“You know what’s really been successful because of Initiative 502? The black market.”
That a tough assessment, because it is exactly the opposite of what Initiative 502, the 2012 marijuana legalization measure, was supposed to do. And it’s particularly tough because it comes from a frustrated Alex Cooley, a successful but straight-arrow marijuana grower (I profiled him in a column last year) who both supported I-502 and has multiple I-502 licenses for growing and processing.
But his assessment reflects a growing unease about the lurching roll out of Washington’s historic recreational marijuana market. Prices, at $25 a gram or more, are far higher than any scenario analysis by an Liquor Control Board consultant, BOTEC, in planning reports before the launch. Tax revenues through about one quarter of the year are $6.5 million ($26 million for a full year). That will probably rise when more stores open (and prices fall), but so far it’s a fraction of what was expected. BOTEC estimated tax revenues could be anywhere from $3.2 billion to $650 million over 10 years.
In an editorial this Sunday, the Seattle Times editorial board takes a look at the problems caused by Washington’s lax medical marijuana regulations, an unregulated shadow market sucking customers from the recreational stores.
Cooley and others have other reasons. Foremost for Cooley is the “proximity problem” in Initiative 502, which bans stores within “one thousand feet of the perimeter of the grounds of any elementary or secondary school, playground, recreation center or facility, child care center, public park, public transit center, or library, or any game arcade.”
The City of Seattle map at right shows, in yellow, the tiny slivers that fit the definition. “There’s a reason there’s so few retailers and grows — there’s no where to go,” said Cooley.
I don’t blame I-502’s drafters for this, because the initiative was written to pass a popular vote, and did.
But the LCB made the “proximity problem” more acute. It first decided to measure the 1,000 feet by “common path of travel,” which would’ve expanded the yellow. Under pressure from federal prosecutors, the LCB changed to a more restrictive “as the crow flies” interpretation. The yellow zones tightened. “If you use common path of travel, you double the number of properties,” Cooley said.
The LCB’s Rick Garza said the direct pressure from the state’s U.S. Attorneys – who retain the power to close the whole I-502 market under federal law – caught the board’s attention. “There wasn’t very many times when we heard directly from the U.S. attorneys. Basically what the feds said is, ‘It’s illegal.’ For them to share concerns about how we measured the 1,000 feet, that got our attention pretty quickly.”
The fact that Seattle, triple the size of any other city in Washington, has only a handful of stores is “odd,” Garza said, because there are 21 locations authorized for the city. The LCB has given the 21 entities who won a lottery for Seattle licenses until mid-November to get moving, or lose their chance at a license. “There’s so many reasons outside of the board that these businesses aren’t opening,” Garza said.
Tweaking I-502 to loosen the 1,000-foot rule seems an obvious fix for some of this. State liquor laws put the buffer at 500 feet for schools.
Rolling out the world’s first from-scratch legal marijuana market is a huge challenge, and deserves patience. But four months in, patience is wearing thin.
An earlier version of this blog post incorrectly described tax revenue estimates by the consultant BOTEC.