Mayor Phil Rico of Trinidad, Colorado, said he expects his community to lose revenue from marijuana sales due to neighboring New Mexico’s legalization of selling recreational cannabis, which started April 1.
But he says Trinidad, home to 26 dispensaries and fewer than 9,000 people, and a popular marijuana outpost for travelers coming through on Interstate 25, has been preparing for that event.
“We knew this would happen at some point,” Rico said. “We know there is going to be some effect. We might see a loss temporarily.”
Rico said Trinidad expects to balance out any marijuana revenue losses through recreational events.
“Colorado is known for recreation,” Rico said. “With recreation, we are trying to create Trinidad as a destination point. We believe with all the recreational components that we will have over the next few years, that we will see a balancing out of any revenue losses that we may incur because of the marijuana law. We have been planning on this. We have some festivals coming up in Trinidad that are going to create a lot of revenue for the community.”
New Mexico’s Legalized Recreational Marijuana Industry
New Mexico joins 17 other states that have legalized recreational marijuana.
The state will levy a 12% excise tax on the sale of marijuana, which eventually increases to 18%. That’s before standard taxes on sales of 5% to 9%.
In comparison, according to the Colorado Department of Revenue, medical marijuana in Colorado is subject to 2.9% state sales tax. Retail marijuana is exempt from state sales tax, but has a 15% special sales tax and a 15% excise tax. Local jurisdictions can also add their own sales and excise taxes.
New Mexico Gov. Michelle Lujan Grisham celebrated the launch of her state’s adult-use recreational cannabis industry.
She said the recreational cannabis industry is expected to create as many as 11,000 new jobs across the state over several years, in addition to generating over $300 million in sales and over $50 million in revenue in its first year.
“This is a historic day for New Mexico – the beginning of a new economic opportunity for entrepreneurs and communities across the state,” said Gov. Lujan Grisham in a press release. “With around 250 retailers licensed and ready to go on day one, New Mexico’s recreational cannabis industry is off to a strong start. With the dedicated work of legislators and advocates, we have crafted a well-regulated industry that is creating jobs, spurring economic activity, and generating revenue for state and local governments.”
Potential Impact on Colorado Sales
Marijuana sales in Colorado have boomed the last few years.
The Colorado Department of Revenue’s Marijuana Tax Revenue Report shows Colorado sold $2.22 billion worth of marijuana in 2021 – the most ever in a year, as sales have now grown year-over-year every year since recreational sales launched in 2014.
The $2.22 billion topped the previous record high of $2.19 billion that was sold in 2020. In the eight full years of recreational sales, Colorado has sold a total of $12.2 billion.
The state collected $423 million in tax revenue from 2021 sales. At the end of 2021, the state had collected a little more than $2 billion in tax revenue since February 2014.
In 2014, the state sold $683 million worth of marijuana. Sales topped $1 billion for the first time in 2016, when $1.3 billion was sold. The first time Colorado sold more than $2 billion was in 2020.
Kim Schultz is co-owner of Trinidad’s Higher Calling U dispensary, which opened in 2014.
She said several factors have slowed marijuana sales in Trinidad in 2022.
“Every year has been different as far as business trends,” Schultz said. “The one thing that we are fighting this year is the high gas prices and the economy. As far as a drop-off in business, it was a slow spring break to start, and usually March is a real heavy spring break time for businesses. We really saw a decline of business overall in the first quarter.”
Schultz said businesses like hers must evolve.
“We are just going to keep plugging along,” she said. “The best means of sustainment for our business is that we are a commercial grower. The reports of prices in New Mexico have been coming back very high in comparison to Colorado. We are projecting that they (New Mexico) are going to run out of products at some point, just because of their goals, until it gets more amped up.”
A native of Albuquerque, Schultz is hopeful that interstate commerce between New Mexico and Colorado marijuana businesses will be possible if federal legalization ever comes to realization.
She believes that Colorado’s head start in commercial cannabis and Trinidad’s reputation as both a marijuana outpost and a tourist stop have built some protection against competition.
Schultz said her business has grown from eight full-time employees, to 30 full-time employees.
“We are just not a spot on the road,” she said. “We have a niche attraction that is unlike anywhere in the world. We have to keep it interesting, and we have to keep diversifying. In Trinidad, we have all these dispensaries, but we have no place for safe consumption, unless you rent a hotel room or an Airbnb. The next step for this area is to have safe consumption locations.”
Rico said Trinidad has benefited financially from marijuana sales. He said the town puts 30 percent of all marijuana revenue in a rainy-day fund, which reached nearly $4 million by the end of last year.
He said 65 percent of marijuana revenue is for community usage, which has included purchasing new city fire trucks, body cameras for the Trinidad Police Department, a new telephone system for the local library, and retiring some city debt. Five percent of the marijuana revenue goes to local nonprofits.
“We have been able to do quite a bit (with that revenue),” he said.
Joe Craig, who serves as associate professor and, chair of the, Department of Economics at the University of Colorado-Colorado Springs, said while Colorado remains an outdoor enthusiast paradise, rising housing costs could play a role in people coming to Colorado.
“My feeling here is that legalizing early gave us an initial boom, and certainly more people (are) moving here but that will tail off,” he said. “Colorado is still a beautiful place and travelers may still think of Colorado as ‘“the’” cannabis destination as we were one of the first states. More likely to level it out is as housing prices increase Colorado will be less and less desirous to transplants and vacationers. I like to think of it this way: it’s like we had an influx of gold. In the short run we have a bounty and can do many things with the increase in money. In the long run it either runs out (everyone else legalizes it), or the boon ends up wrapped up in real estate prices and all other prices.”
