As Colorado Marijuana Tax Revenues Rise, Cities Vary On How To Spend It

Sep 29, 2016

The streets of Edgewater, Colorado, aren’t paved in green, but the city’s mayor says they might as well be.

After an influx of tax revenue from five retail marijuana shops, the small community of 5,300 people just west of Denver repaved every street in town. But that’s just the start. Mayor Kris Teegardin estimates the city’s coffers will pull in $1.2 million this year, a combination of its own sales taxes on the drug’s sales, and redistributed money from state taxes. That amount makes up roughly a sixth of the city’s total annual budget.

It’s an extreme example of marijuana tax dollars at work, best seen in the city’s plans for a multi-million dollar civic center with a new police station, library and fitness center. Teegardin says marijuana tax revenue will pay for half.

“It has been able to speed up major infrastructure improvements that otherwise we would have to take a very incremental approach toward,” Teegardin says.

A more varied picture emerges when you broaden the scope and look at how money collected from the state’s expansive experiment in marijuana legalization is distributed across the state -- and how local governments spend it.

Kris Teegardin is the mayor of Edgewater, Colorado, a small community west of Denver that has seen an influx in marijuana tax revenue.
Credit Luke Runyon / KUNC and Harvest Public Media

Colorado cities and towns remain divided over allowing retailers in their communities. There are those that give a full-throated endorsement, like Edgewater, where city council members gave shops the ability to stay open late and freely approved business licenses, to those who outright ban sales, like Greeley, a rapidly growing city on the northeastern plains.

November 2016 marks four years since Colorado voters chose to legalize recreational marijuana and the drug’s sales have delivered on the promise of millions in tax revenues. Just look at a snapshot of one month, August, when the state reaped $17.5 million in marijuana taxes, licenses and fees. Last year, the tally statewide was $135 million.

Sales have been rising steadily over the years, but analysts predict growth will eventually level off.

The state money goes to school maintenance and construction, drug prevention programs, public health initiatives, even research grants. Some of what’s collected is sent back to cities and counties depending on how much marijuana is sold there.

"There's a lot of pockets in Colorado where they're not seeing any benefit from the legalization."

A large portion of the state’s excise tax on the cultivators who grow recreational marijuana ends up paying for new school buildings or renovating old ones through a statewide grant program.

But Chris Stiffler, an economist with the Colorado Fiscal Institute, says given the need, especially in rural areas, there’s a good chance some school districts will never see a dime of marijuana revenue.

“There’s a lot of pockets in Colorado where they’re not seeing any benefit from the legalization,” he says.

When marijuana legalization was being pitched to voters prior to the 2012 election, Stiffler says many proponents touted what the tax revenue could do for struggling schools, glossing over the fact that the money would be spent on construction not classroom instruction. He says many voters today have outsized ideas about how transformational the marijuana tax revenue has been.

“We like to talk about it as if you were walking home today and you found a 20 dollar bill on the ground,” he says. “You wouldn’t go home and buy a new car or new house. But you would maybe go out for a Chipotle burrito with guacamole and a margarita, right?”

That’s why we see more education funding questions on ballots this election cycle. Colorado ranks 39th in the country for per pupil spending. It’s close to impossible to fix big budget problems with a sin tax, Stiffler says. If voters this election think marijuana solved the state’s funding woes, Stiffler says that’s a problem.

“If there’s this misconception that suddenly we’ve solved all those issues because we’re taxing marijuana, you have a bunch of voters who are operating on faulty assumptions,” he says.

Depending on how it’s spent, the money can make a visible difference for communities like Edgewater, Stiffler says. And that’s why cities and counties that sat on the sidelines for the first couple years of legal marijuana are now jumping in the game. As The Denver Post reported in May, at least five Front Range communities -- Englewood, Sheridan, Littleton, Longmont and Lakewood -- are looking at allowing marijuana sales.

"When we started to actually start seeing some revenue that's when eyeballs started to be opened. Wow, we're going to have a lot of money, and we can have a tremendous impact here."

That was the case for Adams County, too. After a legal fight with Aurora, the county started taxing marijuana sales in 2015. Now the county’s home to three retail stores, three cultivation facilities, three manufacturing plants and a testing laboratory.

“A lot of cities and counties like ours decided to sit back and wait,” says Jim Siedlecki, the county’s spokesman. “Even though it was legal and we could have waded into the pool early, a lot of cities and counties didn’t, but a lot of them are now.”

Adams County Commissioners decided to funnel the tax revenue from this emerging industry into a scholarship fund for low-income high school students. The county’s using the revenue to dole out four year college scholarships. Fifty students received them in the first year.

“When we started to actually start seeing some revenue that’s when eyeballs started to be opened. Wow, we’re going to have a lot of money, and we can have a tremendous impact here,” he says.

Policymakers in Aurora took a different tack, deciding to put money toward the city’s growing population of homeless residents.

“There’s a lot of conversation, whether it’s true or not, that marijuana usage causes homelessness, well let’s address that head on,” says Bob Roth, an Aurora city councilman.

They’re spending their multi-million-dollar windfall of marijuana tax dollars on vans to transport outreach workers to pockets of homeless residents and pair them up with services like mental health care or job training.

The city’s earmarked more than $2 million to be bonded for a new recreation center. Additional money is set aside for road improvements.

“Since it was controversial and we do still hear about it, it was very important in my mind for us to have things that we could point directly to that are benefiting the community,” Roth says.

Tracking marijuana tax revenue in Colorado is tough. Some cities, like Aurora and Edgewater, have created separate funds to make it easier to follow. Others have simply thrown the additional revenue into a general fund, where it’s much more difficult to see exactly how it’s spent.

Regardless, the influx of cash in the last few years still brings a new set of issues for Colorado officials. Even though Teegardin, the mayor in Edgewater, is happy with the big boosts in revenue now, he’s not deluding himself that it’ll be like this forever

“This is something that we know could go away in the blink of an eye,” he says. “Or it could have a downturn when other states legalize it or other municipalities decide to join, so we are really looking at a murky forecast for sales in the next three to four years.”

A handful of states have legal marijuana on the ballot this November, and the outcome of those votes could shake up the entire market for marijuana, and the tax revenue it brings in.