Pubdate: Fri, 31 Oct 2014
Source: Washington Post (DC)
Copyright: 2014 The Washington Post Company
Author: Mike DeBonis
Page: B1


Officials Estimate Potential Revenue

But Coming Vote Is on Possession, Not Sales

If D.C. residents vote to legalize marijuana possession next week, it 
wouldn't just mean a sea change in drug policy in the nation's 
capital. It could also mean big business.

A study by District financial officials shared Thursday with 
lawmakers estimates a legal D.C. cannabis market worth $130 million a year.

The ballot initiative voters will see Tuesday does not allow for the 
legal sale of marijuana - only the possession and home cultivation of 
small amounts - but D.C. Council members gathered Thursday to hear 
testimony about what a legal sales framework might look like.

The issues pondered included how marijuana might be grown, tracked, 
sold and taxed, but more than a few witnesses showed up simply to 
cheer on or warn against the general notion of legalization.

Council member Vincent B. Orange (D-At Large) repeatedly reminded 
them that the legalization question lies in the hands of voters - 
who, according to several polls taken in recent months, are expected 
to endorse the measure.

The passage of Initiative 71 would "still . . . not give us the 
justification for sales and commercialization of marijuana," said 
Will Jones III, a D.C. resident who leads a group opposing the initiative.

But Orange and his colleagues were determined to start working out 
the logistics of creating a legitimate cannabis industry in 
Washington - even as they remain wary of potential congressional 
intervention, which could stamp out the legalization effort before it 
takes effect.

Testimony prepared by city financial officials pegged the potential 
size of the market at $130 million a year, based on an estimate of 
122,000 users, including residents, commuters and tourists, each 
consuming three ounces of marijuana costing an average of $350 per ounce.

An initial version of a marijuana regulation bill before the council 
sets a sales tax of 15 percent, suggesting potential government 
revenue of nearly $20 million a year. A system of legal marijuana 
sales would also come with considerable costs to the District 
government, the testimony indicated, requiring the hiring of up to a 
dozen additional employees and the purchase of new systems and equipment.

The financial official who testified, Yesim Sayin Taylor, said it is 
difficult at this point to estimate the city's exact revenue or 
costs, citing the unfinished nature of the regulatory legislation and 
the difficulty of determining how many current marijuana users will 
migrate from the black market to legal, taxed purchases.

One expert, Joseph Henchman of the Tax Foundation, warned council 
members against setting tax rates so high that marijuana users would 
stick with lower-priced black-market cannabis.

"Colorado and Washington picked tax rates that are still too high," 
he said. "The black market still exists . . . and the black market 
prices are lower."

Two Brookings Institution fellows who had studied the legalization 
programs in Colorado and Washington urged D.C. officials to learn 
from the experiences in those states. One, John Hudak, urged members 
to have "listening tours" in the community - hearing from, among 
others, those engaged in the underground marijuana economy.

"They are efficient. They are innovative. They are effective 
businessmen and women," he said.

The regulatory bill currently under consideration, drafted by David 
Grosso (I-At Large), would tax recreational sales at 15 percent and 
send those proceeds, along with fees paid by cultivators and 
retailers, to a variety of agencies and programs, including police 
training, youth programs and efforts to combat substance abuse. The 
District's alcohol regulators would oversee marijuana sales.

Fred Moosally, director of the Alcoholic Beverage Regulation 
Administration, called the bill "a good start" but suggested 
tightening several measures to conform with guidance issued last year 
by the Justice Department on local marijuana programs - particularly 
adding measures to keep drugs out of the hands of those younger than 
21 and to prevent the import or export of marijuana across state lines.

Grosso said Thursday he has already rewritten his bill in response to 
public input, including dropping plans to end the city's medical 
marijuana program and focusing the revenue more squarely on youth 
programs and prevention efforts.

"It is time for the District of Columbia to step up and address this 
issue in a thoughtful and measured way," he said.

Given the complexity of writing and implementing regulations, Taylor 
said, no city revenue is expected before late 2016. Moosally declined 
to estimate when the first retail sales could take place. "We 
recognize this is a time-sensitive issue," he said. "But at the same 
time, we have to get this right."
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MAP posted-by: Jay Bergstrom