By John Schroyer
How much of an economic impact can a cannabis business have on a community?
A new study offers a glimpse, estimating that a pair of retail marijuana stores in Denver under the same ownership will generate $30 million in economic output, pay $390,000 in city taxes and help create 280 jobs this year.
The study, conducted by University of Denver economics professor Jack Strauss, details how Evergreen Apothecary and Colorado Harvest Company contribute to the Denver economy in numerous ways.
Employees, for example, spend their paychecks in the city on all sorts of products and services, helping create more jobs at other businesses in the area.
The cannabis stores themselves also spend money on services, equipment and technology provided by other companies, further boosting their economic impact.
And the shops – which sell both medical and recreational cannabis – pay roughly 10 times the amount of taxes an average restaurant or retail store in the city pays, helping pad Denver’s coffers.
The data is an important weapon in the cannabis industry’s arsenal, as it could help entrepreneurs persuade hesitant elected officials that marijuana companies can be a positive force in communities around the country, said Strauss, who was hired by the stores’ owners to conduct the study.
“Other marijuana companies can obviously point to not exactly the same (economic impact), but a fairly similar one, and use it to say, ‘We’re paying four to five times the taxes as a regular business, and the city is getting a good piece of this,'” Strauss said.
Among the findings:
- The dispensaries pay their combined 40 employees an average of $17 an hour. All employees get two weeks paid vacation as well as maternity and paternity leave, and the companies are even considering adding perks such as health benefits and stock options.
- Their payroll estimate for 2014 is over $2.4 million, which is eight times greater than average Denver restaurants and retail stores
- Evergreen Apothecary is expected to post $2.7 million in sales this year, while Colorado Harvest Company is projected to generate $8.5 million in revenue.
- Those sales will translate into more than $1 million in tax revenue for the state and almost $400,000 for the city of Denver, the study estimated. That’s 10 times as much as the average for a non-cannabis retailer. A major reason: “The tax rates are more than four times larger” for marijuana companies, Strauss said.
The study is “verification of what we had thought all along, which is, we’re hiring people, and we often hire them well beyond what someone can look forward to making if they’re making cups of coffee down the street,” said Ralph Morgan, co-owner of Evergreen Apothecary and Colorado Harvest Company.
What’s more, some numbers in the report might actually be higher, as many customers who buy cannabis at the shops are tourists visiting Denver specifically for marijuana and therefore have an even greater economic impact.
“There’s a lot of evidence that suggests that at least 50%, or at least a third, of the sales are out-of-state,” Strauss said. “Those are just kind of estimates, and nobody really knows. But I didn’t want to exaggerate too much, so I decided to be conservative.”
Aside from the marijuana stores, Morgan and his business partner Tim Cullen also own two more cannabis companies: OrganaLabs, which specializes in MMJ products, and O.penVAPE, a vaporizer manufacturer.
The pair decided to fund the study – which Morgan estimated cost at most a few thousand dollars – because they wanted more input on how the stores were performing compared to other local businesses.
“There’s a lot of international interest in Colorado’s marijuana experiment, and there’s a lot of speculation about the forecast, regarding tax revenue,” Morgan said. “They’re ranging from worrisome to optimistic. We of course feel very optimistic about the economic impact, and we wanted to have a better understanding of really what that was. We wanted clarity, and we also wanted to demonstrate the ripple effect of well-run marijuana businesses on the community.”
Morgan said another reason they paid for the study is that he and Cullen are currently attempting to expand into Aurora, and being able to show the economic benefits his company creates could give him a leg up.
“It demonstrates that we’re really positive contributors in the community,” Morgan said. “And we’re not unique. There’s a lot of great examples of this. We have a lot of great peers in this space that have a very similar footprint.”
John Schroyer can be reached at Johns@mjbizmedia.com