From free-for-all to business as usual: How Marijuana sales have evolved

From free-for-all to business as usual: How Marijuana sales have evolved

A Decade of Cannabis Legalization in Colorado: Financial Impact and Community Perspectives.

When cannabis became legal in Colorado more than a decade ago, it quickly turned into a cash cow with sales tax revenue piling up as if the state were printing money.

The state taxed the industry heavily, with much of the revenue going to help schools with infrastructure needs. With the distinction of being the first state to legalize the sale of recreational marijuana, communities working without a road map scrambled to write local regulations to restrict when and where dispensaries opened and operated. Opponents worried about the potential increase in crime in the predominantly cash business. Employers fretted about people coming to work high.

Some communities banned dispensaries from the start. Others embraced them.

Fort Collins was among those that had a tumultuous start, first imposing a moratorium, then approving, banning and shuttering dispensaries before ultimately approving them again as voters' wishes ebbed and flowed.

Now, the "free-for-all" early days have turned into business as usual. Fears never played out.

Those who opposed legalization of a drug the federal government still considers illegal couldn't deny the financial windfall.

From 2014 through August 2023, cannabis sales surpassed $15 billion statewide, according to the Colorado Department of Revenue. Fort Collins racked up nearly $1.5 billion, resulting in more than $24 million in sales tax revenue. Larimer County, with only two dispensaries, collected more than $6 million in sales tax revenue.

How the pandemic impacted marijuana sales in Colorado

Annual sales at the state, county and local levels peaked through 2021 before trending down in 2022 and 2023.

Steve Ackerman, owner of Organic Alternatives, said the spike, which he attributed to the pandemic, has now leveled out. "I'm sure it had something to do with people having extra time on their hands from not going anywhere," he said.

Most people were stuck at home — some out of work, others furloughed — and anxiety was high. Sales and use of alcohol and cannabis spiked as people found different ways to cope with the new reality. Liquor stores and dispensaries were considered essential businesses that were allowed to stay open while most other businesses were shuttered.

"There was a lot of self-medicating going on," said Ginny Sawyer, the city's project and policy manager, who has been on this journey since the beginning.

Prices also went up as much as 50%, said Dawn Thilmany, professor of agricultural economics at Colorado State University. So, the increased revenue may not be solely due to increased use, she said. When cannabis was first legalized, the price of buds was nearly $2,000. That dropped to about $750 pre-COVID, then rose again before dropping in the middle of 2022.

According to the Colorado Department of Revenue, which tracks the median market price, the median price per pound of buds is expected to be about $750 for the second quarter of 2024. The price rose to $2,007, its highest price, in January 2015. Prices remained under $1,000 in 2018 and 2019 before cresting that mark in January 2020. Prices remained over $1,000 per pound until January 2022 when they fell to $948. The price dipped to its lowest point of $649 in April 2023.

"During COVID, the market really shot up and demand shot up," Ackerman said. "Because of that, more people were enticed to enter the market as producers ... there was a great deal more supply on the market."

When the pandemic abated, the market kind of sunk back to where it was before, Ackerman said. "It's at a level that we can anticipate it is going to remain at."

Another factor in the decrease could be more home horticulturists who got into growing during the pandemic. Consumers are allowed to have 12 plants for personal use.

"Just like home gardening, people may have realized they could produce enough for themselves at home," said Thilmany. Customers can "go into stores and say, yeah this is great that it's now legal, but it's way costlier," she said. "We don't know how much it's driven home production."

Fort Collins currently has 42 cannabis-related licenses — 11 medical and 11 retail licenses, 12 cultivation licenses and eight product manufacturing licenses, according to the city.

Sales taxes collected from cannabis sales jumped from $3.2 million in 2019, to $3.8 million in 2020 and to $4.1 million in 2021. As life started to resemble normalcy in 2022, sales tax revenue dropped to $3.7 million and last year topped out at $3.3 million, still over pre-pandemic levels but down drastically from 2021.

As big as the total sounds, the city has a $500 million annual budget, so even at its highest point, marijuana sales tax revenue was only a small portion. "All money is helpful, and we want to support all business, but I don't know there's a reliance on that," Sawyer said.

Being first came with new challenges

Being the first to legalize marijuana, demand soared both from Colorado residents and tourists who wanted to buy legal marijuana, and it attracted international and out-of-state entrepreneurs who wanted to set up business, Thilmany said. And because Colorado had a monopoly, the state "taxed it pretty heavily knowing it was such a unique boutique thing that they could do it."

Fort Collins never jumped on the tax bandwagon, however. It taxes medical and recreational pot at the same rate as other retail goods. So, whether customers are buying $100 of marijuana at Organic Alternatives or a $100 sweater at Foothills mall, they'll pay the same $4.35 in city sales tax.

And when staff offered City Council the option of increasing the tax on pot to raise money for high priorities like affordable housing and recreation in 2023, council rejected the notion.

Now, 24 states and the District of Columbia allow recreational and medicinal cannabis sales and use. Only six states — Wyoming, Nebraska, Idaho, Kansas, North Carolina and South Carolina — totally ban both. The remaining states have a mix of laws, including some that allow medicinal use or CBD oils.

The past and future of marijuana in Fort Collins

In 2010, a court ruling created a loophole that allowed for more sale of medical marijuana and the city saw a "huge influx" of people getting home occupation licenses to grow marijuana for medical purposes, Sawyer said, leading to a moratorium to give the city time to develop zoning and land use regulations. "We didn't look at a number (of licenses) necessarily but looked at the use type, what zoning was appropriate and how and what we wanted to license," she said.

At the time, Fort Collins had no other governmental entities from whom to model codes. "There was a lot of unknowns and a lot of anxiety," Sawyer said. "Locally, the biggest challenge was in the banking arena."

Because cannabis was illegal under federal law and banks are federally regulated, most did not accept deposits from cannabis businesses. "There was nowhere for those businesses to bank," Sawyer said. "Literally, we had people coming in with $10,000 in cash to pay for their licenses and applications. That piece was problematic."

By October 2011, the city had 20 licensed medical marijuana centers, most of which had their own city-mandated grow facility, Sawyer said. "We didn't want people just coming to Fort Collins to grow marijuana alone and taking up small industrial warehouses. We tried to say if you have a grow, you have to have a (sales) center," she said.

Dispensaries could buy from whomever they wanted, but if people wanted to grow marijuana, they had to have a sales center.

In November 2011, city voters passed a ballot measure banning all marijuana businesses, which led to the closure of all dispensaries and grow operations. A year later, voters reversed the 2011 decision and approved the sale and use of medical and recreational marijuana.

Under the ballot initiative, one medical center was allowed for every 500 registered medical marijuana patients in the county. At the time, there were roughly 5,200 Larimer County residents with medical marijuana cards, which is how the city came to allow 11 dispensaries in addition to two that were grandfathered in. There are two dispensaries in unincorporated Larimer County.

Loveland, Windsor, Estes Park and Timnath ban dispensaries, but Loveland City Council has been discussing a future ballot initiative that, if passed, would allow the sale of medical and recreational marijuana.

Berthoud allows them, and after Wellington voters repealed the town's ban on marijuana dispensaries by one vote in 2021, Smokin' Cowboy, a drive-thru recreational cannabis dispensary, opened this year.

Since Fort Collins already had the medical marijuana framework in place, it tied its recreational licenses to medical licenses as a way to limit the numbers, Sawyer said. "Only medical marijuana centers could apply for a retail license. That is still true today," she said.

Now that you don't need a medical marijuana card to buy cannabis, there's "not even 3,800" medical marijuana card holders in Larimer County, Sawyer said.

As Fort Collins looks to the future, Sawyer said there's probably room for another dispensary and perhaps the city doesn't need to tie grow operations to the sales counter any longer. And adding delivery service could be something down the road if residents and council are interested.

Liquor stores began home delivery during the pandemic and the state now allows cannabis home delivery as well. But municipalities have to opt in to the program and thus far, Fort Collins has not taken that step.

Cannabis goes corporate

The other change? Cannabis went corporate. The first stores to open in Fort Collins were all local mom-and-pop shops that were small-town people who had an interest in horticulture and the ability to open these businesses, Sawyer said. Now, the small independent stores have been largely bought out. "A majority are corporate ... the industry has become professionalized," she said.

The corporate influence has been positive, said Jim Lenderts, Fort Collins Police Service's marijuana enforcement officer.

"Corporate stores probably have a better business model," he said. "They design their stores to look like stores. That doesn't mean bigger is always better. Sometimes corporate stores and corporate lawyers come in and test us."

Lenderts has been on the job for eight years and spent much of that time bridging the gap between police and store owners. It's taken a lot of communication, awareness and training, he said.

"Eight years ago, it was very much a 'we vs. them' mentality on both sides," Lenderts said. Police worried stores would be selling to minors or shipping out of state. Stores worried they'd be harassed by police who didn't want the stores in the city. That thinking has all but disappeared, thanks to that bridge Lenderts helped build.

Now, police routinely bring new trainees to dispensaries to look around and get a feel for the business, Lenderts said.

In a college town, it's not unusual for those under 21 to have fake IDs to get into bars and dispensaries. So, it takes regular training to teach cannabis store employees how to spot a fake ID. If they spot a fake identification, they seize it and send it to police.

Last year, between bars, liquor stores and cannabis stores, 700 fake IDs were seized and sent to police, Lenderts said. In the last four years, all cannabis stores have passed the city's compliance check, which involves sending an underage Police Explorer with a valid ID to try to enter the store or buy product.

Eight years ago, 30% of stores failed the check and let the person in, Lenderts said. For the last four years, they've all passed the check. "They will run my kid out and that's a big win," Lenderts said. "We're partnering with them and holding them accountable."

If an employee fails to check an ID and allows access to a minor, the employee typically gets fired, he said. "It's a pretty high standard. That's how seriously we take selling to minors."

Now law enforcement perceives cannabis stores and cultivation facilities not as a threat but just as a another business in the community. "They know if they operate as a legitimate business, they'll get treated with respect, " Lenderts said.

A common misconception is that cannabis would bring crime to the community, Lenderts said. "That hasn’t proven accurate in our community." It's been at least seven years since there's been a burglary at a marijuana store, fewer than other businesses in the community, he said.

That's due in part to the requirement that cannabis stores have video surveillance and the manager on site has to know how to print a still photo from the video immediately. "I've been to bank robberies where no one on site knows how to run the video," he said. "It's significant in law enforcement. If there's a crime at your business, give us the tools to help you."

Criminals have figured that out and know if they commit a crime there, they'll be on camera, he said.

Poudre School District sees some benefits from marijuana taxes

With the passage of Amendment 64, which legalized recreational marijuana in Colorado, voters approved a 28% sales tax on retail marijuana products. That included a 15% excise tax to benefit K-12 education in Colorado.

Of that 15%, the first $40 million each year went to Building Excellent Schools Today, or BEST, a capital construction fund boosted by sales tax revenues from marijuana in Colorado. In fiscal 2015-16, voters approved a one-time bump to the BEST fund, bringing the total pot to $80 million. 

That changed again in 2019 when House Bill 1055 mandated that 100% of the excise tax on retail marijuana be collected for school construction.

BEST also gets money from Land Board proceeds, the Colorado Lottery and interest from the Public School Capital Construction Assistance Fund.

The BEST program prioritizes health, safety and security issues such as asbestos removal, new roofs, building code violations and poor indoor air quality. BEST grants are competitive, awarded annually and in most cases must be supplemented with local district matching funds. 

A statewide facility assessment completed in 2009 inventoried more than 8,000 facilities, with more than 123 million square feet assessed, and revealed $13.9 billion in capital construction needs. This need has grown every year since, according to the Colorado Department of Education.

From 2017 through 2023, Poudre School District received about $1.35 million in funds from marijuana revenue, including $187,163 from the BEST program used for air quality improvements; $811,837 from the Expelled and At-Risk Student Services, or EARSS program; and $310,900 from the Ninth Grade Success program, to ensure that students enrolled in ninth grade develop the skills they need to move on to 10th grade.

An email from the district said it had no public records about grants through the bullying prevention, early literacy grant program, the school health professional grant or the state public school fund.

Previous Coloradoan reporting detailed PSD receiving the following grants from marijuana revenue:

  • 2014-15: $81,556 from the Colorado Department of Education School Health Professionals Grant Program. The district used the funds for substance abuse prevention. In 2015-16, the district applied for the grant again and received $98,353.
  • 2016: $437,824 for 2 ½ years of bullying prevention activities at Lesher, Wellington, Blevins and Preston middle schools. That money went toward funding school counselors to implement bullying prevention curricula and activities at each school.
  • 2016: $216,740 for drop-out prevention and student engagement programs at three high schools. The district also received $93,058 from the same grant fund to provide a second year of funding.
  • $1,155,060 over three years to fund counselors at Rocky Mountain, Poudre and Fort Collins high schools to work on behavioral health and disciplinary issues as well as counselors at Irish and Laurel Elementary for substance abuse prevention and behavioral health issues.

BEST distributes funds through grants for construction. Schools with needs involving health, safety and security issues are priority. Districts often must match BEST funds with local district money.

How marijuana is taxed statewide in Colorado

Excise tax: 15% due when retail marijuana is transferred from a cultivator to a processor or distributor. If a processor, distributor and cultivator are the same business, the excise tax is applied to a wholesale price calculated by the state Department of Revenue.

Special sales tax: 15% paid by consumers when retail marijuana is sold. It is similar to a general sales tax.

State sales tax: Medical marijuana is not subject to the excise tax or special sales tax, only the state's standard 2.9% general sales tax.

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Region: Colorado

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