Ne­vada ex­pe­ri­ences the green rush

Shortly af­ter of­fer­ing le­gal sales of mar­i­juana, the state hits a snag with high de­mand and low sup­ply

The Washington Post Sunday - - POLITICS & THE NATION - BY AMY WESTERVELT na­tional@wash­post.com

reno — Ne­vada’s fast-de­vel­op­ing ex­per­i­ment with le­gal sales of recre­ational mar­i­juana was an in­stant hit, and the Fourth of July weekend gave the Sil­ver State a taste of the green rush.

In the first few days of sales, dis­pen­saries re­ported more than 40,000 recre­ational trans­ac­tions, a push that cre­ated two sit­u­a­tions here: A rudi­men­tary dis­tri­bu­tion sys­tem meant there wasn’t enough mar­i­juana to stock the shelves, and high de­mand con­firmed state of­fi­cials’ sense that weed sales could help bol­ster state cof­fers.

The lack of prod­uct was the re­sult of a dis­tri­bu­tion prob­lem the state dis­cov­ered at the last minute and didn’t solve be­fore sales were al­lowed July 1. Al­though state rev­enue pro­jec­tions es­ti­mated that the bur­geon­ing mar­i­juana in­dus­try could pro­vide an ex­tra $100 mil­lion to the bud­get dur­ing the next two years, the state rushed to get it on sale with­out en­tirely fig­ur­ing out how to get it to cus­tomers.

The new state mar­i­juana law gave ex­clu­sive dis­tri­bu­tion rights to whole­sale al­co­hol dis­trib­u­tors for 18 months, but when the first sales were al­lowed July 1, none had met the re­quire­ments for a li­cense. Dis­pen­saries, which had been han­dling med­i­cal mar­i­juana sales for two years, stocked up. Sales were far greater — in some cases sev­eral times greater — than any­one ex­pected.

So, wor­ried that po­ten­tial tax rev­enue could be at risk, the Ne­vada Depart­ment of Tax­a­tion de­clared a state of emer­gency, propos­ing reg­u­la­tions that would en­able the ex­pan­sion of dis­tri­bu­tion be­yond the liquor in­dus­try.

Deonne Con­tine, ex­ec­u­tive di­rec­tor of the Depart­ment of Tax­a­tion, got to the heart of the mat­ter Thurs­day as of­fi­cials con­sid­ered emer­gency fixes: “Dis­pen­saries will run out of prod­uct — they’re al­ready run­ning out of some prod­ucts — and there will be a bud­get short­fall if that hap­pens. Be­cause if these busi­nesses can’t sell prod­ucts, then we can’t col­lect tax.”

On Thurs­day, the state Tax Com­mis­sion unan­i­mously ap­proved the emer­gency reg­u­la­tions af­ter sev­eral hours of pub­lic com­men­tary. Two dis­trib­u­tors won li­censes this week, and Con­tine is de­ter­mined to get more li­censes awarded as soon as pos­si­ble. “Ob­vi­ously, as more li­censes are awarded, more sales will oc­cur and rev­enue will in­crease,” she said.

Look­ing to crack down on the black mar­ket and max­i­mize tax rev­enue, the state moved to start sales of recre­ational mar­i­juana six months af­ter vot­ers ap­proved a bal­lot ini­tia­tive.

What­ever leg­is­la­tors in this Repub­li­can state thought of the idea be­fore, now that recre­ational mar­i­juana has been le­gal­ized in Ne­vada, they want to make sure the state is get­ting its cut. Gov. Brian San­doval (R) has put a 15 per­cent ex­cise tax on whole­salers and a 10 per­cent re­tail sales tax on recre­ational sales. About $70 mil­lion of the $100 mil­lion in mar­i­juana tax rev­enue is ex­pected to come from recre­ational sales and is ear­marked to shore up the state’s fund­ing for K-12 ed­u­ca­tion, which is fac­ing a $40 mil­lion short­fall.

The pot busi­ness here has been boom­ing. Out­side the Blüm dis­pen­sary in Reno, the store has had to add a row of about 20 fold­ing chairs on the side­walk, with a cooler of wa­ter be­cause peo­ple have been wait­ing an hour or more in 100-de­gree weather.

“I was here the first night, and they stayed open all night be­cause they didn’t want any­one who had been in line to not be served,” said David Flint, who has been back to the dis­pen­sary more than once be­cause he likes its of­fer­ings’ va­ri­ety. “It’s more ex­pen­sive, but then you can get ex­actly what you want, and you don’t have to deal with a street dealer.”

The crowd along Vir­ginia Street, the city’s main drag, is var­ied. Young and old, clean-cut and scruffy, ca­sual users and veter­ans. Some felt a lit­tle ex­posed wait­ing out­side for some­thing that wasn’t le­gal just days ago.

“I feel like a col­lege stu­dent with a fake ID and like my par­ents are go­ing to bust me any minute,” said one woman, who de­clined to give her name be­cause she teaches at a lo­cal univer­sity and is wor­ried about what her stu­dents and em­ployer might think.

Ev­ery 10 min­utes or so a se­cu­rity guard comes out to get the next eight pa­trons. They show their iden­ti­fi­ca­tion at a glassed-in desk be­fore gain­ing ac­cess to the in­te­rior wait room, which looks a bit like the lobby of a high-end med­i­cal of­fice, earthy tones with chrome and white ac­ces­sories. In­side, a dozen or so peo­ple wait to be called into the re­tail space — a long, back­lit counter that re­sem­bles a jew­elry dis­play case but for its va­ri­ety of cannabis prod­ucts. Bud ten­ders, many of whom are re­cent hires to meet the de­mand, help cus­tomers pick out what they want, ring them up and send them on their way with large white child-safe pouches.

Though off to a fast start, the Ne­vada mar­i­juana in­dus­try is, like all oth­ers across the coun­try, viewed as il­licit in Wash­ing­ton. Mar­i­juana sales and pos­ses­sion still re­main fed­eral crimes, and At­tor­ney Gen­eral Jeff Ses­sions, who was in Las Vegas last week, is an op­po­nent of recre­ational use.

“He could shut us down at any time, and he’s very anti-weed,” said Mikel Al­varez, di­rec­tor of re­tail for Terra Tech, which op­er­ates the four Blüm dis­pen­saries in Ne­vada.

Al­co­hol dis­trib­u­tors have cited reser­va­tions over fed­eral reg­u­la­tions as one rea­son they’re hes­i­tant to make the in­vest­ments re­quired to get mar­i­juana dis­tri­bu­tion li­censes. Dis­pen­saries in Ne­vada and else­where largely shy away from us­ing the U.S. bank­ing sys­tem be­cause of fears of a fed­eral crack­down that could af­fect their funds.

The reg­u­la­tory fight — which al­co­hol dis­trib­u­tors are com­mit­ted to, hav­ing filed law­suits against the state and al­leg­ing the emer­gency reg­u­la­tions are in­valid — is just one ex­am­ple that op­po­nents of the new law point to when ar­gu­ing that Ne­vada was too quick to get into recre­ational mar­i­juana.

“Ne­vada stands alone with this six-month rush,” said Jim Hart­man, an at­tor­ney and pres­i­dent of Ne­vadans for Re­spon­si­ble Drug Pol­icy. “Why? What is the hurry here?”

PHO­TOS BY MELINA MARA/THE WASH­ING­TON POST

Bud ten­ders Max Erick­son, left, and Christo­pher Price help cus­tomers at the Blüm Med­i­cal Mar­i­juana Dis­pen­sary in Reno just a week af­ter Ne­vada le­gal­ized recre­ational mar­i­juana. First-week sales were so suc­cess­ful that the dis­pen­sary sold out much of its in­ven­tory.

Ne­vada hopes to gen­er­ate $100 mil­lion in tax rev­enue from mar­i­juana sales dur­ing the next two years.

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