By Michele Frisby

In September 2014, in conjunction with its 100th annual conference in Charlotte/Mecklenburg County, N.C., ICMA hosted a telephonic news event during which a group of local government advisors and managers representing jurisdictions at the forefront of marijuana legalization efforts, shared their perspectives on what legalization has and will mean for local governments and their communities. The panel examined the challenges local jurisdictions will face when what appears to be an inevitable and major shift in the longstanding criminal status and public policy regarding marijuana takes place.

Download the audio recording of the ICMA media call.

Today, in addition to the 19 states and the District of Columbia that have legalized pot for medicinal reasons, the use of marijuana for recreation is now legal in Alaska, Colorado, Oregon, and Washington, D.C. [1] Colorado marked the first-year anniversary of recreational marijuana sales in January 2015[2], and in 2016, an additional five states are expected to vote on legalization[3].
 

New Meaning to the Words “Marijuana Management”

A new development in the evolution of one of the most complex social experiments since prohibition is the establishment of the country’s first government-owned pot store. The Cannabis Corner, owned and operated by the city of North Bonneville, Washington (pop. 1,000), is located along the Columbia River just 40 miles from Portland, Oregon. According to Governing.com, the store is run out of a renovated storage barn by a team of 10 government employees and offers customers small baggies of marijuana for $12 to $20 each.

The Cannabis Corner’s business model, reports Governing.com, is a public development authority similar to the one that runs Seattle’s Pike Place Market. A five-member board makes all the business decisions, and the store’s profits will fund community projects. Because it is run by the government, unlike its competitors, The Cannabis Corner is free from any federal tax responsibility.  

Present and Future Tax Revenues

The Council for State Governments reports that as more states consider adding marijuana and industrial hemp to their agricultural industries, the costs and benefits to those states and the local jurisdictions within them are becoming clearer[4].

Legal medical marijuana sales in California alone totaled just over one billion dollars in 2014[5]. During its first year as a legal recreational drug, marijuana generated tax revenues totaling $63.4 million for the state of Colorado. Yet, experts say it’s too early to predict what this means for future marijuana revenues and cite the need for more historical data[6].

Despite the tight timeframe between voter approval in November 2012, the creation two months later of statutory regulations, and the sale of retail licenses and opening of the first stores in January 2014, Colorado’s move to recreational marijuana use was made relatively smooth because of the state’s previous history with medical marijuana[7]—an advantage cited repeatedly by the panelists who participated in the ICMA media event.

The state of Washington, which opened its initial retail stores in July 2014, did not have the same prior-knowledge advantage as Colorado[8] but managed to generate $120 million in sales of recreational marijuana as of March 2015, with nearly $30 million in revenue generated during so far this fiscal year[9].

Banking Challenges

What happens to all the revenues generated as part of the marijuana commerce industry? Because marijuana is still classified by the federal government as an illegal, Schedule 1 controlled substance, most banks refuse to accept pot-based businesses, whether medical or retail, as customers for fear of violating laws against money laundering[10].

The result is a potentially unsafe, inefficient, cash-only business that is highly susceptible to “robbery, burglary, or assault…or tax evasion, fraud, and skimming,” according to a July 2015 PM magazine article[11].

The situation changed dramatically in February 2014 when the Obama administration allowed the banking industry to conduct business with legal marijuana sellers. Today these individuals can establish checking and savings accounts in which to deposit revenues[12], a development which signals that marijuana commerce is about to come “out of the shadows and into the mainstream financial system”[13].

 
New Local Government Workplace Realities

Employee workforce issues promise to become a key local government marijuana-management challenge. The question soon will become what local governments will do when federal law no longer prohibits the medical use of marijuana, which many believe is inevitable[14], and cities, towns, and counties will need to shift virtually overnight from treating marijuana as a criminal issue to supporting it as a medical product that many employees feel they have the right to use.

A free, 20-page e-book, Managing Medical Marijuana in Local Government: An Integrated Action Plan, can help communities navigate this potentially thorny issue. The book provides local government managers and human resources directors with an action plan—which involves policy rewriting and value alignment—to cope with the likely removal of marijuana from the federal government's Schedule 1 list of toxic substances.

Additional information on the topic of marijuana-related workplace issues is available through two PM magazine resources: “Marijuana at City Hall: It’s Medicine Now” (December 2013) and “Managing Medical Marijuana” (January/February 2015).

Footnotes & Resources