Editor’s note: Reporter Elizabeth Hewitt spent a week in Colorado earlier this month to look at lessons learned in the state that first opened legal recreational marijuana sales. Vermont lawmakers are expected to consider similar legislation in January.
[D]ENVER — Visitors to Nome Street in an industrial northwest corner of Denver are met with a conspicuous olfactory welcome.
Partway down the street, inside a 40,000-square-foot warehouse, workers in blue scrubs tend to thousands of marijuana plants. The company, Medicine Man, harvests 25 pounds of marijuana every day, which it sells at a storefront on Nome Street and a recreational dispensary a few miles away in Aurora.
Medicine Man is not the only grow operation close by, even on this block. The area, Montbello, has become so popular in Colorado’s new green industry that residents have given it a new nickname: “Potbello.”
Colorado, the first state to allow legalized, regulated recreational marijuana sales, has become a template as other states around the country have followed suit. As of the 2016 election, eight states and the District of Columbia allow adult recreational marijuana use.
Nearly three years into the experiment, Colorado offers a glimpse of what legalization might look like in Vermont, if it joins those ranks. Earlier this year, Vermont lawmakers tried and failed to pass legalization legislation but are expected to take up the issue again next year.
Amendment 64
There are almost 1,000 medical and recreational dispensaries licensed in Colorado. Or, as some like to point out, more dispensaries than Starbucks and McDonald’s locations. Combined.
Dispensaries, many of which deal both in medical and recreational product, range in vibe from clinical, like a doctor’s office, to hipster coffee shop, to neighborhood liquor store. All come complete with in-the-know, licensed employees, called budtenders, to guide customers to the right product for them.
Splashy ads in weed-focused glossies (one is called Dope Magazine) promote health companies (HempMeds), international business events (Toronto’s 2017 O’Cannabiz Conference & Expo), and the six-city Four-Twenty Games (“destigmatizing millions of responsible, positive cannabis users through athletic achievement”).
Wordplay aside, Colorado’s marijuana industry has established itself as a growing economic behemoth. Total marijuana sales in 2015 in the state were just short of $1 billion. Ten months into 2016, sales had already topped $1.1 billion.
In Colorado, as in many states, laws prohibiting marijuana were first enacted in the early part of the 20th century. As of 1931, 29 states had banned marijuana. The substance remains federally illegal.
In 2012, Rep. Jonathan Singer, a Democrat who had recently been appointed to fill a vacant Colorado House seat, was at a bar near the Capitol building when advocates told him about the push for legalization. By that time, the proposal had already received the 86,105 signatures and approval from the secretary of state necessary to get an initiative on the ballot in Colorado.
Singer’s view, he recalled during a recent interview in his office, was that the current marijuana policy was not working. “We need to treat marijuana like the drug it is, not like the drug that some people fear it to be,” he said.
After reviewing the amendment language, Singer signed onto the initiative, unaware that he was one of just two state lawmakers to back the ballot measure, he said. The issue went to the voters on Election Day 2012 and passed with 54.8 percent of voters supporting it and 45.1 percent opposed.
After voters approved Amendment 64, Gov. John Hickenlooper assembled a team of people, including Singer, to begin the implementation process.
It was, Singer reflected, a strange position to find himself in. Just a year before, Singer was a child protection social worker.
“It’s not that I’ve ever used marijuana or that I’ve ever encouraged other people to use marijuana,” Singer said. “It was just, I was sick of it costing us so much and still doing so little for us.”
Under the law, residents and visitors age 21 or older can buy up to an ounce of marijuana at a time from a licensed retailer. The amendment also allows Colorado residents to grow up to six plants at home.
The market is controlled under a licensing structure that covers every aspect of the system — from growing and processing the plant to manufacturing infused products, like edibles, and selling those products in a dispensary. A fourth category licenses laboratories for testing cannabis.
The industry is complicated by federal policy, under which marijuana is still illegal. It’s classified as a Schedule I drug — a substance not recognized as having any medicinal value that poses a high risk for abuse.
Under the Obama administration, the U.S. Department of Justice has largely looked the other way as Colorado and other states legalized medical and recreational marijuana. The approach has been guided by two memos that direct DOJ resources at six priorities, including preventing gangs and illegal organizations from profiting from marijuana, limiting youth access to the drug, and reducing drug-impaired driving.
The incoming Trump administration could change that policy, though how it might change and the impact it would have on what has already passed remains unclear.
Very few banks are willing to take the risk of violating federal law to work with marijuana businesses, according to Singer. Many marijuana stores continue to work exclusively in cash, a practice that gives rise to logistical challenges. For example, the state needed to purchase new money counting machines to process the taxes marijuana businesses paid in cash, Singer said.
“I tell people that at dispensaries, there’s two types of green,” Singer said. “There’s cash and there’s marijuana.”
Rules and regulations
Three clear Christmas ornaments hang down over the middle of a sales counter at Simply Pure, a sleek medical and recreational dispensary in a trendy Denver neighborhood. The whitewashed storefront is marked with a subtle bronze sign and a vertical green banner with a pharmacy cross that advertises “DISPENSARY.”
Conceived by a budtender, the baubles are topped with festive ribbon and filled with assorted red, green and gold bells and a bud. Depending on the strain a consumer chooses, prices could range from $25 to $45 for an eighth of an ounce — enough for a few joints.
Pot producers pay a 15 percent excise tax on wholesale marijuana transfers. The consumer then pays a 10 percent state marijuana tax, the 2.9 percent state sales tax, and any additional local tax at the time of purchase. Denver has a special tax on marijuana of 3.5 percent, in addition to the 4.75 percent municipal sales tax.
Because of state regulations, the Christmas decorations require some assembly at home. By law, marijuana must leave the dispensary in childproof packaging. Simply Pure uses large white containers that look like pill bottles. The ornaments are sold separately.
Bryan Nowak, Simply Pure’s compliance manager, said keeping up with changing regulations and rules in the industry can be tricky. Rules about packaging and design, for instance, have changed considerably as the state has sought to improve clarity on dosages of edibles and make them look less enticing to children. This year alone, there have been almost half a dozen regulation changes at the state level, he said.
In Colorado, the marijuana marketplace is regulated by a section of the Department of Revenue created specifically for the task, called the Marijuana Enforcement Division. It handles licensing in the recreational and medical systems, which largely parallel each other, as well as enforcement. The division is authorized for 100 full-time employees and includes 35 sworn law enforcement officers, according to Jim Burack, director of the MED.
As of this month, there were 982 medical and recreational dispensaries statewide and 1,416 licenses for cultivation sites of both varieties. Business models vary; medical and recreational dispensaries often are in the same storefront. Many dispensaries are owned by companies that run their own grow operations — sometimes on site, as is the case at Medicine Man in east Denver.
The goal, according to Burack, is to ensure that all sales occur within the licensed, regulated system.
Employees of marijuana businesses are required to be individually licensed. About 25,000 people hold that license, according to Burack, though not all of them work in the industry. Licensees are required to have no felony convictions in their background in the last five years, and no prior felonies related to drug possession or distribution.
The marijuana system in Colorado vests significant control in local government authorities.
Municipalities can decide how many licenses to allow within their borders, how late dispensaries can be open, and whether to allow medical sales or recreational sales, or opt not to allow dispensaries of any kind. As a result, Colorado’s marijuana map is a patchwork quilt.
One of the keys to the Marijuana Enforcement Division’s success, Burack said, is open and frequent collaboration with other stakeholders.
The agency regularly meets with a variety of players, including those in the industry, local government and other state departments, he said. The groups work together on adjusting the rules and regulations on a regular basis.
Singer, the representative who initially backed Amendment 64, recognized from the start that marijuana legalization would be an evolving project.
“We’ve had legalized alcohol for 70 years. As of last year, I think there were at least a dozen bills dealing with alcohol,” Singer said. “So to expect a brand new industry that is still federally illegal to not have new regulations, or to not be tweaking old ones, is probably actually irresponsible.”
Work in progress
Public opinion polls suggest the majority of Coloradans do not regret legalization, though a significant portion of the state continues to oppose it.
In a poll in September, 47 percent of respondents saw legalization as having a positive impact on the state, 39 percent said the impact was negative, and 9 percent said there wasn’t an impact.
Asked if they would support a repeal of Amendment 64 — the only way to do so would be by a direct ballot measure, as it was passed — just 36 percent of respondents said they would, 51 percent would oppose it, and 13 percent were undecided.
Mason Tvert, of the Marijuana Policy Project and a key figure behind legalization, said three years in, he considers Amendment 64 to be a success.
“Overall, the system is working incredibly well and as intended,” he said.
He said there have been many benefits, including revenue and economic growth, but from his perspective, the biggest success was bringing marijuana above ground. Estimates suggest that about 70 percent of demand for marijuana is being met by the regulated market, according to Tvert.
“The primary goal of the law was to take marijuana sales out of the underground market and ensure marijuana is being controlled and sold by licensed businesses,” he said.
Singer also sees many successes in legalization. The revenue brought into the state by the marijuana tax means that even in a tight budget year, the state has some financial cushion, he said. In the first year of legalization, 2014, the state brought in $76 million in marijuana tax and fee revenue. State marijuana revenues in 2015 reached about $135 million and are poised to increase in 2016.
(The Rand study that considered the potential impact of marijuana legalization in Vermont pegged annual revenue estimates at $20 million to $75 million. Other estimates have been more conservative. The 25 percent tax the Senate Finance Committee adopted in February would have generated between $13.4 million and $20.8 million in the first full year the law would be in effect, according to Joint Fiscal Office estimates.)
By law, the first $40 million raised from the Colorado excise tax each year goes to school construction projects. Other revenues raised from marijuana sales go into a fund that can support programs in substance abuse treatment, health education, law enforcement and others.
The funding structure also leaves some flexibility for how the money can be used. In November, Hickenlooper proposed using $12.3 million in marijuana revenue in the next fiscal year for a new program that would build housing for people who struggle with chronic homelessness.
Singer pointed to decreases in citations and arrests for marijuana-related crimes as another upside to legalization. The reduction in pot crimes has freed up court, prosecution and public defender resources, he said.
Lawmakers and public safety officials continue to grapple with how to ensure all marijuana commerce is occurring within the regulated structure.
Republican Sen. Chris Holbert, the Senate majority leader, raised the issue of the so-called gray market — marijuana that is grown legally then sold outside the regulated system. Law enforcement officials raised concerns that pot could be grown by criminal organizations in Colorado and sold in other states, though some advocates question the extent to which that occurs.
Efforts have been made to curb the gray market. Holbert and Singer both worked on a law that will take effect next year that registers caregivers — people who grow marijuana for medical patients. Under Colorado law, medical marijuana patients with a doctor’s prescription can grow up to 99 plants each. Those patients can have somebody else, a caregiver, grow those plants on their behalf. Caregivers are permitted to take on five patients, which would allow them to have nearly 500 plants.
Lawmakers and regulators hope that a caregiver registry will ensure that marijuana grown in that structure is not diverted into illegal sales.
Holbert noted that some residents feel legalization did not deliver on the promised boost to state finances.
Even though the revenues from marijuana sales range in the hundreds of millions, it is just a small fraction of the overall state budget, which totaled more than $25 billion in fiscal 2015, Holbert said.
“When we’re dealing in billions, that doesn’t solve our funding problems,” he said.
Holbert, who opposed legalization, has noticed shifting opinions on marijuana since Amendment 64 took effect.
“There are people who voted for it who are frustrated that it didn’t solve (the budget) problem, and there are people who voted against it like me who have found reasons to really appreciate that it’s legalized,” he said.
Holbert voted against both medical and recreational marijuana. He represents Douglas County, to the south of Denver, where there are no dispensaries of either variety.
But he was swayed on the issue after hearing from a constituent whose son benefited from treatment by an oil containing cannabidiol, a compound found in marijuana, for his epilepsy. Holbert was a lead sponsor on a bill that passed earlier this year with bipartisan support that allows parents of children with conditions treatable by marijuana-based products to go onto school property and administer that treatment.
“The evolution of legalization in this state has been fascinating because I think it’s taken people who were for and against in opposite directions,” Holbert said.
