Denver council sets marijuana tax rate at 3.5 percent

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DENVER — Denver’s city council voted Monday night on a municipal tax rate for recreational marijuana after members spent three hours Monday afternoon debating dozens of regulatory proposals, some of which seemed aimed at making it almost impossible for the new industry to gain any kind of foothold in the city.

The tax rate, at least for the first year, will be 3.5 percent.

That passed by a 7-6 vote, with council members divided over the initial five percent tax rate suggested by Mayor Michael Hancock and the 3.5 percent rate floated by the city’s auditor, Dennis Gallagher.

One proposal that would have prohibited marijuana retailers from ever moving locations — never mind how a landlord might take advantage of that — failed by just a single vote.

Another proposal to force marijuana retailers to locate 2,500 feet away from schools, which failed by a vote of 5-8, amounted to “an effective ban” on recreational marijuana in the eyes of some council members.

“It seems like some of you wish that [Denver] opted out [of Amendment 64],” said Council Member At-large Robin Kniech. “But we didn’t, we opted in.”

The industry has agreed to support a proposal to subject every licensed dispensary to a public hearing before it’s allowed to sell recreational marijuana, something dispensaries opposed just days ago.

“Every community deserves to have a say-so,” said Council Member Paul Lopez, who supports the mandatory hearings.

Some other council members wondered aloud how useful those hearings would actually be.

“The current licensing process for liquor retailers is a complete charade,” said Neviit. “All you need is a good lawyer. So my concern isn’t about whether we have these hearings but about what the hearings will actually be.”

Later Monday night, the full council approved a 3.5  percent sales tax to put on the ballot — a shift from earlier this month when a committee of the whole council had given initial approval to the five percent rate.

The seemingly small difference amounts to about $2 million in annual revenue.

“We’ve got to make sure we have enough revenue to regulate this new industry, to keep the public safe,” said Council Member Charlie Brown, who supported the 5 percent tax rate proposed by Mayor Michael Hancock.

Other members, like Lopez, who favored the 3.5 percent rate suggested by Gallagher, worry that setting the rate too high will drive would-be consumers to the black market.

“We find that sweet spot where we generate enough revenue but don’t hurt these businesses,” Lopez said. “It’s important that, when these businesses are just starting out, we put them in a position to succeed because, long-term, we want this to work.”

Converting medical marijuana shops in Denver to house commercial marijuana would take more than a year, but the city council has about a month to finalize the rules and regulations that would govern such shops.

“We know that there are a lot of other cities that are watching Denver and how we do it,” Lopez said. “We want to make sure we do it the right way.”

The council opted to return next week to take up a proposed rule requiring a wall inside pot shops, separating medical marijuana from retail marijuana business. Opponents say such a proposal would be too expensive, resulting in fewer dispensaries.