From Darkness To Light

19 Jul 2015

How the City Clerks spend their time regulating marijuana retailers who pay licensing fees

Posted by Adam Howell

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Marijuana retailers in Durango are required to pay higher licensing fees than most other businesses, which leaves people wondering what the fees are used for, and why the City might ask voters to approve a new 5% tax on recreational retail marijuana sales.

IMG_3368City of Durango officials say that the businesses license fees are required to help offset some of the costs associated with staff having to process their applications, and the required training that they need to help keep those businesses compliant with state and local regulations.

In the context of the City positioning to ask voters to approve a new 5% tax on all recreational marijuana sales in the city to help pay for city buildings, it’s more important than ever for the public and aspiring entrepreneurs to know about the fees that the City already requires for people wanting to sell cannabis as a business in Durango.

Many other businesses in Durango are paying a one-time $35 dollar application fee plus an annual businesses license fee of $50 to $122 dollars, with the possibility of another small fee depending on what they specialize in and how many employees they have.

In contrast, marijuana retailers opening up a new shop in Durango can expect to pay around $10,350 dollars between state and city fees plus a $250 dollar background check for each owner. For a co locate of both stores in one location, a license costs around $16,000 dollars plus background checks at $250 per owner.

Since the licenses need to be renewed annually, a renewal of one business would cost $8,ooo dollars plus background check fees, or for two businesses, $16,000 dollars plus background check fees.

That’s aside from the fees for modification of premise ($2,000), trade name changes ($1,000), duplicate license fees ($50) and late renewal applications ($500).

City staff time cost estimates for regulating marijuana industry

Following the City of Durango’s adoption of an Ordinance in 2014 that allows for the licensing and regulation of recreational retail marijuana stores and testing facilities, City staff did a time cost analysis to determine how to recover the costs of day-to-day administrative and regulatory functions of licensing and enforcement.

Back in 2012, City of Durango staff in the clerk’s office took mental notes on how much time they were spending to regulate medical marijuana industry, according to City Clerk Amy Phillips.

Staff from the City Clerk’s office and other departments submitted their mental estimations to a spreadsheet analysis of compiled data that showed how much time that nine City staffers were spending with the regulations, in addition to their hourly rate and the annual cost of their time accrued, Phillips said.

A similar analysis was done to project the time that 13 City staffers would spend on regulating the recreational retail marijuana industry in 2014 and 2015, using a spreadsheet and more mental timekeeping.

Both of the analyses were attached and discussed on an agenda at a City Council meeting last year in June where they assembled a marijuana establishment license fee schedule and approved it as a resolution.

This blogger asked City Clerk Amy Phillips and Deputy Clerk Dana Evans how they spend their time carrying out administrative and regulatory functions for the industry, as noted in the Staff Time Cost Study of 2012 and the Staff Time Cost Projections for 2014 and 2015.

Evans’ estimate of the total hours that she had spent in 2012, and would spend in 2014 was 672 hours per year, or the equivalent of around 84 days per year.

Evans mostly spends that time processing applications and renewals, she said.

“We take calls all the time. A lot of calls from the applicants,” said Evans. “There’s a whole review process. Usually the applications are incomplete. So we spend a lot of time with the applicants going back and forth trying to get their application to the point then where it goes before the licensing authority.”

After reviewing the previous Staff Time Cost Study and Projections, Evans wondered if they fully accounted for the time that herself and Licensing Technician Ben Florine were spending with administrating the regulations.

“I’m not sure if we didn’t–Ben and I–haven’t still shortchanged ourselves some because we do spend a lot of time on the review and the process of them,” she said.

“There’s just so much to an application. It can be 150 pages–one application. There’s a lot to review, and it takes two sets of eyes, most of the time, sometimes three,” said Evans. “Just that whole review process to make sure that everything is in it that needs to be.”

“The state won’t license, and we can’t license a business if their lease is not through the life of the license. And so many times they’ll bring their lease in, and the lease doesn’t extend out past the license, and so they have to have their lease renewed. So it’s a lot of trying to reach that completed application process,” said Evans.

More often than not, applicants have to make multiple visits to the Clerk’s office to finish the process, said City Clerk Amy Phillips.

“With renewals, they have to do the whole packet again. And it’s very surprising. Just like with anyone who needs applications, it takes probably an average of five times to get people in here to get everything done, everything signed. The lease in the same name that you have the business that you’re applying through the state for your licenses–everything has to match. It sounds pretty easy, but it’s not,” said Phillips.

“Built into this, it’s just not applications,” said Phillips. “It’s all the time that we spend on the regulations, writing the ordinances, going to the classes to find out where the state is headed towards and looking at in regulations.”

“Dana has attended at least four or five up in Denver. And they’re all day long,” said Phillips. “That’s the flight up there, it’s staying there, it’s coming back. The City’s paralegal goes to those. We have classes that are just locally that we go to when the Marijuana Enforcement comes down and does some of the classes,” said Phillips.”

A voice from the industry

Gary Davis, who owns the Telluride Bud Companies in Durango and Telluride–two recreational retail marijuana stores–is in the process of trying to get several others pot shops opened in Colorado. He talked to this blogger about his experience with the marijuana license application process in Durango.

“The application process is fairly complicated, but I’ll say this–we’ve done enough applications–to where ours was not complicated,” said Davis. “I think we had to clear up one thing, and I can’t tell you exactly what that was, and it took us about five minutes, and that’s it. Our application was complete when it went in there, so we didn’t have to do a bunch of follow up and stuff.”

“Now I know there were a lot of people that did have to, just from talking to the guy that works in the clerk’s office there that handles this stuff, telling me that most people’s applications weren’t that complete, you know that they had to do a lot of follow up work, and stuff–but we did not,” said Davis.

“They want your money and they want squeaky clean applicants,” said Davis. “You’ve gotta be so clean, you could run anything.”

It was unclear to Davis what the City was using his marijuana business license application fees for.

“I have no idea what the City of Durango is using it for,” Davis said.

Retail marijuana tax revenue for the City of Durango

With the City positioning itself to possibly ask voters to approve a 5% tax on recreational retail marijuana, it’s important to know what the City is already bringing in from local retail marijuana sales.

In the first five months of 2015, the City of Durango had collected in total around $152,206 dollars from two preexisting taxes on retail marijuana: a 3% city sales tax on medical and recreational marijuana sales, and a 15% portion of a 10% special state sales tax on recreational marijuana.

Part of the city’s 2015 year-to-date marijuana tax collections are from recreational marijuana retailers who paid the City of Durango $80,328 in city sales taxes, according to data on the City’s Finance web page. This means that between the seven recreational marijuana retailers in Durango, they’ve collectively sold around $267,492 dollars worth of products so far in 2015.

The City of Durango started reporting its sales tax collections from recreational marijuana retailers in March of 2015. Before then, the City was unable to give out specific information because there were 3 or less businesses in that category, said Dana Evans, the City’s Deputy Clerk.

A special marijuana sales tax of 10% that recreational retailers pay to the state distributes 15% of that back to local jurisdictions that allow recreational retailers to do business.

So far in 2015, Durango has received $71,878 dollars in special recreational marijuana sales taxes distributed back from the state, while in 2014 when the recreational industry just got started, Durango received $30,491 dollars back from the state.

List of retail and medical marijuana businesses in Durango

The Durango City Council will have a public hearing on City Manager Ron LeBlanc’s proposal to ask voters to approve a new 5% tax on recreational retail marijuana this Tuesday at 6:30 p.m. in the Council Chambers.

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