Pubdate: Thu, 20 Feb 2014
Source: Seattle Times (WA)
Copyright: 2014 The Associated Press
Author: Rachel La Corte, The Associated Press


Over 4-Year Period Starting Next Year

Many Unknowns Before Market Takes Hold

OLYMPIA - The state's new legal recreational-marijuana market is 
expected to bring nearly $190 million to state coffers over a 
four-year period starting in mid-2015, according to an economic 
forecast released Wednesday.

The forecast by the Economic and Revenue Forecast Council showed that 
$51 million is expected for the 2015-2017 biennium from marijuana 
production and sales. An additional $138.5 million is expected for 
the next two-year budget that ends mid-2019.

A little less than half that revenue is expected from excise tax and 
license fees related to the marijuana market. The rest is forecast to 
come from retail sales tax and business taxes.

The passage of Initiative 502 in 2012 allowed the sale of marijuana 
to adults for recreational use at licensed stores, which are due to 
open by summer.

Steve Lerch, the council's executive director, said that because of 
concerns over local moratoriums and bans on pot sales, and general 
uncertainty about how the improper location or inadequate financing. 
He expected that rate to rise to 30 percent as the review continued.

That would put the state on pace for roughly 11 million square feet 
of farms, Simmons said, calling that a manageable amount. The growing 
cap is expected to be raised as the market takes off.

State officials also believe the legal market might be bigger than 
first anticipated because the state Legislature now appears likely to 
come up with new rules for the largely unregulated medical-marijuana 
system that will steer many patients into recreational stores.

Marr noted that Colorado had reported that 50 percent of the 
entrepreneurs in its highly regulated medical marijuana system had 
failed not long after opening. He also said most Washington 
applicants weren't planning on growing at their maximum allotted 
space at the outset. He estimated that the state would likely end up 
with about 5 million square feet of farms by the end of the market's 
first year - an acceptable target.

Licenses to be issued in March

Simmons said the first growing licenses would be issued next month, 
but it would take many months for licensing officials to conduct 
background, residency and financial checks on all the applications.

It generally takes growers about three months to get plants from 
seedlings through harvest. Calling herself an optimist, LCB Chair 
Sharon Foster predicted the first retail stores would open in early June.

More than 900 applicants sought multiple licenses, according to 
Simmons. Those entrepreneurs can withdraw their other applications 
and get their $250 fee refunded. Or they can place their applications 
on a hold status for up to a year or until the board decides more 
licenses are needed.

Kealy said he is developing a 100,000-square-foot growing facility in 
Kent. He will now try to lease his space to others. "Smart business 
guys knew this was coming and had to be prepared to sublet," he said.

Marr agreed. "We said all along this is a malleable process," he said.

McVay said he'd likely be advising frustrated clients that the liquor 
board "made the best of a bad situation."

In another unanimous vote, the board decided to license businesses in 
cities and counties with bans and moratoria on legal pot merchants.

After Attorney General Bob Ferguson advised the LCB that cities and 
counties could lawfully block pot business, some wondered if the 
board would reallocate licenses it had designated for those resistant 
communities to more welcoming ones. Seattle City Attorney Pete 
Holmes, a sponsor of Initiative 502, implored the board to allow more 
than the allotted 21 retail store licenses in the Emerald City.

Foster noted that Seattle had 20 state liquor stores before voters 
privatized the market - and those stores served some 1,500 
restaurants as well as individual consumers. "We won't reallocate," 
Foster said. "We're going to see how 21 goes," Foster said. system 
will work, the council has made assumptions that sales won't start 
until June 2015.

"Obviously, as we see any actual sales we'll be able to revise, if 
necessary, our forecast," he said. "But these seemed like reasonable 

Rep. Ross Hunter, D-Medina, a member of the Revenue Forecast Council 
and the top budget writer in the House, said, "More money is better, 
but there's not a whole lot more here."

Hunter said he expects the forecasts to move around over the next 
couple of years as the market takes hold and lawmakers see how much 
money there actually is.

"We just don't know," he said. "The expansion is slow, the stores 
aren't open. Something's going to happen, we don't know exactly what 
it is. We're using the best data we have."

Colorado is the only other state to legalize recreational pot sales, 
and its marijuana market is far exceeding tax expectations, according 
to a budget proposal released Wednesday by Gov. John Hickenlooper.

Retail sales began Jan. 1 in Colorado, and while sales have been 
strong, exact figures for January sales won't be made public until early March.

However, Hickenlooper's proposal outlined plans to spend some $99 
million next fiscal year on substance abuse prevention, youth 
marijuana-use prevention and other priorities. The money would come 
from a statewide 10 percent sales tax on recreational pot, indicating 
Colorado's total sales next fiscal year will be near $1 billion.

The overall updated Washington state forecast for the current 
two-year $33 billion budget cycle shows lawmakers may have $30 
million more available through 2015, and that they'll have an 
additional $82 million more than projected for the 2015-2017 
biennium, with more than half of that increase because of the 
recreational-marijuana market.

The projected overall state budget for 2015-17 is expected to be 
$35.7 billion and increase to $38.7 billion for the next two-year 
budget cycle that begins July 1, 2017.

The next revenue forecast is June 18.

AP writer Kristen Wyatt contributed to this report from Denver.
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MAP posted-by: Jay Bergstrom