NM ranks high in new cannabis study - Albuquerque Journal

NM ranks high in new cannabis study

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Even though use of marijuana for recreational purposes remains illegal in New Mexico, the Land of Enchantment still gets pretty high – when ranked among other states for dispensary density and tax revenue generated from cannabis sales, that is.

Two buds of Do Lato cannabis, a strain of medical marjuana sold to patients at Ultra Health in Santa Fe. (Eddie Moore/Albuquerque Journal)

New Mexico is seventh on the list of states with the most dispensaries per capita, according to a study released last month, and solely on the strength of its medical cannabis program is ninth-highest in terms of tax revenue raised, though that may change. A state Supreme Court ruling over whether medical marijuana producers can claim a tax deduction for prescription medication is expected soon.

That could affect more than 80,000 medical marijuana patients in New Mexico, including 9,300 patients in Santa Fe County.

The study – commissioned by Verilife, a company that operates recreational and medical cannabis dispensaries in six states – measured New Mexico at 5.2 dispensaries per 100,000 people.

With 10 dispensaries and growing, Santa Fe is in the top 5% of U.S. cities surveyed in terms of the number of pot shops per capita, with 5.9 per 50,000 residents. That ranked 28th on the list of 600 cities in the 36 states where cannabis is legal for either recreational or medical use.

Only cities with populations of at least 50,000 were surveyed, as results can be significantly skewed in smaller cities, according to Matt Zajechowski, of Chicago-based Digital Third Coast, which conducted the survey.

Just three other New Mexico cities met the population threshold. Albuquerque was measured at 3.3 dispensaries per 50,000 residents. Rio Rancho and Las Cruces came in at 2.3 and 2.4, respectively.

The study can be reviewed on the Verilife website: www.verilife.com

Cities and states

Somewhat surprisingly, Missoula, Montana – in a state that, like New Mexico, has only a medical cannabis program – topped the national list, weighing in at 18.1 dispensaries per 100,000 people.

Zajechowski said Missoula’s comparatively low population – 75,000 – tips the scales a bit.

“Missoula ranks so high on the list because they have a high number of dispensaries per a smaller population size than many of the other cities on the list,” Zajechowski said in an email.

The next five cities on the list are larger and in two of the 11 states where recreational cannabis is legal – Medford, Oregon; Pueblo, Colorado; Eugene, Oregon; Denver; and Portland, Oregon – and range from 17 to 14.5 dispensaries per 50,000.

Zajechowski said Montana’s relatively low population – roughly half that of New Mexico – also lifts its ranking on the national list, putting it third, with 15.1 dispensaries per 100,000 people.

Oregon ranks first on the list of states.

“Considering it was one of the first states to legalize medicinal marijuana, it might not be too surprising that Oregon hosts the most marijuana dispensaries per capita,” the report says. “There are more than 660 dispensaries located throughout the state, or 16.5 per 100,000 residents.”

And times have changed since Merle Haggard sang about it. They do now smoke marijuana in Muskogee, Oklahoma, with no fewer than a dozen dispensaries, including a Minerva Canna shop. There is also a Minerva Canna shop in Santa Fe. It is one of 10 dispensaries now open in Santa Fe. There are 108 medical marijuana dispensaries statewide.

Oklahoma, with perhaps the loosest regulations for medical cannabis in the country, ranks second, with 15.6 dispensaries per 100,000 residents.

Colorado, Alaska and Washington – where recreational pot is legal – are fourth, fifth and sixth, ahead of New Mexico.

Market penetration

Efforts to legalize cannabis for recreational use by adults in New Mexico failed again during this year’s legislative session, tabled in committee. The Senate Judiciary Committee blocked the legislation from advancing over concerns that the legislation was too far-reaching and the role of labor unions in determining who would get marijuana dispensary licenses. Critics also said legalization would erode drug-free workplace policies and lead to more impaired drivers on the state’s roadways.

But the medical program continues to grow, enrollment increasing by 19% in 2019 and now up to 82,147 patients, according to the latest information from the state Department of Health.

Ultra Health, a Scottsdale, Arizona-based company with a big presence in New Mexico, is one reason. The company has 20 dispensaries across the state and holds a 15% market share in New Mexico, generating nearly $20 million in sales last year.

Duke Rodriguez, who heads Ultra Health, is seen in 2018 at his facility in Bernalillo, which houses many cannabis plants. (Roberto E. Rosales/Albuquerque Journal)

President and CEO Duke Rodriguez has been behind the push to make medical marijuana accessible, targeting more remote corners of the state.

“A lot of what’s happened has been driven by Ultra Health penetrating rural communities,” Rodriguez said, adding that medical marijuana dispensaries are nearing saturation in some urban areas. “We’ve gone into communities like Hobbs, Clovis, Silver City, Farmington and Clayton. When you start to do that kind of outreach, other producers have followed.”

Rodriguez said plans are to expand even further by adding 10 more Ultra Health dispensaries by the end of the year. One of them is planned for Cerrillos Road near the intersection with Zafarano Drive that he said could open within the next 60 to 90 days.

“So, we have one already open in Santa Fe (on St. Michael’s Drive) and a second one under construction nearer the south side and more centralized,” he said.

Rodriguez talks about market penetration and is not surprised that New Mexico ranks so high on the per capita list in the Verilife study.

“We have one of the highest adult penetration rates in the country,” he said, adding that Oklahoma, where 5% of its total population is enrolled in its medical marijuana program, is tough to beat. “Oklahoma has broken the barrier. They are one of the most liberal, if not the most liberal, as far as eligibility and acceptability. And unlike New Mexico, they don’t put a limit on what patients can buy – basically there’s no ceiling – and there are no barriers on how much producers can grow. When you have that, you’re going to have market penetration.”

Rodriguez said that, with less restrictive requirements, the medical marijuana program in New Mexico could double in size.

“If we were more progressive on eligibility and how much we’re allowed to grow, we could be at more than 100,000 and approaching 200,000 cardholders,” he said.

To tax or not to tax

Using data from 2018, the Verilife report placed New Mexico ninth on its list for tax revenue, it having generated $9 million that year.

That’s a little deceptive in that 15 states and the District of Columbia don’t collect a tax on pot sales at all, and data wasn’t available from three other states.

The top five on the list are states with the most dispensaries and states where recreational marijuana is legal.

California leads the way with $345 million, followed by Washington ($319 million), Colorado ($266 million), Oregon ($94 million) and Nevada ($70 million). Then comes Arizona ($22 million), where recreational use of marijuana is still illegal.

Estevan Mendoza, a bud tender at Ultra Health in Santa Fe, measures out a gram of Red Dragon for a medical marijuana patient. (Eddie Moore/Albuquerque Journal)

“It appears that Arizona has a higher tax revenue to report over New Mexico simply because their total revenue for marijuana sales was higher,” Digital Third Coast’s Zajechowski said. “New Mexico’s medical cannabis program totaled $106 million in 2018, where Arizona reported sales of $400 million.”

With that 19% increase in enrollment in the medical program last year, cannabis sales in New Mexico totaled $129 million, generating $10.5 million in gross receipts taxes.

Ultra Health’s Rodriguez observed that the states generating the most tax revenue charge an excise tax of 15% to 20%.

He said Colorado’s tax revenue figure is driven by the recreational marijuana industry.

“Colorado had the wisdom not to tax medical patients,” he said. “They have almost the same number of medical patients, but New Mexico made the mistake of taxing cardholders.”

That could change if the state Supreme Court upholds a Court of Appeals ruling that allows medical marijuana producers to claim a tax deduction for prescription medication. And that would likely lower prices for patients.

“We hope the court exercises compassion and treats (medical marijuana) like any other medical service,” said Rodriguez.

While the bill to legalize recreational marijuana failed this year, many believe it’s just a matter of time before it happens.

Gov. Michelle Lujan Grisham said in a statement last month that “legalized recreational cannabis in New Mexico is inevitable.”

“The people of New Mexico have said they want it,” she said, referring to polling on the issue. “A diversified state economy demands it.”

If that were to happen, Rodriguez said projections indicate marijuana sales could reach $600 million annually. With a 20% excise tax, that would mean recurring annual revenues of $120 million, which would move New Mexico up to fourth on the list.

“The better news is that the state model has greater than 40% of revenues from people from Texas visiting New Mexico,” he said.

This year’s recreational marijuana bill called for a 9% excise tax on sales. The money would go to help fund local law enforcement, preventive education and social justice causes negatively affected by past federal drug polices.

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