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Legal Marijuana in Colorado: Local Decisions, National Attention

April 15, 2014

The January rollout of Amendment 64, which legalized marijuana, has made Colorado the subject of a national viewing party. As the only state with operating retail stores, we are at the center of attention.

A Colorado Health Institute issue brief scheduled to be released later this week examines the policy decisions that Colorado has made to begin regulating retail marijuana, their implications and the questions that remain to be addressed.

Still, it may come as a surprise that many marijuana policy decisions are in the hands of local governments.

A number of the law’s provisions are uniform across the state, including the ability for adults to use or grow up to one ounce of marijuana in their homes. Commercial growth, testing and sale, on the other hand, is predominantly under the control of Colorado’s local governments, as are extra taxes and fees.

In order for a store to operate, it must have a license from both the state government and the local government. About 150 of Colorado’s 271 cities and towns have formally addressed the question of marijuana stores, either by council decision or local election, according to the  Colorado Municipal League.

Ninety have prohibited marijuana stores and another 21 have barred any establishments until a later date, playing a “wait and see” game. Thirty have imposed additional regulations, allowing operations in one way or another.

Local governments can control hours of operation, proximity to schools, the number of establishments and the types of marijuana establishments, such as retail stores, cultivation facilities, infused product manufacturers or marijuana testing operations.

In the end, tax revenues may be a strong incentive for local governments.

Proposition AA has opened the door for new revenue to flow into cities and towns. It sets aside 15 percent of the state’s 10 percent marijuana sales tax for local towns, based proportionally on sales. Half of licensing application fees also go to local jurisdictions. In addition, towns may enact operating fees or impose higher excise and sales taxes. They keep all of those additional revenues.

Seven towns voted on April 1 to introduce marijuana taxes or fees, bringing the number of local governments that have imposed extra financial requirements to 19.

Voters in six towns faced retail marijuana questions in elections on April 1 and April 8, with four towns voting to prohibit retail sales and two allowing them. Fruita voters, interestingly, passed a marijuana tax but defeated a measure to allow marijuana stores.

For now, local voters seem to be leaning toward prohibiting marijuana stores or adopting a “wait and see” attitude.

As revenue projections continue to rise, will that sentiment change? Will the revenue be too hard to ignore? Or will other community priorities determine whether to allow marijuana stores?

The Colorado Health Institute will be monitoring these questions going forward.