By Dan Frosch, Published: January 9, 2015 at 7:38 PM

DENVER—Before Colorado became the first state to allow marijuana for recreational purposes, supporters boasted that legalization would generate a sizable tax windfall, while opponents warned that it could have dramatic social consequences.

Slightly more than a year into the state’s experiment with sanctioning pot sales to adults 21 and older, neither prediction is proving entirely true. Marijuana so far hasn’t been the boon or bane that many expected, offering potential lessons to other states considering legalization.

The office of Colorado Gov. John Hickenlooper last February estimated the state would haul in nearly $100 million in revenue from recreational marijuana taxes in the fiscal year that began in July. But sales have been slower than expected—due in part to a 25% tax rate that experts say has steered potential users toward medical marijuana, which is cheaper.

State economists revised their own, separate forecast on Dec. 22, estimating that recreational pot sales would generate $58.7 million in tax revenue for the fiscal year, down from $67 million.

“It was an educated guess, because we were dealing with a federally illicit product,” said Larson Silbaugh, a senior economist with the Colorado Legislative Council.

Meanwhile, fears that legalization would trigger a marked jump in teen drug use also don’t seem to have been realized. Fewer high-school students reported using marijuana in 2013 than 2011, according to a survey released in August by the Colorado Department of Public Health and Environment.

After Colorado voters approved a landmark measure legalizing pot in 2012, the drug became legal for adults in the state to possess and grow in 2013, though retail sales didn’t begin until the start of 2014.

“All of the concerns you had about kids and spikes in uses, none of that materialized,” said Christian Sederberg, a partner with Vicente Sederberg, LLC, a Denver law firm that represents the marijuana industry.


Washington became the second state to allow recreational pot sales last summer, and Oregon and Alaska approved legalization measures in November. Activists are pushing legalization in several other states, including California, where they aim to put a measure on the ballot in 2016.

To be sure, there have been problems with marijuana safety in Colorado, especially with edible forms of the drug, which the state is struggling to regulate.

As of Nov. 30, the number of calls to the state’s Rocky Mountain Poison and Drug Center by people experiencing adverse effects from marijuana nearly doubled, to 202, compared with the whole of 2013, according to the latest available data.

Several Colorado doctors recently reported in the Journal of the American Medical Association that local hospitals had seen an uptick in patients who became sick from ingesting too much marijuana, particularly children.

According to a recent federal survey, marijuana use among Coloradans age 12 and over went up slightly between 2011 and 2013, to 12.7% from 10.4%.

“This is exactly what we were worried about,” said Kevin Sabet, director of the drug policy institute at the University of Florida, and co-founder of a group, Smart Approaches to Marijuana, that opposes legalization.

Neighboring states are also complaining that Colorado marijuana is flooding their jurisdictions. Nebraska and Oklahoma last month sued Colorado in the U.S. Supreme Court, claiming that legalization has resulted in more interstate drug trafficking and violates federal law.

In some ways, however, marijuana has been woven into everyday life in Colorado, as more than 200 highly regulated retail businesses sell their wares around the state.

State lawmakers and economists say pot is indeed contributing to Colorado’s economy, spurring tourism and the conversion of blighted warehouses into marijuana grow-houses.

According to state figures, nearly 16,000 people are now licensed to work in the marijuana industry in Colorado. And a study conducted last year for the state by the Marijuana Policy Group, a Colorado research firm, found that tourists accounted for nearly half of recreational sales in the Denver area and 90% in popular mountain communities.

Warehouses in Denver are now selling for $75 to $100 a foot, up from $40 to $60 a foot last year, according to Tim Shay, a senior vice president at Colliers International brokerage firm, who noted that the pot industry was the driving force behind the price surge.

On a recent day in the Denver suburb of Edgewater, several customers milled about Live Green Cannabis, eying an expansive display of pot strains like “Star Nebula” and “Sour OG.”

“As an industry, we’re excited that we’re setting a model for the rest of country,” said Brooke Gehring, a former commercial banker who owns Live Green and several other pot stores around Colorado. She noted that since recreational marijuana sales began Jan. 1, 2014, Live Green has seen up to a tenfold increase in daily customers, with sometimes as many as 500 a day.

While tax revenues may have been less than originally forecast, experts note that a number of municipalities chose to wait before allowing recreational sales, or banned them outright, which ended up affecting tax collections. Collections have generally been increasing since last January, according to the state’s department of revenue.

Some lawmakers initially against legalization have since committed themselves to making it work, including state Sen. David Balmer. The Republican from Arapahoe County said many of the concerns voiced by critics of marijuana legalization haven’t been realized, and the drug is proving to be a viable economic contributor.

“I just had the same knee-jerk opinion as all of the other elected officials,” he said. “But once I toured the dispensaries and the warehouses, and I saw the dramatic regulatory framework that has been set up, I wanted to help the business community succeed.”

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