In or out?
That’s the crucial question facing towns, cities and villages this month as a Dec. 31 deadline looms for municipalities to either opt in or out of allowing retail dispensaries of cannabis and/or lounges that allow on-site consumption of marijuana.
Those communities that don’t actively send the state a message that they’re opting out by the end of the month will automatically be included in the licenses, and be eligible immediately to reap whatever rewards and consequences come from the decision.
It’s not an easy or simple decision, and it carries a significant potential impact.
Because of that, local governments need to listen to their constituents and engage them in a discussion before moving ahead with allowing these types of businesses to move into their communities.
That means setting up public hearings or public sessions at scheduled meetings now, this month, as well as enlisting citizen input on social media and on local government websites to take the public’s pulse.
We know there’s not much time. And frankly, given the delays on the state level in providing more details about regulations and licensing standards, the state owes it to municipalities to extend the opt-in/opt-out deadline at least six months. But that’s unlikely to happen.
So if communities feel they can’t make the best decision for themselves right now, their best option for the time being would be to opt out of the licensing, knowing they can opt in later once they feel more comfortable with the information they have before them.
So what’s to debate?
The state essentially is lifting Prohibition on marijuana, allowing it to be smoked for recreational use and grown in small quantities for personal use.
Now the question is whether local government leaders should allow it to be sold in their communities and whether to allow the operation of indoor businesses where people can congregate to smoke.
One incentive for communities to opt in and allow one or both of these types of facilities is the potential revenue.
Under the new law, there will be a 13% tax on every sale of state-generated marijuana. Of that 13%, 9% will go to the state and the remaining 4% will go to counties and municipalities. Of the 4% that will go to counties and municipalities, 75% will go to municipalities based on their adult-use sales, and 25% of those sales will go to counties.
That sounds like big bucks to help pay for local essential services. But how much revenue will it generate?
As with every projection the state makes when it introduces a new business opportunity, the actual revenues don’t always live up to the projections. (See upstate casino gambling.)
New York state expects to receive $20 million in revenue from licensing fees from marijuana retailers in the first year of operation. When fully implemented, the state projects sales will generate $360 million a year in revenue, with $75 million going to local governments.
If we look to Massachusetts, which began licensing marijuana sales in 2018, the picture is rosy.
Sales have soared this year as the state had emerged from the pandemic, and one analyst estimates the state will generate $1.35 billion in 2024 due to new store openings, increased consumer demand and new products.
But amid the positive news, Massachusetts is experiencing what many fear will happen in New York that could ultimately slow sales. That includes zoning issues with siting these businesses (such as proximity to schools), bureaucratic delays in licensing (New York is the king of bureaucracy) and forced shutdowns of nonessential businesses during the pandemic.
We also don’t know what will happen to sales in New York when neighboring states jump on the cannabis bandwagon and start competing with one another, as happened with casinos.
And even with retail marijuana stores, many people will still buy marijuana illegally from existing dealers, who can sell it cheaper than the state and who don’t pay sales tax.
Local budget officers will have a difficult time factoring in sales revenue into their budgets until they can get a clear picture of the business and regulatory landscape.
So while communities opting in might have dollar signs in their eyes, they have to consider that the business might not be as lucrative for their tax coffers as they think.
There are other considerations that citizens need to factor in before encouraging their municipality to opt in to licensing.
Are the local police and courts prepared to deal with higher numbers of drivers driving under the influence of marijuana? What about loitering, robbery and other crimes? Do they worry about people driving from other places into their community to make purchases and then driving home? This opt-in option could create a situation where people drive to communities where the drug is legal to buy. That could work in favor of local sales revenue, but against public safety.
With incomplete state regulations and so many other factors to consider, communities might want to err on the side of caution by waiting to see what the licensing regulations look like, and give citizens more time to debate and discuss the pros and cons of allowing these businesses to operate within their borders.
Opt in or opt out?
The time to decide is quickly approaching.