Hayden council to lower the town’s marijuana excise tax to 3%
Hayden Town Council opted not to change one ordinance about marijuana and signaled a future change to another at Thursday’s council meeting.
Council decided to forgo changes to a local ordinance restricting where another dispensary would be able to open in town. Council member Bob Reese had pushed for changes that would keep shops off the U.S. Highway 40 corridor, an area often referred to as Main Street by council.
Reese said a lot of residents he talks to are not pleased with the dispensary already going in and want to limit where another one could be located in the future, but other council members said they have not received much public comment on the issue.
“If there are that many out there that are upset … I am a little bit surprised that we’re not hearing from them here,” said Mayor Pro-Tem Tammi Engel, pointing out other local issues that garnered lots of feedback from the public during council meetings.
After more than a month of discussion in several meetings, only Reese voted to amend the ordinance, meaning current limitations will stay in place. Council did signal a willingness to change a different marijuana-related ordinance to lower the local excise tax collected on pot grown in town.
Hayden resident Rodney McGowen, who runs a marijuana-growing operation in Oak Creek, told council growing has not been as rosy of a business as anticipated in 2016. Then McGowen had no problem with the 7.5% excise tax applied to grow houses, seeing it as an opportunity to give back to the community where he lives.
But now, he says it is preventing him from running a profitable business, and while he has started the process of opening another grow house in Hayden, he wants council to lower the excise tax to 3%.
“It is an extremely challenging business where you are always fighting something,” McGowen said, citing insects, equipment failures and a wildly fluctuating market.
An excise tax is not a sales tax, instead it is closer to an income tax, and McGowen said it only applies to cultivation. The state takes a 15% excise tax already, and Hayden adds 7.5% to that. For McGowen, that means he makes $77.50 for each $100 of marijuana he sells.
The 3% number isn’t really scientific, McGowen said, rather it is the lowest number he thought council would accept. Other municipalities like Oak Creek and Steamboat Springs do not charge any excise tax, and ideally, McGowen believes Hayden shouldn’t either, but he sees his 3% ask as a compromise.
“Three percent of something is a lot more of 7.5% of nothing,” McGowen repeated twice. “If you do that, you have a decent chance of getting our one grow. If you would like more businesses like this, I would suggest you lower it to zero.”
McGowen argues that lowering the tax will reap more benefits for the town, because it will generate more taxes locally and employ people in Hayden. The grow he is proposing in Hayden would have five rooms to grow plants in and could generate up to $1 million in annual revenue, meaning his proposed 3% excise tax would yield Hayden about $30,000.
McGowen also predicted that having multiple grows in Hayden wouldn’t be a problem, as much of the marijuana currently grown in Routt County is often sent elsewhere in the state, and the grows would not be competing with each other.
“I’m willing to concede that 7.5% is too high, but I am not willing to go to 0%,” council member Trevor Gann said.
Council member Janet Hollifield agreed, adding the town should be more competitive with other local municipalities that do not charge any excise tax.
“I know we don’t want to just open the floodgates and be a marijuana city, and I am not recommending that,” Hollifield said. “But if we want to grow more businesses in town, no pun intended, make it inviting for businesses to come.”
Reese suggested council lower the excise tax now with the stipulation the change is reviewed in a few years. But he and others on council also questioned whether that could frighten away businesses who would be wary the town would raise the tax back up after they set up shop.
Council ultimately directed town staff to draft a change to the ordinance reflecting a decrease in the excise tax to 3% and present it at council meetings over the next few weeks. Town Manager Mathew Mendisco said if approved, the new ordinance would likely go into effect in May.
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