A new retail marijuana sales tax could be key to upgrading Durango’s aging facilities, but those in the industry worry it could drive more sales to the black market.
The current sales tax on retail marijuana is 17.9 percent, and the city is proposing an additional 5 percent tax, which would have to be approved by voters.
A question on the tax could be on the November ballot, and if approved, it would generate about $900,000 for the city annually.
The city has exhausted all of its other potential options for raising new revenue, said City Manager Ron LeBlanc.
Without funds from a marijuana sales tax, the city would likely have to cut positions to come up with the same amount of money for building upgrades, he said.
The Durango Police Department, the Carnegie Building, River City Hall and other buildings need to be remodeled or replaced. The police department is the top priority because the work space is inadequate and, in some areas, unsafe, LeBlanc said.
City Councilor Dick White is interested in funding the building upgrades, but he also raised the question about whether an additional tax would drive sales underground.
Getting marijuana out of the black market was one of his reasons for supporting the legalization of marijuana, he said.
In La Plata County, black-market sales of pot have not decreased since legalization in 2014, said Dan Bender, a spokesman for the La Plata County Sheriff’s Office.
The assistant manager at Animas Herbal Wellness Center, Wen Dolphin, has observed the same trend, and he would like to see taxes reduced statewide to combat illegal sales.
“The black market in La Plata County is still absolutely thriving,” he said.
In some cases, the price of black-market pot is 50 percent less than it is at a retail store, he said.
A sales-tax increase could also drive customers to nearby cities, and, ultimately, it might generate less revenue for the city, said Joel Cameron, an owner at the Greenery. For example, the retail marijuana sales tax is 16.9 percent in Mancos, he said.
However, LeBlanc said a local sales tax similar to the one the City Council is considering has passed in 19 communities across Colorado, and it is has not hurt sales in those towns.
Among customers, views were mixed Tuesday at Animas Herbal.
“I think 5 percent would be a little bit much,” said Judy Musgrove. But she understands the city does need some money to shoulder some of the burden of legalized marijuana.
But some thought the added tax might be fair because of the good the extra revenue has done on the state level. Marijuana taxes have been used to fund health professionals at schools and construction projects.
“There’s always been some great things to be done from taxing marijuana,” said Terry Martin, an Animas Herbal customer.
The city already receives a portion of the state’s special 10 percent sales tax on marijuana. This has generated a little more than $53,000 for the city so far this year, according to the state.
Before the City Council decides on the ballot question, it plans to ask residents to weigh in on whether to put it on the ballot and how the new revenue should be spent.
Once facilities are paid for, the money could be used for other projects.
There has been debate among councilors about whether tax revenue from marijuana should have a permanent purpose, set by law, or if future councilors should have flexibility to determine the best use for it.
A public hearing on the issue will be held at 6:30 p.m. July 21 at City Hall, 949 East Second Avenue.
