The Little Town That Pot Built

This story was originally published by Stateline, an initiative of The Pew Charitable Trusts.

GARDEN CITY, Colo. — This Saturday, tiny Garden City will throw a party to celebrate improvements to its main street. Officials will close a block to traffic and install an ice-skating rink in the middle of the road. There will be horse-drawn carriage rides. There will be hot toddies. And there’ll be three blocks of new sidewalks, crosswalks, benches and trees to show off to the public.

Garden City isn’t much of a city; it’s smaller than a square mile and has fewer than 300 residents. But it could afford to spend $3 million on downtown infrastructure upgrades thanks to its four bustling marijuana retailers.

Before the first medical marijuana dispensary in town opened in 2009, Garden City collected about $360,000 in revenue each year, said longtime Town Administrator Cheryl Campbell. Now pot is legal for recreational use, too, and last year, the town raked in over $2 million from sales taxes alone—mostly from the sale of bud, pre-rolled joints, edibles and other pot products.   

The marijuana boom hasn’t had any downsides, Campbell said. “It’s been a benefit to the community, as far as I’m concerned. And I was anti-marijuana myself.”

In Colorado and other states that let adults possess small amounts of marijuana, the lure of additional tax revenue has helped convince many towns and counties to welcome pot shops. Here in conservative-leaning Weld County, where most towns have said “no” to dispensaries, local officials are watching Garden City and wondering whether they should change their anti-pot stance.

For instance, although the 7,000-odd residents of Milliken in 2015 voted against licensing dispensaries, the town board last year decided to license a couple of retailers. “Obviously, the town board that approved that was hoping for revenue,” Milliken Town Administrator Leonard Wiest said. “They saw what was happening in Garden City.” 

So far, he said, no marijuana retailers have opened, though one store is going through the building permit approval process.

Marijuana tax revenue hasn’t been quite as transformative in Colorado cities with larger tax bases, such as Denver and Boulder. And tax experts say it’s risky for cities to lean too heavily on a single source of revenue—particularly one that’s illegal at the federal level and vulnerable to a federal crackdown.

“It’s not a stream of revenue they should rely on for their major, long-term spending needs,” said Katherine Loughead, a policy analyst at the Tax Foundation, a Washington-based think tank.

The Cannabis Boom

Garden City has a history of embracing vice. It split off from the town of Greeley in the 1930s, after the larger town outlawed liquor manufacture and sales. In its early days, Garden City was the place where locals went to drink and party.

That history didn’t inform the town council’s decision to allow marijuana sales, Campbell said. But the comparison is inevitable. Today, Greeley, population 100,000, doesn’t allow dispensaries, and Garden City is the go-to pot destination for Greeley residents as well as those of neighboring towns and rural areas as far away as Wyoming.   

The city is so small that it only takes a few minutes to drive through it and enter Greeley, which surrounds the town on three sides. Three of Garden City’s four dispensaries are tucked away off the main commercial strip, and it’s easy to zoom through town without noticing them.

On a recent November morning, a steady stream of people made their way into the recreational dispensary run by Nature’s Herbs and Wellness Center. The shoppers ranged from neatly dressed hipsters and young men in camouflage-print hats to middle-aged women in hoodies, who joked with one another as they waited in line.

Three “budtenders” took orders of bud, pre-rolled joints, edibles and pot paraphernalia from behind counters that ringed the room. The air smelled lightly of weed—a sweet alternative to the smell outside, where the wind carried the scent of manure from nearby farmland. 

On weekends, paydays and the April 20 holiday celebrated by pot smokers, this location can serve 800 to 900 customers, said Tucker Eldridge, general manager of production. The sprawling facility includes a medical marijuana dispensary, a warren of indoor grow rooms, two-and-a-half rooftop greenhouses and space for manufacturing edibles and hash oil. It employs about 100 people, Eldridge said.

Unlike some other jurisdictions such as Denver, Garden City doesn’t have a special tax on weed. Its marijuana-related revenue comes from the 3 percent city sales tax, plus state marijuana sales tax money shared with local jurisdictions, Campbell said.

She estimates that the four dispensaries in town employ about 225 people among them, making marijuana the largest industry in Garden City. Most of the rest of the town’s commerce comes from small stores and restaurants, such as pawn shops, auto body shops, Mexican restaurants and a gas station.

A Town Transformed

Garden City’s embrace of legal weed hasn’t rankled too many residents; Campbell said she can only think of one person who is adamantly opposed, for religious reasons.

Mike Schwartz, co-owner of Empire State Pizza, a family-friendly restaurant full of arcade games, said some old-timers might be against the industry. “But you can’t argue with the results,” he said.

Thanks to the influx of sales tax revenue, Garden City has been able to spend more on public works such as the new sidewalks and crosswalks along Eighth Avenue, the street outside Empire State Pizza. The city also provides grants of up to $8,000 to help local businesses pay for property investments such as facade improvements.

Empire State Pizza’s landlord used one such grant to add windows, an awning and new tiling to the exterior of the restaurant and its neighbor, a popular hot wings restaurant called Wing Shack. Schwartz used another grant to replace the pizza place’s outdoor signage, he said.

The money also has allowed the city to add new services. Garden City used to be patrolled by the county sheriff’s office, but now it can afford its own four-person police force. Campbell’s staff—once just her—has swelled to three and a temp, not including the police department.

The flood of visitors to local dispensaries has been good for the pizza business, Schwartz said. He cross-promotes with the marijuana retailer across the street, including by offering customers there a coupon for free garlic knots. The tagline? “Pizza tastes better when baked.”

“There’s a lot of hungry people walking out of that building,” Schwartz said.

Limits to the Cash Cow

Garden City isn’t the only small Colorado town that’s been transformed by marijuana revenue. Marijuana sales have helped rural Log Lane Village pave streets and replace water lines, according to Town Clerk Bobbie Mesmer. Marijuana sales have revitalized De Beque, a fading oil and gas town in Western Colorado, and boosted artsy Trinidad, near the New Mexico border.  

In larger jurisdictions, however, pot has had less of an impact—despite headline-grabbing revenue figures.

Denver expects to collect over $48 million this year from taxes on marijuana sales, licensing fees and state tax money shared with the city ($584 million of weed was legally sold in the city last year, raising about $45 million in revenue). But all that pot money comprises less than 4 percent of the city budget.

The money helps fund city priorities—such as maintenance projects, affordable housing and combating the opioid epidemic. “It’s $48 million we didn’t have before,” said Molly Duplechian, deputy director of policy and administration at the city and county Department of Excise and Licenses.

Some $8 million to $9 million of Denver’s marijuana money covers the cost of regulating the industry and running marijuana-related public health campaigns, such as a push to educate young people about the consequences of underage use. Towns need to set aside money to manage the industry, Duplechian said. “I always, always try to emphasize, when I’m talking to other jurisdictions, how important that’s been.”

In Edgewater, a small city of some 5,000 people that shares a border with Denver, marijuana sales generate about 12 percent of annual tax revenue—less than one of the local big box stores, said City Manager HJ Stalf.

Stalf said the city is wary of relying too much on an industry that’s controversial at the federal level. That’s why the money has been spent on capital improvements, such as a new civic center, new police cars and road upgrades, rather than on staff positions, he said. “If it were to go away, we wouldn’t have to lay anyone off.” 

The state of Colorado collected $247 million in marijuana-related revenue last year, less than 1 percent of its overall revenue, said Shannon Gray, marijuana communication specialist at the Colorado Department of Revenue. “It hasn’t been nearly the amount of money, when you put it in the context of the entire state budget, as some media reports would have you believe.”

Some members of the public mistakenly think schools are getting a windfall from weed, because $40 million in annual excise tax revenue from marijuana sales goes into a school construction fund, said Chris Stiffler, an economist at the Colorado Fiscal Institute, a Denver-based think tank. The state also has spent additional marijuana money on public schools, including $31.6 million in fiscal 2016-17.

The marijuana money comprises only around 1 percent of the state’s overall education budget. But the misconception can make it harder for school superintendents to convince voters to raise local education taxes, Stiffler said.

Saying ‘No’ to Weed

Four years after legal marijuana sales began in Colorado, plenty of communities remain wary of pot shops. Greeley’s City Council voted in 2013 to ban commercial sales, and a 2016 city report concluded that the cost of regulating marijuana could cancel out expected tax revenue while creating public health and safety problems, the Greeley Tribune reported at the time.

City council members initially voted against pot sales because they were concerned about enforcement and possible conflict with the federal government, said City Manager Roy Otto. The Greeley Tribune’s coverage of Garden City’s marijuana revenue hasn’t moved council members to reconsider the ban, he said.

There is, however, a chance that a citizens group could put a petition to allow marijuana sales on next year’s ballot, he said. “Will Greeley ultimately legalize it, the way they did alcohol? Time will tell.”

Marijuana’s impact on health and safety in Colorado has been mixed, according to an October report from the Colorado Division of Criminal Justice. Law enforcement officers aren’t filing more cases of serious marijuana-related crimes, but organized crime related to marijuana has been rising.  

Fewer young people say they’re using marijuana, but more Colorado marijuana users are being hospitalized, though that may be partly because people now feel more comfortable telling doctors they smoke weed, the report cautioned.

In Garden City, legal sales haven’t led to a noticeable increase in crime, Campbell said. She can think of one break-in—“that amounted to nothing”—and some minor shoplifting. The city doesn’t set aside money especially for marijuana enforcement or policing, she said.

If anything, local business owners say, the town feels safer now thanks to the new police department.

The Garden City location of Smokey’s: A 4:20 House, a recreational and medical dispensary, has never had a break-in, but it’s reassuring to know that the police aren’t far away, said Jake Smith, marketing administrator and president of the Garden City Business Association. “Now I can sleep knowing that if someone did try, the Garden City Police Department is a block away from my store.”

The dispensaries have worked hard to be good citizens. Nature’s Herbs and Wellness sponsors a Thanksgiving food drive and a winter coat drive, for instance, and LivWell Enlightened Health—a chain of dispensaries with a location in Garden City—has a philanthropic arm that’s active all over Colorado.

Perhaps the biggest long-term threat the marijuana industry poses to Garden City is competition. If more Weld County towns allow pot sales, Garden City’s stores will lose their lock on the local market and become less lucrative.

Campbell said she anticipates that any new locations will spread revenue throughout the region. Still, she’s optimistic. “I feel like we’re established enough to stand on our own.”