Recreational cannabis industry budding in New Mexico
A LOOK AT THE INDUSTRY
BY WILL HOOPER PHOTOS BY GABRIELA CAMPOS
Santa Fe New Mexican
State legislators, local municipalities, entrepreneurs and growers alike are all looking toward a profitable industry that is projected to bring in $300 million in annual sales revenue, according to reports from the state’s Cannabis Control Division (CCD), the regulatory body created to oversee legalization. While legalization has many people excited, getting all the nuanced details established hasn’t been seamless. Some localities are in the final stages of enacting and tweaking local cannabis ordinances, while others have yet to pass any legislation regarding the plant. The local and tourism markets may be hungry for cannabis, but some say it may take months beyond April 1 until New Mexico has an overflow of cannabis products. The 34 current medically licensed cannabis producers in the state have a leg up on the competition and will be the main companies to accommodate recreational users. While some say this may not be enough to meet demand, regulators say there should be plenty of marijuana to go around. One thing that many agree on, regardless of the struggles to get the ball rolling, is that legalization is likely to have a net positive effect on our communities. DEVELOPING THE LAW The Cannabis Regulation Act, which began as House Bill 2, was officially signed into law by Governor Michelle Lujan Grisham in June 2021. The act is now in the hands of the CCD, an agency of the state Regulation and Licensing Department. Under its careful watch, cannabis licenses of all kinds — for production (growing), manufacturing (extraction), retail sales, courier businesses, microbusinesses (growing fewer than 200 plants), research facilities, and consumption areas — will be issued. CCD director Kristen Thomson said that when developing the regulations, her staff looked to states that had been successful in legalizing cannabis, “particularly Colorado, Washington and Oregon.” Pagosa Springs, Colorado, provides an example of what tourist areas like Santa Fe and Taos may come to experience. Pagosa Springs planning director James Dickhoff said that legislation to legalize recreational cannabis in the town passed by just one vote in 2013. In Colorado, unlike New Mexico, municipalities can opt out of recreational cannabis. After lengthy discussions, Dickhoff said the town ultimately settled on allowing a total of six dispensaries — three to the east of the main throughway and three to the west. The town currently has four, with a fifth in the application process. Dickhoff and town manager Andrea Phillips believe the town was wise to require that 70 percent of the cannabis sold in dispensaries there be sourced from within Archuleta County, helping to keep the money and the jobs local. “That was a means to address these big Denver companies coming in and taking over small towns. We didn’t want that to occur here,” said Dickhoff. “I think the grow requirement is pretty unique,” added Phillips. “I haven’t seen that elsewhere in Colorado, with the exception of maybe Steamboat Springs.” Phillips also served in town government in Mancos, just west of Pagosa Springs, where she said cannabis was approached differently. “We didn’t have a grow requirement, but the community did want to cap the size of the grow facilities at 10,000 square feet.” Mancos also included a $2 per transaction town fee. New Mexico’s law doesn’t give as much power to municipalities when it comes to regulation, but it does allow them to control “time, place and manner” of cannabis production and sale, said CCD director Thomson. New Mexico has done its best to “learn from the good work of others as well as the mistakes of others,” she said, but the Cannabis Regulation Act is unique in several ways. She credited the governor’s commitment to legalization and the desire to give all New Mexicans an opportunity to participate in the industry — primarily with microbusiness licenses, which cost just $1,000 per year and allow small-scale growers to cultivate up to 200 mature plants at a time. “Setting up that ability for a lower cost point of entry for the people of New Mexico is not only unique but is a very thoughtful approach,” she said. Thomson added that New Mexico is also unique because of its decision not to put a cap on the number of licenses issued, which she said was “almost unheard of.” As of late February, the CCD had received 417 applications and had approved 81 of them. Municipalities have primarily looked to the state for guidance when establishing local ordinances. Taos County has been working on several cannabis ordinances (dealing with growing, retail sales, and manufacturing), and county senior planner Andy Jones said it has been a rough start. “There was a lot of information coming at us but not a lot of clarity on some things, especially in terms of what we as a county jurisdiction could regulate and not regulate.” “The state kept saying, ‘We’re building the car as we’re driving it,’ and it certainly has felt like that,” Jones said. Santa Fe County had finalized and approved its cannabis regulations by September 2021. Carmelina Hart, communications coordinator for county manager’s office, said the county is “ready for the April 1 sales to begin.” In terms of the law, she echoed that the state left little wiggle room. “We had some strict guidelines that we had to follow determining what we were allowed to do and what we were not allowed to do,” she said. “The law was very detailed, and we’re ready to follow the law that was [created] for the state.” This includes allowing any resident over the age of 21 to grow six cannabis plants (up to 12 per household). FROM A GROWER’S POINT OF VIEW Many businesses are eager to start, but the process has been slowgoing, said Heather Brewer, communications director for the CCD. The division has struggled to hire staff during the nationwide labor shortage, which has impacted local entrepreneurs hoping to get their businesses under way. For some, a lack of local legislation has also gotten in the way. Daniel Scharf is a hemp grower in Velarde who plans to upgrade his already successful CBD company, High Grade Hemp, to a full-scale cannabis grow. Scharf said that after growing hemp on his property for three years, the transition to cannabis should be easy. He is ready to start growing as soon as the weather permits — around late March or early April. However, in December, 2021, the state enacted an emergency rule stating that if a jurisdiction has not adopted a cannabis ordinance, “any cannabis businesses wanting to set up in that jurisdiction would simply follow the existing business rules and would simply be considered any other type of business that would set up in that area,” explained Brewer. Sharf said he has had trouble getting a legal opinion on whether or not he could actually start his grow operation, as Rio Arriba County has not yet passed its ordinance. As of the time of this publication, Scharf said he was in a holding pattern. He said the uncertainty has been an annoyance, and he hopes local and state governments can come together to work out licensing issues as soon as possible. “I basically don’t know whether I’m going to be able to really do it this year,” he said. “It really sucks for running a business, but it’s part of the game, I guess.” Scharf plans to grow a total of 1,500 plants and has applied for a regular cannabis producer license, though the limit was recently raised to 16,000 plants. “They’re encouraging people to grow more,” he said. Regardless of the setback, Scharf said he looks forward to the positive impacts legalization will have on the community. “It’s going to be really positive, especially in Rio Arriba County, which has a fairly poor community,” he said, adding that the agricultural nature of the area will lend itself to more growing opportunities and thus more jobs in the community. Though he acknowledged that all the tax dollars will be distributed by the state, he said that “any money that can go to the [Española] school district is amazing.” He also hopes to donate “a small portion of the profits and directly put that back into the community,” as soon as he sees some success. After initial talks with state representative Roger Montoya, Scharf hopes they can work together to find an appropriate way for the money from cannabis sales to benefit the community. COMMUNITY IMPACTS Ali Arshad is a professor of economics at New Mexico Highlands University, where he has proposed a research study to look at the economic impacts (particularly in relation to job creation and taxation) of cannabis legalization in New Mexico. “If you look at the national trend, the growth has been phenomenal in the last four or five years, so one impact is an increase in employment,” he said, noting that an estimated 200,000 new jobs have been created by the industry nationally. Arshad said that around 4,000 jobs were created in New Mexico through the medical cannabis program, and “as we are approaching legalization, the impact should be much bigger.” He has seen job creation estimates from 11,000 to 20,000. He also noted that $50 million in new revenue for the state budget is projected for the first year alone. The state will tax recreational cannabis sales at 12 percent, with each municipality or county receiving one-third (33.3 percent) of that. The tax will be raised by 1 percent each year from 2025 until 2030, for a final tax of 18 percent. To offset the cost to consumers, Arshad noted, increased competition will likely drive prices down to competitive levels. “The biggest argument in legalizing marijuana was that it will fill the coffers, that it will bring in extra revenue,” said Arshad. Under the current law, Arshad said, “a lot of money will go toward education, and that will be a great thing.” Arshad also noted that small towns in other states have used the revenue from cannabis taxes to bring about infrastructure changes. “In Sedgwick, Colorado, the tax revenue generated from medical and recreational marijuana allowed them to pay for new street signs and some new equipment.” As much as the industry and communities may want to see that money, it may not arrive as quickly as hoped. While April 1 will likely see long lines at recreational cannabis shops and a celebratory atmosphere, newer business owners may be slower to see money come in as they work towards getting grows, stores and extraction businesses up and running. Will Hooper, a journalist based in Taos, is a full-time reporter for the “Taos News.” He enjoys skiing, exploring the local culture and spending time with his dog.