March 11 (Bloomberg) -- The first month of recreational marijuana sales in Colorado brought in about $2 million in tax revenue, the first indicator of the earning potential of the U.S.’s premier legal pot market.
The January figure for retail sales was more than twice the $900,000 in taxes on medical marijuana, which has been legal since 2000. The long-awaited figures, released yesterday, were in line with what state officials said they expected as marijuana emerged from prohibition in Colorado.
“The first month of sales for recreational marijuana fell in line with expectations,” said Barbara Brohl, executive director of the Revenue Department, which regulates the marijuana industry. “We expect clear revenue patterns will emerge by April and plan to incorporate this data into future forecasts.”
When fees were included for registration of retail and medical marijuana businesses, total revenue to the state from its cannabis industry was $3.5 million from 59 businesses, the department said.
The numbers show that taxes from retail pot sales will provide a significant source of new funds for state policy makers, who are under pressure to prove they can tightly regulate a substance that’s illegal under federal law.
Governor John Hickenlooper, a Democrat up for re-election in November, proposed a $133 million spending plan for marijuana-related revenue through June 30, 2015, that dedicates the lion’s share of proceeds to funding drug education and substance abuse programs. The forecast assumed recreational cannabis sales of $610 million for fiscal 2015.
“Our administration is committed to the responsible regulation of adult-use marijuana and the effective allocation of resources to protect public safety and health and to prevent underage use,” Hickenlooper said in a Feb. 18 budget request to Representative Crisanta Duran, a Denver Democrat who is chairwoman of the legislature’s Joint Budget Committee.
“Indeed, we view our top priority as creating an environment where negative impacts on children from marijuana legalization are avoided completely,” the governor wrote.
The proposal drew criticism from law enforcement, marijuana business owners and some residents who disagreed on the best way to spend millions in new revenue.
Robert L. Ticer, president of the Denver-based Colorado Association of Chiefs of Police, sent a letter to Hickenlooper dated March 3 complaining that none of the governor’s plan would help fund local law enforcement.
“Many of our local law enforcement agencies have diverted staff from other operations into marijuana enforcement,” Ticer said, “leaving gaps in other service areas as a direct result of marijuana legalization.”
Ticer proposed that 15 percent of total marijuana revenue be earmarked for police for such things as training officers in how to recognize drivers who are stoned; for marijuana compliance officers to monitor pot cultivation, and to help create a statewide database on cannabis crimes.
The governor’s office is working with local law enforcement to address these concerns, said Eric Brown, a spokesman for Hickenlooper.
Colorado voters last fall approved a ballot initiative placing a 15 percent excise tax on the wholesale price of retail marijuana and a 10 percent sales tax. These levies come on top of a 2.9 percent state sales tax and local taxes. Taxes on cannabis are as high as 35 percent in some areas.
The first $40 million in excise tax is set aside for school construction. Hickenlooper’s spending proposal includes $45.5 million to deter underage marijuana use and $40.5 million for substance abuse treatment, among other programs.
The proposal, subject to approval by the legislature, also includes spending for a three-year statewide marijuana education campaign; to develop a web portal to educate residents about the drug; to collect information on illegal production of cannabis in the state; and to develop a registry of people suspected of driving under the influence of drugs and alcohol.
Marijuana business owners expressed concern that the governor’s request would fund a media campaign extolling the dangers of marijuana to a populace that overwhelmingly approved a ballot measure legalizing pot sales to those age 21 and over in November 2012. Washington State also allows retail sales and 20 states permit medical marijuana.
“I think the people of Colorado will feel slighted if this huge windfall ends up in an anti-cannabis campaign,” said Tim Cullen, co-owner of two Denver-based dispensaries.
Pot-related purchases of one sort or another more than quintupled to 550 a day, on average, from 100 since Cullen started selling retail marijuana on Jan. 1 at Evergreen Apothecary and Colorado Harvest Co. The business is adding two warehouses and doubling Evergreen’s retail space.
The new market’s nationwide appeal is evident at a Denver-based store called Medicine Man. Of about 300 people a day buying cannabis, more than half are from out of state, said Elan Nelson, a consultant for the company. About 100 a day patronized the store before Jan. 1, when it sold only medical marijuana, she said.
The company will finish a project doubling its space to 40,000 square feet next month, she said.
“What used to be our best day ever is now our normal day,” Nelson said. “With the way things are going, we may have to expand further.”
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