Manitou set to own pot market

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As Colorado Springs watches, county’s first retail shops could open by April.

On Jan. 21, the Manitou Springs City Council voted on a second reading of an ordinance to allow two retail marijuana stores to operate within a narrowly defined commercial area of the city.

Since the Council passed the ordinance on first presentation by a 6-1 vote, it’s no surprise that it passed easily on the second reading, also by a 6-1 vote. Store owners are poised to reap a bonanza, assuming they can get enough product to meet expected demand.

How large will the demand be?

On Jan. 8, retail outlets around the state reported aggregate sales of $5 million during the first week of legal recreational marijuana sales. Long lines were reported at stores statewide in the first few days.

The lines were still there on Jan. 11, when this reporter ventured timidly into a friendly Denver LoDo establishment. No edibles were available, and tight supplies limited customer purchases to three grams, or about an eighth of an ounce. The law of supply and demand was readily apparent, with prices ranging from $18-$22 a gram.

A dozen colorfully named strains (e.g., Death Star) were available, and the sweet scent of marijuana perfumed the air. To one born three years after national marijuana prohibition took effect in 1937, it was a surreal scene.

If Manitou stores retain a local monopoly for any length of time, they’ll serve a market of more than 650,000 people, approximately 15 percent of the state’s population.

So do the math: If retail outlets outside the Pikes Peak region did $5 million in a week, then the regional market could account for $750,000 or more in the same period.

That’s far more than Manitou has projected. Some reports suggest that many first-week buyers may have come from other states, inflating totals. Also, potential customers in northern El Paso County might go to Denver, while those to the south could head for Pueblo. And it’s doubtful that the two proposed stores could physically accommodate such customer volumes. At $400 an ounce, the stores would have to sell 1,200 ounces in a week and serve several thousand customers in that period.

Yet if the regional market is anywhere close to $50 million annually, that’s an enormous number. By comparison, the average Wal-Mart supercenter has average annual sales of $72.5 million.

Asked for his take on these highly theoretical numbers, Manitou Springs Mayor Marc Snyder had a one-word reply:

“Wow!”

“We’re not budgeting a penny in the 2014 budget (from retail marijuana),” he continued, “but we’ve identified areas of concern.”

Those areas include transfers to minors, possible staffing needs and impacts on tourism.

“I’m not in the business of granting monopolies,” he said, “but I’ll never support putting retail marijuana in our historic downtown. Many of our tourists come from Texas or the Midwest, and I don’t think they’re interested in marijuana.”

Under state law, Manitou’s two existing licensed dispensaries are grandfathered in for retail. According to Snyder, they’ll have a nine-month window before other licenses can be granted. Manitou might realize a substantial tax windfall from the new businesses. The city already collects a 3.9 percent sales tax, and will receive another 5 percent directly from marijuana purveyors, in addition to a 1.5 percent rebate of state taxes.

The first retail shops may be open as soon as mid-April, Snyder said, depending upon the regulatory process.

Voters in Palmer Lake will decide in April whether to allow retail marijuana sales, so it’s possible that Manitou’s local monopoly will be short-lived.

Projected windfall

Nevertheless, the Colorado Legislative Council has projected that marijuana sales will amount to $578 million annually, bringing in $67 million in state sales tax revenues.

Those numbers are attractive — so much so that retail marijuana may soon come to Colorado Springs.

During 2012, the city collected $989,000 in tax revenue from medical marijuana. It seems likely that retail marijuana sales would bring in several times as much. Mayor Steve Bach has frequently predicted that the city will be insolvent within three years if present revenue/expenditure trends continue. An extra $5 million in annual revenue would make a significant difference.

The Colorado Springs City Council split 5-4 against allowing retail marijuana in a 2013 vote. Councilor Val Snider, who had been widely expected to support retail marijuana, was a no vote.

Recently, Snider has given indications that he might change his mind in view of the successful rollout of retail marijuana statewide. If no other councilor switched sides in a revote, that would open the doors to retail marijuana in Colorado Springs.

But at least one of the four councilors who supported retail marijuana may have changed her mind. Councilor Jill Gaebler now believes Council should refer the issue to a public vote.

“What Council gives, Council can take away,” said Gaebler. “Whatever the voters decide, only the voters can alter. I’ve asked (city staff) to prepare language for such a referred issue.”

Vote not a certainty

The political implications of a public vote are complex, so much so that a majority of Council might hesitate to put it on the ballot. Those of their number who believe that permitting retail marijuana sales could endanger the city’s military/industrial presence might oppose a vote.

Conversely, some councilors who supported retail sales might not necessarily support a public vote. Council President Keith King pledged during his 2013 campaign to support retail marijuana because voters in his district had strongly supported Amendment 64. He may not feel bound to support a referred measure, given the expense and uncertainty.

A referral would make sense, Manitou’s mayor believes.

“[Council would] retain control over the content,” Snyder said. “They’d have no control over a voter-initiated measure. In any case, it could be difficult to pass. An ‘advisory’ vote in Englewood last November barely passed, although Amendment 64 had gotten more than 60 percent of the vote.”

So Manitou may hold on to its monopoly — and that’s fine with Mayor Snyder.

“Val Snider may have done us a big favor,” the mayor said with a chuckle.

One Response to Manitou set to own pot market

  1. “permitting retail marijuana sales could endanger the city’s military/industrial presence”

    As the state capitol Denver has numerous state and federal employers. I hear no talk of the Federal Center, the Mint, Buckley AFB, etc being jeopardized by Denver’s allowance of RMJ. Given the higher, no pun intended, expectations of the military/industrial employees I would expect RMJ would be a non-issue if government clerks in Denver can continue to perform their duties since the rollout of RMJ January 1st. Hiding behind the city’s “military presence” is weak and shows an unwillingness, or worse inability, to think about or discuss the issue.

    Jason
    January 22, 2014 at 1:03 pm