New law allows counties to consider retail marijuana sales tax

La Plata County looks at options to offset budget shortfall

Tanner Waldron, left, and Nick Noto of Durango Organics help customers in September 2014 with their selections during the first day of retail marijuana sales in Durango. Enlarge photo

Durango Herald file

Tanner Waldron, left, and Nick Noto of Durango Organics help customers in September 2014 with their selections during the first day of retail marijuana sales in Durango.

La Plata County may have a new way to address its budget woes: a tax hike on marijuana.

House Bill 1203, which was approved by the state Legislature and signed into law by Gov. John Hickenlooper earlier this month, allows county governments to ask voters to approve a special sales tax on retail marijuana.

Megan Graham, spokeswoman for the county, said the county is considering the option of a sales tax, potentially in conjunction with the city of Durango, as it could generate an estimated $276,000 a year for every 1 percent increase.

“It’s definitely something we want to look at more closely and would certainly want to have conversations with the city about,” Graham said.

It wouldn’t be the first time the concept of a special local tax on pot has been brought up. A similar proposal was considered by the city in 2015 but eventually shot down when dispensary owners spoke out against the disproportionate burden it placed on them.

City Councilor Dean Brookie, who was the mayor when the tax increase was considered, said he opposed singling out the industry, as it contributes roughly $1 million in revenue for the city and is taxed at a high enough rate, 20 percent between state and local sales taxes plus a 15 percent excise tax, as is.

“In my opinion, there is no real reason to contemplate any increase in that tax,” Brookie said.

He added that additional taxes on retail pot could drive down the profit margins and drive sales underground where they can’t be regulated.

Graham said any increase in tax rates is far in the future and would require extensive input from the community and business owners.

Another marijuana-centric option is an excise tax on wholesale production, which County Commissioner Julie Westendorff brought up during a Chamber of Commerce event Wednesday.

An excise tax would allow La Plata County to generate revenue from pot that is grown in the county and then shipped to sell elsewhere in the state, such as the Front Range, Westendorff said.

The county is more invested in an excise tax, as the sales tax option only recently became available and the county has not had time to analyze it, she said.

Both tax options would have to be approved by voters.

In the meantime, La Plata County is focusing on other efforts to reach its goal of shaving $1 million from its operating expenses for the upcoming year through innovation, and also come to grips with an estimated $6.5 million funding shortfall between 2016 and 2018 after it approved a $77.5 million budget, which represents a 26 percent drop from the 2016-17 fiscal year.

The efforts to close the shortfall cover a wide spectrum, including prioritizing essential positions, thinning staff through retirements and reducing services, such as closing the branch libraries at Sunnyside and Fort Lewis Mesa elementaries.

The county also is working to improve efficiency in various offices. Those efforts include requiring electronic submissions for development planning proposals ($30,000) and considering installing auto-shutdown programming on county computers to save energy costs ($15,000).

Various road and bridge practices are being evaluated to save on equipment use and staff time, such as placing truckloads of gravel at the fairgrounds to save travel time, and $3,000, during the winter months.

“It’s a silly little one, but it’s kind of just endemic of the kind of thinking that we’re trying to do here,” Graham said.

lperkins@durangoherald.comThis article has been updated to clarify that the total budget shortfall is $6.5 million, and that the attempt to save $1 million through innovation does not include savings through such things as staff reductions.

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