PUBLISHER’S NOTEBOOK: Put away the giant scissors

Well now that Prop B-1 was voted down, it looks like Marijuana, Inc has clear sailing to open up shop in the borough, with exception for the cities of Palmer and Wasilla. Facebook comments on our story about the victory for the “Vote No on B-1” spoke of this being an opportunity for building new schools and parks in the borough. One comment suggested 25 percent of the tax revenue should go to a ski resort on Hatcher Pass. Another suggested that Wasilla and Palmer will reconsider their stances when they see the city of Houston benefit with new schools and parks and growth. Though, last I checked, Wasilla and Palmer are still in the borough and another measure that just passed — Proposition B-5 — was for a 5 percent borough tax, so, Wasilla and Palmer will still benefit.

So will there be a big economic boon as we’ve seen in my home state of Colorado? I have my doubts.

Colorado has a 10 percent special retail sales tax for marijuana sold in legal businesses. There is also a 2.9 percent sales tax imposed for revenue generated for each county that allows these businesses. Alaska has a $50 per-ounce cultivation tax for every ounce of marijuana sold to retail shops.

I don’t know where that money will go but I doubt much will trickle down to the boroughs. But let’s focus on the revenue generated strictly on the new 5 percent borough tax. The borough population is estimated at 102,095. Let’s compare that to a city in Colorado of the same size, let’s say Boulder, whose population according to City-Data.com sits at 105,122. The Mat-Su borough and Boulder have a large tourism industry, but Boulder also has a major university and are much more liberal in their views than the valley.

In July 2016, on the 10% special retail tax, the County of Boulder (population 310,048) generated S197,795 in tax revenue. So based on population, take one-third of that and that leaves $65,931 for the city.

Now divide that in half because our tax here is 5 percent, not 10 percent, and that leaves $32,965. So if all things were equal in sales you would be looking at $395,586 raised over 12 months. My guess — and it’s only a guess — is with Boulder’s liberal attitude and the University of Colorado campus, sales in Boulder should be much higher (no pun intended) than that of the much more conservative Mat-Su Borough.

It seems hard to believe the tax revenue will even be $200,000 per year, but hey that’s $200,000 per year we didn’t have before. But with the state budget cuts, it’s a mere drop in the bucket in the Mat-Su.

Who knows? Maybe the $50 per ounce tax will be a nice shot in the revenue arm, but I wouldn’t count on it.

So put away the giant scissors and grand opening ribbons because I don’t think marijuana tax is going to build very many schools, parks, ski resorts or whatever else folks have on their wish list.

Will MJ be good for our economy? I don’t think so, and it has nothing to do with being for or against marijuana.

Anyone listed as a partner in a marijuana retail shop has to be an established resident of the state, and that means PFD-qualified resident. Out of state money won’t have an influence unless it’s illegally funneled through, which would put an already shaky business in jeopardy. We know the banking issues for marijuana businesses and there are no real solutions coming down the pike.

So, that leaves qualified private money to make the industry thrive. I don’t know how many established business people with real money to invest will do it in the marijuana industry. Again, maybe I’ll be surprised. What I see happening is a group of friends who are passionate about weed opening small mom and pop shops having to over pay for legitimate weed grown in legitimate cultivation facilities with not a lot of start-up cash. They’ll be over paying for product that is already pretty flush in the market even if it’s on the black market.

I don’t know how many customers are going to move from buying their pot from their current source and going to a retail shop.

I’ve been in the retail industry and opened new businesses. Grand openings are great but once the newness wears off it’s tough sledding from there. The rule of thumb for any new business is you won’t typically turn a profit for the first three years. Without the cash upfront to float the business through the lean times many just don’t survive. It should be a real concern for where these friends will get this money from and what will be the true long term damage for their futures and how that would affect our local economy.

We see this all the time with small time pizza, coffee and smoke shops. But for the successful shops there will be some cottage industries developed such as hydroponics, security and so forth.

Who knows? Maybe in time the industry will flush itself out and the strong will survive and create some successful entrepreneurs. After all, if it generates $200,000 in tax revenue as I calculated earlier that’s means marijuana would be a $4,000,000 annual industry.

You’ve come a long way Mary Jane.

Thank you for reading the Frontiersman.