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Pueblo County to continue collecting tax while City prepares for retail pot

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Sal Pace fears oversaturation. - COURTESY PUEBLO COUNTY
  • Courtesy Pueblo County
  • Sal Pace fears oversaturation.

Since legalization went into effect, Pueblo County was a "go" for retail pot shops while the city of Pueblo was a "no." That's about to flip as the city gears up to accept license applications for the first time while the county holds off on adding more.

With voters' recent stamp of approval, Pueblo City Council met Jan. 3 to establish a set of rules to govern the licensing of retail pot shops. The ordinance, passed unanimously, limits the total number of licenses available within city limits to eight — four north and four south of the Arkansas River.

City staff will host a pre-application meeting on Jan. 11 for interested parties, who will have until Feb. 24 to submit paperwork to the clerk's office. Local applicants with experience running a marijuana business will get preference.

Meanwhile, Pueblo County, nicknamed "the Napa Valley of weed," extended its moratorium on all dispensaries until January 2019. The measure commissioners adopted Dec. 19 forbids the county from accepting any more than three new licensing applications for retail marijuana stores — which must be located outside the 81006 and 81007 zip codes. The Pueblo County commissioners also voted to enact another moratorium, this time on cultivation facilities. It has exceptions, allowing medical cultivators to apply for a recreational growing license at the same location and licensed dispensary operators to apply for a cultivation license.

Commissioner Sal Pace says the county welcomes the industry growth, but he worries about an oversaturated market.

"We're the No. 1 wholesaling county in the state," Pace says. "But we're not concerned about there being too many grows because we welcome the job growth and economic impact. Rather, [the moratorium] is meant to prevent a precipitous price drop that could lead to diversion either out-of-state or into the black market."

Ball is in the next court

As reported in CannaBiz on Jan. 4, Pueblo County's special marijuana sales tax may be jeopardized by a recent appellate ruling that found Adams County's tax invalid. Adams will keep collecting the tax while preparing to bring the case to the Colorado Supreme Court. Pueblo will also continue to collect its tax but hopes for a legislative rather than judicial fix.

The issue of whether counties can tax a single product, in this case recreational marijuana, first arose after Adams County voters approved a 3 percent special sales tax in 2014. When Adams County enacted it in 2015, Aurora, Northglenn and Commerce City sued, arguing the county had neither the statutory nor constitutional authority to levy such a tax. The cities — all home-rule municipalities whose voters approved the tax — claimed adding the county tax to existing local and state marijuana taxes put their dispensaries at a competitive disadvantage relative to, say, Denver's.

A district court judge sided with Adams County this fall. Then the cities earned a reversal from the Colorado Court of Appeals at year's end. Adams County will appeal to the Colorado Supreme Court, which can choose to take the case or not.

In the meantime, according to a Denver Post report, Adams County continues to collect the controversial tax and promises to make good on project funding related to the associated revenue, including college scholarships for low-income students.

Pueblo County, the only other in the state with a similar tax, has put about $1.5 million in funds generated from marijuana on hold, meaning the 13 projects promised a chunk of those funds are in limbo. It will not, however, join Adams County in court.

"We're not dealing with exactly the same situation [as Adams]," Pace says, noting that Pueblo County's special marijuana sales tax hasn't impacted the City of Pueblo yet, because there have so far been no recreational pot sales there to tax. (The city is just starting to move toward licensing recreational pot shops following the November vote.) Adams County's tax, on the other hand, has already impacted Aurora, Northglenn and Commerce City.

Still, the case is relevant to Pueblo. "We'll be watching the Adams County case very closely," Pace says, "but really, we want the [state] Legislature to act."

Colorado's General Assembly thus far has opted not to clarify counties' statutory and/or constitutional authority to levy this particular kind of tax, despite requests to do so throughout this litigation. More clearly stated intent could put the issue to rest. Sen. Larry Crowder, R-Alamosa, will likely lead such an effort, according to Pace, who added that he's "awfully hopeful" this will all work out to benefit the people of Pueblo, who have twice voted in favor of the tax.

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