By Mike DeBonis October 30, 2014, Washington Post
If D.C. residents vote to legalize marijuana possession next week, it wouldn’t just mean a sea change in drug policy in the nation’s capital. It could also mean big business.
A study by District financial officials shared Thursday with lawmakers estimates a legal D.C. cannabis market worth $130 million a year.
The ballot initiative voters will see Tuesday does not allow for the legal sale of marijuana — only the possession and home cultivation of small amounts — but D.C. Council members gathered Thursday to hear testimony about what a legal sales regime might look like.
The issues pondered included how marijuana might be grown, tracked, sold and taxed, but more than a few witnesses showed up simply to cheer on or warn against the general notion of legalization.
Council member Vincent B. Orange (D-At Large) repeatedly reminded them that the legalization question lies in the hands of voters — who, according to several polls taken in recent months, are expected to endorse the measure.
View GraphicThe status of marijuana laws across the nation.
The passage of Initiative 71 would “still . . . not give us the justification for sales and commercialization of marijuana,” said Will Jones III, a D.C. resident who leads a group opposing the initiative.
But Orange and his colleagues were determined to start working out the logistics of creating a legitimate cannabis industry in Washington — even as they remain wary of potential congressional intervention, which could stamp out the legalization effort before it takes effect.
Testimony prepared by city financial officials pegged the potential size of the market at $130 million a year, based on an estimate of 122,000 users, including residents, commuters and tourists, each consuming three ounces of marijuana costing an average of $350 per ounce.
An initial version of a marijuana regulation bill before the council sets a sales tax of 15 percent, suggesting potential government revenue of nearly $20 million a year. A system of legal marijuana sales would also come with considerable costs to the District government, the testimony indicated, requiring the hiring of up to a dozen additional employees and the purchase of new systems and equipment.
The financial official who testified, Yesim Sayin Taylor, said it is difficult at this point to estimate the city’s exact revenue or costs, citing the unfinished nature of the regulatory legislation and the difficulty of determining how many current marijuana users will migrate from the black market to legal, taxed purchases.
One expert, Joseph Henchman of the Tax Foundation, warned council members against setting tax rates so high that marijuana users would stick with lower-priced black-market cannabis.
“Colorado and Washington picked tax rates that are still too high,” he said. “The black market still exists . . . and the black market prices are lower.”
Two Brookings Institution fellows who had studied the legalization programs in Colorado and Washington urged D.C. officials to learn from the experiences in those states. One, John Hudak, urged members to have “listening tours” in the community — hearing from, among others, those engaged in the underground marijuana economy.
“They are efficient. They are innovative. They are effective businessmen and women,” he said.
The regulatory bill currently under consideration, drafted by David Grosso (I-At Large), would tax recreational sales at 15 percent and send those proceeds, along with fees paid by cultivators and retailers, to a variety of agencies and programs, including police training, youth programs and efforts to combat substance abuse. The District’s alcohol regulators would oversee marijuana sales.
Fred Moosally, director of the Alcoholic Beverage Regulation Administration, called the bill “ a good start” but suggested tightening several measures to conform with guidance issued last year by the Justice Department on local marijuana programs — particularly adding measures to keep drugs out of the hands of those younger than 21 and to prevent the import or export of marijuana across state lines.
Grosso said Thursday he has already rewritten his bill in response to public input, including dropping plans to end the city’s medical marijuana program and focusing the revenue more squarely on youth programs and prevention efforts.
“It is time for the District of Columbia to step up and address this issue in a thoughtful and measured way,” he said.
Given the complexity of writing and implementing regulations, Taylor said, no city revenue is expected before late 2016. Moosally declined to estimate when the first retail sales could take place. “We recognize this is a time-sensitive issue,” he said. “But at the same time, we have to get this right.”