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SOUTH COAST — The legal cannabis industry is bringing fists full of cash to Oregon coffers, a welcome boon to a state that has long been strapped for funding. 

Since recreational marijuana became officially legal in Oregon in July 2015, the state has raked in millions of dollars in revenue.

Oregon began taxing recreational marijuana in January 2016 at a temporary rate of 25 percent.

Exactly one year later, the state had collected more than $60 million, according to the Oregon Department of Revenue.

The tax changed in January of this year to 17 percent, with counties and communities given the option to enforce a three-percent local tax.

In November, nine counties and more than 80 municipalities voted in favor of enacting the local tax.

And even with just two months of the new tax on the books, the preliminary revenue numbers are encouraging, say state economists.

During a 12-month period spanning between February 2016 to February 2017 alone, Oregon reported more than $49 million in tax receipts.

Mazen Malik, senior economist for Oregon’s Legislative Revenue Office, said those Department of Revenue numbers will change once the state has received and processed its tax returns.

“They could go up or they could go down,” he said, explaining that each merchant has a different method and process for reporting monthly sales. “When the time comes and they have to put things in perspective and actually report on them on tax forms, they may try to put a sale they put down for the wrong month back to where it belongs.”

Malik said the $60 million the state collected in its first year taxing recreational marijuana, while exceeding initial government projections, seemed to be a good indicator of what to expect in terms of annual revenue.

“I think we could realistically expect somewhere between $50 million and $60 million a year,” he said. “That’s the reasonable range for our market, our size and our tax rate.”

Malik said the $1 billion collected in taxes in Colorado and the more than $700 million projected in Washington reflected their higher tax bases and ability to attract out of state customers for the specific purpose of purchasing marijuana.

“It seems like that there is less pressure on our market, with legalization already in other places like California and Washington, so you don’t have as (many) people coming to experience a different thing in a legalized market,” he said. “This is becoming a more and more normalized type of affair.”

Casey Houlihan, executive director of The Oregon Retailers of Cannabis Association (ORCA), argues that normalization process is essential for the industry’s longevity.

“It’s still very Wild West-like, the marijuana industry as whole,” he said. “There’s a lot of elements at play, and part of it is bringing growers and retailers into that legal realm and providing them protection. Our mission is that the cannabis industry gets treated fairly. We got legalization out of the way, now it’s time for normalization.”

ORCA represents 150-member businesses across the state, with two-thirds of them being retailers.

One goal the organization has in particular — beside lobbying the government for fair treatment on behalf of its members — is offering a pathway to use a bank account, a godsend in a market that is primarily based on cash.

“It’s not a good system,” Houlihan said of the industry norm of not having a bank account and relying on paying taxes and employees with cash, check and money orders. “It seems so far a lot of financial providers are hesitant to step up.”

Despite the uncertainties, pot shops have sprung up across Oregon since voters approved Measure 91, which legalized the production, processing, delivery, possession and sale of recreational marijuana among adults in 2014.

As of April 14 of this year, the Oregon Liquor Control Commission, which is responsible for regulating the industry, had approved 421 retail licenses statewide.  

In Coos County alone, there are 9 locations with approved retail licenses to sell marijuana.

While North Bend's city council failed to pass an ordinance — by way of a tie vote — that would have prohibited recreational sales within city limits upon Measure 91’s passing, Coos Bay hesitated, placing a moratorium on recreational dispensaries and only recently voting to allow their operation in last November’s election.

The result has been shops appearing across Oregon’s largest coastal city rapidly in recent months: three are already in operation while six have filed for permits to begin the process.

“So far, we do not know who has approval until they come back in for a business license and check on building requirements to ensure that their place of business meets current codes,” Coos Bay’s Community Development Administrator Tom Dixon said in an email. “To my knowledge, the State of Oregon has no process to inform local governments with advance notice that a particular applicant has been through the vetting procedures and been granted a dispensary license.”

North Bend, likewise, has three operating locations, with another that was just recently approved, according to City Administrator Terence O’Connor.

And while most businesses would view the newcomers as competition, the area’s already established dispensaries are welcoming the development.

“We need a healthy industry in order to have an industry,” said Rob Metcalfe, owner of Stonies, North Bend’s oldest operating marijuana dispensary, which has 18 employees. “We need to help each other to establish ourselves as a legal viable business.”

Metcalfe's sentiment echoes across the industry, at least locally.

“It’s not a competition,” said Zander Shundahai, 24, manager of Way High 101, in Bunker Hill which opened on March 17. “It’s not in our interest to be unfriendly. We can only really help each other out. Oregon makes a lot money on this. Oregon is my state. Oregon says I can do this, so I’m gonna do this. If the Federal Government wants to say something about that ... well I’ve got my own complaints, as powerless as I may be, but any disagreement (the dispensaries) might have doesn’t change that we are all in the same boat. This is an uncertain course we are navigating, so we have to work together and talking bad about each other is not going to help anyone.”

Greg Pierce, owner of Positive Vibrations in North Bend, which was originally a medical dispensary before changing locations and transitioning to recreational, called the initial tax numbers for the state “incredible” and said he believed it was only a matter of time before the economic benefits began manifesting locally. “It’s really gonna blow up this whole area and will be beneficial to everybody.”

Joe Polder, 26, of Reedsport, a former plumber and owner of North Bend based Coastal High Ways, argued the plethora of pot shops would hopefully rid the stores of their stigma.

“So I don’t see them as competition,” he said.

When President Donald Trump appointed Jeff Sessions as his Attorney General, fears began to swirl within the legal marijuana world about potential federal oversight strangling the burgeoning industry.

Compounding concerns, marijuana is still listed by the Department of Justice as a Schedule 1 controlled substance, alongside heroin.

While Sessions has yet to take action against the recreational and medical marijuana industries, statements he’s made in the past point to a shift from The Cole Memo, which for years has dictated federal policy toward cannabis.

On April 3, the governors of Alaska, Oregon, Colorado and Washington — all states with legalized recreational marijuana — sent a signed letter to Sessions and Treasury Secretary Steven Mnuchin urging the federal government to communicate with them regarding any potential changes to regulatory and enforcement systems and warned of the unintended consequences relating to such abrupt changes.

“The Cole Memo and the related Financial Crimes Enforcement Network guidance provide the foundation for state regulatory systems and are vital to maintaining control over marijuana in our states,” the letter said. “Overhauling the Cole Memo is sure to produce unintended and harmful consequences. Changes that hurt the regulated market would divert existing marijuana product into the black market and increase dangerous activity in both our states and our neighboring states.”

The Cole Memo, issued by President Obama’s Deputy Attorney General, James Cole, in August 2013, said the federal government would not interfere with state markets where marijuana had been legalized, providing the industry was properly regulated.

The memo has served as the framework for federal marijuana policy ever since.

“I believe the Feds are always going to want to protect federal land and federal everything but they’re not going to mess with state issues,” Metcalfe said, explaining that legalization was burying black market buyers and sellers.

Stonies, for instance, offers a $5 gram deal with $1 tax.

“That’s so below the black market ten years ago,” Metcalfe said. “We are beating everyone of those guys at every corner now.”

State economist Malik estimated the recreational industry’s continued growth would most likely nail a coffin in whatever vestiges remained of the black market within the next decade.

“I think growth will continue for the fact that less sales on the black market will happen and more sales on the legal market will occur and that will continue for probably eight to ten years until you get to a point where it’s not profitable anymore for the black market to exist, “ he said. “But we are not there yet. Until then, four to five percent [annual] growth is probably a safe level to look at in sales and taxes; those come hand-in-hand.”

Polder noted that if the federal government were to step in, growers and shop owners wouldn't be the only ones feeling the pinch.

"If they ever did try that here it wouldn’t just be pot stores angry," he said. "It’d be the plastic industry making tubes [for oil] or the batteries for [vaporizer] cartridges and the security companies who represent the stores."

There's also the entities that benefit from the state recreational tax on marijuana: the current State Revenue Distribution Formula allocates 40 percent of taxes to the Common School Fund and 20 percent to mental health, alcohol and drug services. Another 15 percent goes to the Oregon State Police, while 5 percent is allocated to the Oregon Health Authority. The remaining 20 percent is split evenly between counties and cities, at ten percent each.

"If they [the Feds] do step in, they do, I’m not going to worry about it," Pierce said. "There’s not much we can do but keep informing people of the good (recreational marijuana) can do."

Metcalfe touted the benefits of a well-regulated industry.

“You’re not waiting to finish a crop in your basement where you get what you get," he said. "You’ve now got variety, you’ve got great customer service and you have great establishments. We have a fit for human consumption product hitting the market that’s reliable.”

Stonies’ owner reiterated that he welcomed the new businesses joining the local market.

“We just need everyone to work together,” he said. “We’re too new to start some competitive poking and sticking that’s just going to kill everybody. We all need to focus on one thing: we are creating an industry.”

Reporter Spencer Cole can be reached at 541-269-1222, ext. 249, or by email at Spencer.Cole@theworldlink.com Follow him on Twitter: @spencerdcole.

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