Weed Messiah Saving Colorado's Cities and Towns

Written by Jason Simpkins
Posted March 9, 2016

Legal weed has been a financial boon, no doubt. But only recently have we begun to see the tangible effects of the flooding cash.

Colorado's 938 dispensaries generated $65 million in state taxes, Bloomberg reports. Of that, $6 million was shared with cities, which used the money to plug budget holes and repair decrepit infrastructure.

Trinidad, a former mining town plagued by evaporating industry, received $850,000 in weed revenue last year. It's using that money to dig up 140-year-old brick streets and replace clay and wooden water lines. The taxes make up 10% percent of the city’s budget and are replacing revenue lost to declining property taxes after railroad and mining operations closed.

In Pueblo County, a 5% excise tax will apply to sales of up to 20 tons of marijuana grown at Los Suenos Farms, the nation’s largest legal outdoor cannabis facility. That’s expected to help generate $1.7 million in college scholarships. And an additional $1.7 million collected from the farm and the county’s 88 other licensed cultivators will fund sidewalks on rural roads and other projects.

“The scholarships are something that couldn’t have happened before,” Los Suenos Farms sales director Michael Cadwell, told Bloomberg. “I don’t see the alcohol industry paying for scholarships.”

Furthermore, the cannabis grower is spending locally, buying GPS-controlled tractors and dozens of other agricultural products from nearby stores. Roughly two-thirds of construction under way in unincorporated areas is cannabis-related, according to city officials.

In other parts of the state, marijuana is compensating for declining oil and gas revenue.

One town called DeBeque was facing bankruptcy, when it approved several dispensaries and grow operations “more or less out of desperation,” said Lance Stewart, the town administrator.

“The community can, for once, start replacing streets, curbs and gutters and reline settling ponds for sewers,” he said.

Richard Sprague, a town trustee in Empire, says: “People here don’t really care for marijuana, but the sales tax from pot is helping us stay afloat.”

Two dispensaries in that town have replaced revenue lost after antique and convenience stores closed down last year.

Finally, Denver – home to 85% of Colorado’s pot stores – collected about $29 million in marijuana taxes and fees in 2015. Of that, $11 million was budgeted for regulation, enforcement and drug prevention, with the rest flowing into the city’s general fund.

In all $135 million in state taxes and fees were collected by the state last year – 44% more than a year earlier.

It's no wonder other cities, states and municipalities are following suit in rapid succession.

In 2014, pot legalization initiatives passed in three of the four elections where they appeared on the ballot. That group includes Alaska, Oregon, and Washington D.C. Florida, the lone holdout, missed by just 2% of the vote.

Five more states will address the issue in 2016: California, Nevada, Arizona, Massachusetts, and Maine.

Among them California and Nevada are most likely to legalize marijuana. Maine and Massachusetts are something of a toss-up. And Arizona is least likely.

Still, it's a legitimate possibility that all five of these states will vote yes. And it'd be hard to blame them.

Washington state, which legalized marijuana last summer, levies a 25% excise tax that's expected to bring in more than $694 million in revenue through the middle of 2019.

Alaska stands to gain $23 million in annual tax revenue from the marijuana market.

And Oregon could see nearly $40 million in marijuana taxes the first year alone.

Also, as in Colorado, hundreds of millions of dollars would be saved from enforcement.

Fight on,

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Jason Simpkins

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Jason Simpkins is Assistant Managing Editor of the Outsider Club and Investment Director of Wall Street's Proving Ground, a financial advisory focused on security companies and defense contractors. For more on Jason, check out his editor's page. 

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