Amazon vs. marijuana
Communities throw millions at retail giant while snubbing pot
WHEN A CHICOPEE woman won the record-setting Powerball jackpot in August, lost in the cacophony were the two $1 million winning tickets sold in Dorchester and Watertown. Despite the disappointment of not hitting the big one, neither winner said “no, thanks” to the lesser sums.
But that appears to be what’s happening in Massachusetts with the Amazon sweepstakes. State and local officials are pulling out all the stops to win the jobs and capital investment jackpot that Amazon has to offer, while there appears to be scant interest in the smaller prizes associated with the new industry associated with marijuana sales and cultivation. Indeed, more than 100 of the 351 Massachusetts cities and towns have instituted bans and moratoriums on marijuana businesses.
No one is suggesting that the legalization of marijuana will have the economic impact of a second Amazon headquarters, but, like the $1 million winning tickets sold in Dorchester and Watertown, the numbers are nothing to sneeze at.
“It’s always good policy to support jobs and job growth and economic development regardless of what type of market, be it Amazon or cannabis,” says Beau Whitney, an economist with New Frontier Data, which analyzes the marijuana industry. “The jobs in cannabis aren’t just minimum wage jobs, they’re actually livable wages. I don’t see a whole lot of difference” with commercial pot as an economic driver.
In Massachusetts, the Department of Revenue estimates annual pot sales in 2019 will range between $771 million and $1.4 billion. Using those figures, the state’s tax take from pot could be as little as $131 million and as much as $244 million a year. Municipalities that accept pot businesses could rake in anywhere from $23 million to $43 million a year in local option taxes.
Amazon is clearly in a different league. The company is promising 50,000 jobs by 2027 with pay averaging $100,000 a year. Amazon’s payroll, corporate income, and property taxes could provide a huge financial lift to the state that wins the prize.
But Amazon won’t come cheap. Newark and the state of New Jersey are offering Amazon $7 billion in incentives. Chicago is offering $2 billion. Massachusetts is putting off those discussions until what it hopes will be a second round of bidding, but officials know they will have to be competitive and also invest in costly infrastructure upgrades to make landing Amazon possible.
Marijuana companies, by contrast, are paying municipalities to let them open up in their communities – as much as 3 percent of revenues over and above the local option tax. And most marijuana businesses will fit into the existing business ecosystem: they will be spread out across the state, take over existing buildings, and won’t require major outlays of funds for infrastructure improvements.
“If you look at the economics of marijuana, it’s really a positive thing for your town,” says Adam Fine, a lawyer in the Boston office of the national law firm of Vincente Sederberg, which represents hundreds of companies in the marijuana industry. “Certainly, there’s likely not going to be as many jobs as Amazon – the largest dispensary in Massachusetts employs about 300 people – but they’re good jobs. They provide an economic benefit to the state and to communities.”
Yet opposition to retail marijuana remains strong, even though voters approved legalization by a margin of 54-46 percent. State officials delayed the kick-off for sales and cultivation several times until finally passing a bill in July that gave local communities more control than the ballot initiative. Lawmakers have also been skittish about funding the regulatory framework needed to get the industry up and running, allotting just $2 million so far to get the process underway despite an estimate form the state treasurer’s office that $10 million would be needed for the first year.
Those municipalities that have instituted bans and moratoriums or are proposing a ban are taking the view that revenues from marijuana will do little to offset the social ills and anti-business message they say pot shops would send.
Colorado witnessed similar municipal resistance when it legalized marijuana. At least 165, or 59 percent, of the state’s 271 municipalities opted out of allowing the sale or cultivation of recreational marijuana within their borders.
But now some of those communities have reversed their bans and a number of others are rethinking their positions as they see the revenue flowing into their neighbors’ coffers. Cities and towns in Colorado are allowed to assess a 9 percent sales tax as well as an additional local excise tax on marijuana sales, with the average local levy running about 4.6 percent.
Kevin Bommer, deputy director of the Colorado Municipal League, which represents most of the state’s cities and towns, said the decision to opt out for many of the communities was about quality of life issues. He said some communities are now changing their mind, but doubted the tax revenue from pot will make a big difference. “The notion that retail marijuana is going to pave the streets with gold is somewhat of a fallacy,” he said.
While the tax revenues may not pave streets in gold, they can at least pave streets in asphalt.
The small town of Edgewater, a suburb of Denver, has repaved its streets, fixed its sidewalks, and is constructing a new city government complex using marijuana tax revenue, which accounts for 20 percent of its budget. Aurora officials have earmarked $1.5 million from cannabis revenues to fight homelessness in the city.
In 2015, as marijuana sales were ramping up in the state, the City Council of Longmont, about 15 miles north of Boulder, voted 5-2 to ban marijuana in the community. But in September, that same council, though with different members, narrowly overturned the ban and is now soliciting proposals for four retail shops in the city of about 93,000, roughly the size of Quincy. Officials estimate the four stores will generate about $400,000 annually in tax revenue and licensing fees, not including a 3.3 percent excise tax officials are asking voters to approve.
Shawn Lewis, the assistant city manager of Longmont, said that when the ban was initially approved, the lure of more revenue was overwhelmed by concerns about weed-whacked residents and visitors driving and roaming the streets. Four years of legal sales in the state, he says, have painted a different picture.
“At the time the city council passed the ban, there was no data available,” Lewis said. “Basically, the council saw that these are just tax dollars that are leaving our communities.”In Massachusetts, as they did in Colorado, some city and town officials are opposing marijuana sales inside their borders, saying a drug business sends a negative message to traditional types of companies that may not want to be associated with pot stores. Mason Tvert, a former spokesman for the Marijuana Policy Project in Washington, which has pushed for legalization around the country, including Massachusetts, said fear often drives the debate. He said the evidence shows marijuana is a business like any other and many of those fears were unfounded.
“There’s this false argument it would deter large businesses from locating here and that’s clearly not the case,” said Tvert, who now lives in Colorado. “Know who’s considered one of the frontrunners in attracting Amazon? Denver.”