New report predicts high dollars if NM legalizes marijuana

By Marissa Higdon / Albuquerque Business First

Published on September 21, 2016

A new report, commissioned by medical marijuana producer Ultra Health, found that, if marijuana is legalized for recreational use in New Mexico, the industry could bring in $412.5 million in annual revenue in the first year and $677.7 million five years after legalization.

The report estimates that more than 40 percent of this new revenue would come from out-of-state tourists who buy marijuana while visiting New Mexico, and the rest would mostly come from individuals who currently use cannabis illegally. Kelly O’Donnell, of O’Donnell Economics and Strategy, authored the report. According to the organization’s website, she worked in former Gov. Bill Richardson’s administration in a number of positions, including as director of state tax policy. Her report found that legalizing medical cannabis would create 11,400 new jobs in the state in the first year. The Drug Policy Alliance and the Rio Grande Foundation joined industry advocates in providing support for the report’s creation.

According to the New Mexico Department of Health, there are almost 27,000 patients with medical cannabis cards, meaning there are currently almost 27,000 people with the ability to consume cannabis legally, under restrictions. The report estimates that 138,000 people over 21 in New Mexico use cannabis illegally, and 48,000 of those people use it daily. If all of these people were able to legally obtain cannabis, the report estimates that they would consume 57.3 metric tons of it. The report says 6.3 metric tons is currently produced in the state.

A lot of the data O’Donnell points to comes from Washington and Colorado.

Forbes reports that Colorado’s cannabis industry brought in $996.2 million in revenue in 2015, but, since its inception, the Colorado cannabis industry has been larger than New Mexico’s. Right before legalization, which occurred in January 2014 , Colorado had 221 licensed medical cannabis dispensaries, 112,862 medical cannabis card holders and producers generated $185 million in revenue in 2012. In comparison, New Mexico has 35 licensed producers, 27,000 card holders and producers have brought in $21.5 million in revenue so far this year.

After the first year of recreational cannabis legalization, WIRED magazine reports cannabis in Colorado was a $700 million industry, and in the first half of 2014, the state brought in $30 million in tax revenue.A t first, growth in the industry was slower than expected.

Still, that kind of tax revenue could have a big impact on a state like New Mexico. According to Colorado’s department of revenue, cannabis taxes, licenses and fees have brought in $97.7 million for the state during fiscal year 2015/2016. Tax revenue for New Mexico would depend on the size of taxes levied on the industry.

Another question has to do with cannabis tourism. In her report, O’Donnell, based on Colorado’s experience, estimates that 40 percent of cannabis sales will come from out-of-state visitors. She cites 119,000 Texas residents who reported using marijuana in the last year who live only 200 miles from the New Mexico border as possible consumers. The question is, with Colorado’s cannabis industry so close, would people choose to come to the Land of Enchantment? The Santa Fe New Mexican reported a record 33 million visitors to the state in 2014, and t he Denver Post reports that 77.7 million people visited Colorado in 2015.

Still, O’Donnell isn’t estimating that New Mexico’s cannabis industry will match Colorado’s; she’s estimating much lower numbers than our neighbor is seeing, and she is quick to point out that the true success or failure of a recreational cannabis industry will be mostly decided by the regulators who make the rules and process business licenses.