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Oakland County municipalities seeing big economic benefits from marijuana sales

Posted By: The Oakland Press on July 11, 2022.  For more information, please click here to read the source article.

For some Oakland County communities, the economic windfall promised when recreational marijuana was legalized statewide is coming true. State data shows that some are seeing big returns and officials say the investments are paying off.

Take Hazel Park. Ed Klobucher, the city manager, said marijuana payments received from the state for its eight licensed recreational retailers has helped to bolster the city’s $3.5 million pension system, which jumped by over $1 million in just the past year.

The city receives these payments every year from the Michigan Department of Treasury as a portion of state sales taxes The dollars are put into the general fund and designated for pension contributions, which are constitutionally-protected payments made to city retirees that must be made every month.

“Our city’s pension system is significantly underfunded, but we’ve never missed a payment,” he said. “We know that the pension system has a shortfall every year. We had to find some revenue sources to help the city cope with that adjustment in cost. These marijuana revenues are helping us meet those obligations.”

Each month, the city pays out $300,000 in pension payments, says Klobucher, from its $17-$18 million general fund budget.

REVENUE GENERATED

Over the past two years, over $50 million has been distributed to over 50 counties and dozens of municipalities across the state. Payments are based upon the number of state-licensed recreational retailers located within its jurisdiction.

The dollars are pulled from the Marijuana Regulation Fund as part of the Michigan Regulation and Taxation of Marijuana Act, which was approved by voters in 2018 to legalize recreational marijuana.

This past March, the Michigan Department of Treasury announced that more than $42.2 million would be distributed among 163 municipalities and counties, including 62 cities, 15 villages, and 53 counties. On average, each county and municipality received around $260,000 in marijuana payments.

For the 2021 fiscal year, this means that each eligible municipality and county received more than $56,400 for every licensed cannabis retail store and microbusiness located within its jurisdiction.

According to David Harns, spokesperson for the state Cannabis Regulatory Agency (CRA), there are no restrictions in how communities can spend these marijuana payments. There are also no requirements for the locals to report any spending to the state.

Statewide, sales tax revenue was collected from 374 cannabis retail licensees during the 2021 fiscal year. Some of these municipalities host more than one licensed retail store and microbusiness. In fiscal year 2020, revenue was collected from 178 cannabis retailers.

For the 2021 fiscal year, more than $111 million was collected from the 10% adult-use marijuana excise tax. In total, there was $172 million available for distribution from the fund. For the 2020 fiscal year, more than $31 million was collected from the 10% adult-use marijuana excise tax. In total, there was $45.7 million available for distribution from the fund.

State law outlines how much is distributed from the Marihuana Regulation Fund.

Aside from the more than $42.2 million in disbursements to municipalities and counties, $49.3 million was sent to the School Aid Fund for K-12 education and another $49.3 million to the Michigan Transportation Fund.

In total, more than $1.1 billion in adult-use marijuana sales was reported for fiscal year 2021 compared to $341 million in fiscal year 2020.

“It’s rewarding to see that the agency’s balanced regulatory approach is effectively protecting consumers while still allowing Michigan businesses to grow and thrive,” said Andrew Brisbo, CRA executive director. “The funding provided directly to local governments – and the thousands of jobs created across the state – show that Michigan is leading the way in the cannabis industry.”

Oakland County received nearly $800,000 in payments for fiscal year 2021, a 300% increase over the $200,000 in payments for fiscal year 2020. The number of licensed adult-use retailers jumped from 7 to 14 in that year alone.

Hazel Park, Ferndale, Madison Heights, and Walled Lake also received payments totaling $338,721, $169,360, $169,360, and $112,907 respectively.

Walled Lake City Manager Dennis Whitt said the dollars are put into the city’s $6 million general fund budget. The city currently has three cannabis retailers, the maximum allowed by city ordinance.

He said the marijuana payments have helped the city make critical investments in the downtown area.

“Because of that extra money, we’re able to do sidewalk repairs downtown as well as other improvements,” he said. “We’re also able to contribute matching dollars for our grants.”

Ferndale City Manager Joe Gacioch said the marijuana payments are put into the city’s $22.6 million general fund budget and have been important to sustaining revenue levels.

The city currently has five adult-use retailers in operation with one more expected next year. Six is the maximum number allowed by city ordinance.

“We use those revenues to support general operations and core services, but we’re not targeting or carving out explicit uses for that revenue,” he said. “I expect that could happen over time as we come out of the pandemic in a more stable way. Right now, this revenue is pretty important.”

Gacioch said this year’s marijuana payment, totaling just over $338,000, was substantially more than anticipated and helpful in sustaining city revenue that fluctuates year-to-year due to decreases in new development and activity downtown.

“Not receiving these marijuana payments could mean the difference between moving forward with a critical infrastructure project or being able to receive a grant for one of our parks,” he said. “If you look at it that way, it’s meaningful.”

GIVING BACK

Whitt said the marijuana retailers are helping the community and the benefits have been substantial.

“They take the lead in trying to clean up the community and improve it,” he said. “We’re pleased with what goes on.”

In Hazel Park, Klobucher said the marijuana retailers, and the industry as a whole, has been very supportive of the city, including helping to build a new park by recruiting volunteers.

“These businesses are very community-minded,” he said. “They have become a big economic boost. They donate to charitable causes and have created a lot of jobs for local residents.”

In addition to bringing in revenue, he said the businesses have moved into, and renovated, derelict buildings and have turned them into “show places” helping to improve the overall aesthetics of Hazel Park.

“There’s a misperception in the community that somehow these marijuana businesses are choking out other businesses, but we still have available space for restaurants and things like that,” he said.