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Cannabis legalization could draw out-of-state visitors

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Out-of-state tourism and reduced stigma could help fuel sales of recreational marijuana in New Mexico if it is legalized, a consultant told a state task force Wednesday. (Dean Hanson/Albuquerque Journal)

Copyright © 2019 Albuquerque Journal

Demand for cannabis products has far outpaced expectations in Colorado – a situation that New Mexico should prepare for if it legalizes recreational marijuana, an economist said Wednesday.

Kelly O’Donnell, a consultant who has studied the marijuana market, told a task force established by Gov. Michelle Lujan Grisham that New Mexico should expect out-of-state tourism, the reduced stigma and other factors to help fuel sales of recreational marijuana if it’s legalized.

She estimated the annual revenue for state and local governments could hit $120 million in five years, well beyond what legislative analysts estimated earlier this year. The actual market, of course, would depend on the tax structure and a variety of regulatory decisions, O’Donnell said.

Her comments came as part of a presentation Wednesday to a task force that will recommend a regulatory structure this fall for legalizing marijuana in New Mexico, with the possibility of legislative approval in the 2020 session.

O’Donnell has studied marijuana demand for a private medical marijuana company. But she said she was volunteering her time Wednesday and speaking on her own behalf.

She told the task force to expect more adults to use marijuana if it’s legal and more socially acceptable – a factor that’s often overlooked in projections.

“It’s not the kids who are smoking more pot – it’s the grown-ups, which is a good thing, generally speaking,” O’Donnell said of communities with legal marijuana. “There will be more people willing to use it.”

Tourism is also a factor. New Mexico’s proximity to Texas and Mexico – especially El Paso and Juárez – would expand the market for marijuana sales to out-of-state visitors, the task force was told.

Texas isn’t expected to legalize marijuana anytime soon, and pot’s legal status in Mexico is complicated.

James Girard, a member of the task force and an economist for the state Taxation and Revenue Department, said the large number of people who live in Texas and Mexico – but near the New Mexico line – would create a “multiplier effect” that should be considered if marijuana is legalized.

“It’s like tripling our population,” Girard said. “No other state that’s legalized has been in a percentage situation like that.”

O’Donnell said that if legalization is approved, New Mexico policymakers should consider how to tap into the Texas market without violating interstate commerce laws and while maintaining health and safety protections.

Heath Grider, a task force member and Portales resident whose wife is a medical cannabis patient, said the demand for recreational marijuana would have to be reckoned with – to ensure that patients aren’t left without medicine.

“We can’t keep up with the market in rural New Mexico as it is,” Grider said.

Pat Davis, an Albuquerque city councilor and chairman of the task force, said the group is examining how to legalize marijuana without harming New Mexico’s long-standing medical cannabis program.

“Non-negotiable,” he said, “is protecting patients.”

Health Secretary Kathy Kunkel noted that other states that legalized recreational marijuana have experienced drops in enrollment in their medical programs. And she said she already hears from patients who say they can’t get the products – including lotions, gels and suppositories – they want.

The task force explored a variety of options for protecting the medical program.

The state could establish a licensing and fee system that would provide an incentive for companies that produce marijuana for medical consumers, or regulators could require that a certain amount of a company’s sales be dedicated to patients.

New Mexico could also encourage medical consumers to stay in the program by exempting their purchases from the taxes levied on recreational consumers. Another option would be to reserve certain products with high potency for medical patients only.

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