Three years ago, the town of DeBeque was on the brink of collapse.
Plunging fuel prices had all but erased the local tax base. Local leaders had exhausted all their emergency options to keep the community operational, and braced themselves to tear up the town charter and be absorbed into surrounding Mesa County. The same recession that threatens to turn North American oil country into a new rust belt seemed likely to dissolve a town that’s been there since white settlers arrived in Ute indian territory in the late 1800s.
But now, DeBeque’s citizens can exhale. After narrowly approving marijuana growing and retail sales operations within their borders in the summer of 2014, the town is gulping down more tax revenue from cannabis alone than it got in pre-bust years from all oil and mineral taxes combined.
“We are going to survive by it because we sure as hell can’t survive without it,” local liquor store owner Darrel Kuhn told Governing.com.
DeBeque once got over a quarter-million dollars in tax revenue from the oil and gas industries, a princely sum for a town of about 500 people. But the collapse of world fuel prices pushed that figure down to $17,000 a year.
When a state referendum legalized recreational marijuana in Colorado in 2012, the measure was designed to allow towns and counties to prohibit the industry from operating within their borders. That flexibility helped the initiative succeed, assuaging fears among pot opponents that legalization would be forced upon them.
Despite their town’s revenue crisis, DeBeque residents were wary of replacing dead dinosaur money with living ganja cash. Leaders called a vote in June 2014, on whether or not to allow licenses to grow and sell recreational pot in town. The community decided to welcome the industry, by a vote of 69 to 65.
Recreational dispensaries opened soon after, and the town was once again awash in money. In 2015, pot tax revenue hit $340,000. The town was able to renovate a community center, repair basic utilities like the sewer system and city sidewalks, and even began putting money aside for college scholarships for local kids.
DeBeque gets that revenue from a 5 percent town tax on pot sales, atop the roughly 28 percent combined tax rate the state assesses through three different levies on the industry.
Statewide sales of recreational cannabis totaled $996 million last year, and state government revenues from taxes and licensing fees cracked $135 million on the year. The legalization regime is designed to steer much of that money to school construction and refurbishment, but the state still has $100 million in 2015 pot revenue to play with even after the schools investments are set aside. (The state nearly gave all that money back last fall, thanks to an esoteric provision folded into the state Constitution back in 1992. But voters turned out again to affirm that they wanted the drug revenue to stay in public coffers.)
And there is reason to think that Colorado is still nowhere near the top of its pot-cash potential. The industry’s success to date comes despite a number of hurdles.
Growers and vendors can’t claim the same tax deductions that any other business receives from the Internal Revenue Service due to ongoing federal criminalization of the drug. Cannabis entrepreneurs are stuck dealing in cash because the feds continue to cut the industry off from banking services. That raises overhead for businesses and puts a heavy lid on sales by making it impossible for someone to buy with a credit or debit card, while also making the business more dangerous than it needs to be.
Until the federal government drops the prohibition that drives the drug war, Colorado and DeBeque won’t know exactly how far the new industry can carry them. But it’s already helped at least one community navigate to a stable economic future rather than drying up and blowing away.