Making Green: The Economic Impact of Recreational Marijuana in the North | Features
By Victor Skinner | April 16, 2022
Communities in northwest Lower Michigan are witnessing the clear economic benefits of recreational marijuana this spring, as the state distributes nearly $2 million in excise taxes to local municipalities and area counties.
The cash is a welcome new income at a time when inflation is driving up the cost of government business, but local officials argue the cash is just one aspect of the industry that breathes new life into certain communities and provides opportunities for growth that did not exist just a few years ago.
“In terms of tax revenue, the first year we got about $84,000, and this year it was double that for the same number of stores,” says Benzonia Township Supervisor Jason Barnard. The township collected $169,360 in taxes from sales of three stores in 2021, about 9% of the township’s budget, and Bernard expects that number to increase with the addition of another store over the course of this year. the last year.
When local authorities approved up to four dispensaries, two cultivation facilities and two processing centres, the focus was on creating better paying jobs and promoting development. Barnard says the industry is living up to these expectations without any of the expected downsides. In addition to generating funds that will likely go to the township’s struggling fire department or a walking trail and other improvements to Benzonia Township Memorial Park, the recreational marijuana industry employs locals with good wages, helps attract visitors and improves the real estate market.
“When we wrote the ordinance, we put everything but retail in our industrial districts,” says Barnard. “When we started, there were a handful of properties available, and now there really aren’t any. … It’s definitely an increase in property values, no doubt.
Benzonia Township’s current status as the only place in the county with recreational sales is driving traffic not only to dispensaries but also to other businesses along the way, Barnard says, and it’s contributing to a shift in perception of the public that will be difficult for neighboring municipalities to ignore.
“I think it opened a lot of people’s eyes to the industry and the product as a whole,” he says. “There is a stigma attached, and when people see firsthand a situation like this with stores and businesses opening up and crime not increasing and car wrecks not increasing , that helps.”
There’s a similar dynamic at play in Manistee, where the county and city received $282,267 in taxes for 2021.
“We weren’t expecting to get this much so it was good to have another source of income,” Manistee City manager William Gambill said. The city is working on its budget, and the 4% increase is a necessary addition as officials grapple with rising roadwork costs and aging infrastructure, he said.
The city’s five dispensaries have also helped breathe new life into a business district between crossings along US-31, renovating older buildings and attracting a steady stream of customers from communities. surrounding.
Trent McCurren, owner of The WellFlower, says that while stores are zoned close together, most thrive on developing unique identities with selection and style that appeal to different demographics.
“I think that’s a testament to the strength of the marijuana market,” he says. “Around Manistee, there aren’t many municipalities that have gone for recreational marijuana.”
Manistee dispensaries also contribute to the community in a variety of other ways beyond tax revenue, McCurren said. The WellFlower team strives to participate in charity work at least every two months, and the dispensaries are collaborating to organize an event this summer called “Smoke on the Water”, led by the Authentic 231 dispensary.
City officials approved the event proposal in early April, and organizers are now working on licensing and other details for the July 16 event at Douglas Park. Dispensaries have partnered with the non-profit organization Salt City Rock to host the Beachside Smoking, which will feature a Deep Purple tribute band and help fund an amphitheater on First Street Beach for future concerts. and community events.
“I think it will bring in tourism and people who don’t normally come to the area,” Gambill said.
As one of the first public marijuana events in the region, the event could also shape public perception and the relationship between marijuana retailers and mainstream tourist interests.
The industry is also moving beyond sales in Kalkaska, where the village’s seven dispensaries generated $395,174 in taxes for county and local governments last year.
The Botanical Co. is set to open the state’s first public consumer salon adjacent to its current storefront on Cedar Street later this month. The “Kalkushka” expansion aims to differentiate the store from others in the competitive market while providing a safe place for customers to consume and another source of revenue from beverages and other items, says owner Russ Chambers.
“All of our data…shows really big spikes in people’s interest in these shows,” he says.
“We hope the social use lounge will drive traffic to the store.”
The competition intensifies
Traffic will be critical to maintaining sales as various factors play against the market in Kalkaska and elsewhere. As competition increases, there are new pressures on marijuana companies to adapt to survive. So far, only about 7% of Michigan municipalities have opted into recreational sales, and the tax revenue associated with no significant issues will no doubt encourage surrounding communities to participate, Chambers predicts.
“I absolutely think more places are going to sign up,” he says.
Industry expansion is expected to weigh on existing stores as customers have more options, especially in larger markets like Traverse City, where officials are currently working to open recreational sales.
“For a store to go halfway, it needs to have at least $3 million in sales,” Chambers says. “In another year, we’ll start to see people arguing.”
Another challenge, Chambers notes, comes from falling cannabis prices. During 2021, the Michigan Marijuana Regulatory Agency reported a 40% drop in the price of an ounce of marijuana.
“We’ve seen in the first two months of this year that prices have gone from $2,500 a pound to $800 to $900 a pound,” Chambers says. “When you get to that price…it’s hard to make money.”
Lower prices do not indicate a drop in demand, but rather the entry into the market of large-scale manufacturers who can do business at a different scale of production than small-scale farmers. Chambers predicts Michigan will follow the same pattern as other states like Colorado that legalized marijuana, which saw a price drop that forced many businesses to crash before the market stabilized.
Tourism likely to grow
But as retail sales enter a more competitive phase, other aspects of the marijuana industry are only beginning to burgeon, and the success of more tourism-oriented businesses, such as smoking tours or culinary partnerships, will largely depend on integration in the region. tourist community.
The Michigan Cannabis Hospitality Industry Growth Organization released a 2021 tourism report that showed marijuana-friendly lodging “is the number one thing people haven’t seen enough of,” says group president Lisa Liberman. “The second was events,” she adds.
More than 60% of marijuana users surveyed by the group also expressed interest in cannabis-friendly camping, wellness classes and retreats, and bus tours similar to the region’s famous wine events. In many parts of the state, these types of programs and events are increasingly available, even though local tourism officials have been reluctant to embrace the industry, Liberman says.
“Certainly the stigma is one of the reasons we hear over and over again, mainly the smell,” she says.
At Traverse City Tourism, chief operating officer Whitney Waara is working with an international cannabis task force to promote best practices in the industry, but the illegality of marijuana under federal law poses safety concerns. marketing.
Pairing cannabis with culinary experiences, buds and breakfasts, marijuana-themed outdoor adventures, and integrating the industry into other events like beer festivals are exciting possibilities, Waara says, but tourism officials in Traverse City and elsewhere are proceeding with caution.
“We don’t take big ads saying come here to do these things,” she says. “A lot of hospitality offices around the state are having conversations and talking about it, but they’re very cautious. It’s a huge industry with huge long-term economic impact, and we’re only seeing the tip of the iceberg. on this subject.
Tim Riley, chairman of the Manistee County Visitors Bureau, offered a similar assessment.
“It’s something the organization is starting to talk about and address,” Riley says. “I think members of our organization see new businesses as an asset to our region. »
In the meantime, dispensary owners and promoters in the area are hoping that tax revenue, events like Smoke on the Water, and new venues like the Kalkaska Drinking Lounge will help make marijuana more mainstream and create more places to drink.
“The more consumption is allowed, the more the industry will grow,” says McCurren of WellFlower. “I think if we could make progress on this, it could increase cannabis tourism significantly.”