally purchased weed from getting in the hands of minors.

Even if those local governments have a new pot of money from taxing marijuana sales, collecting that cash hasn't always been easy, especially with banks' reluctance to work with recreational sellers. Gilbert "Bo" Ortiz, the county clerk in Pueblo, about 300 miles north of Santa Fe, says that the recreational dispensaries in his county have been paying the sales tax with cash. Banks have refused to deposit the retailers' money.

"I'm a little nervous talking about this," Ortiz says, "but it can be a lot of money."

Of roughly $1 million in sales made by 11 marijuana merchants within its jurisdiction, according to a spreadsheet provided by Ortiz, Pueblo County netted $36,669 from its own 3.5 percent sales tax in 2014.

New Mexico cities and counties that rely on fluctuating tax revenue might be envious of Ortiz' security problem. Still, advocates here aren't hopeful that legalization will get far in the current political climate, which features a Republican governor (and former prosecutor) who opposes legalization and a Legislature with some Democrats, particularly from rural districts, who bristle at the idea of recreational marijuana sales in the state.

Insiders say reform might have better chances in 2018, when the political climate could shift. By then, some say more states will have legalized pot, making the prospect of a Colorado-like green boom less likely as the novelty of smoking weed legally wears off.

"I like to compare it to Las Vegas when they were the only ones who had gambling," says Schultz, the Trinidad recreational seller. "Everybody went to Vegas to party and gamble. It is a boom, and we're taking advantage of it until the rest of the country wakes up and says, 'Wow, look at what they're doing. Why can't we do this?'"

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