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Other communities, including Denver, mulling cannabis club conundrum faced by Colorado Springs

March 13, 2016 Updated: March 14, 2016 at 10:19 am
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Colorado Springs isn't alone in banning cannabis clubs. Washington state did so last summer, and Portland, Ore., followed suit this month.

Englewood, Colo., was set to ban them but decided to extend its moratorium to June 15 while it explores how to regulate them instead.

But while the Colorado Springs City Council on Tuesday ordered cannabis clubs to phase out their businesses over the next eight years, Denver residents will vote Nov. 8 on an initiative to license and regulate the clubs.

Under the Denver Responsible Use Initiative, sponsored by the National Organization for the Reform of Marijuana Laws, NORML, the social clubs couldn't sell or distribute marijuana and would have to pay licensing fees. A permit also would become available for pot use during special events.

Meanwhile, proposed state legislation by Rep. Jonathan Singer, D-Longmont, aims to create licenses for private clubs that could sell only 1 gram of marijuana, ¼-gram of pot concentrate or 100 milligrams of a marijuana product per patron per visit - all to be consumed on-site.

The club would have to buy its marijuana from a licensed retail entity or acquire its own marijuana cultivation license. Thus the drug would be tracked, as is all medical and legal recreational pot throughout Colorado.

Local jurisdictions still would have ultimate authority, though, so Colorado Springs could keep its ban.

Legalization of cannabis consumption clubs in Denver, Colorado or both could generate millions of dollars, if recreational and medical marijuana enterprises are any gauge.

This February alone, the state counted more than $12 million in taxes, licenses and fees from marijuana businesses. That was up 41.6 percent from the $8.8 million amassed in February 2015.

Last year, $996 million worth of marijuana was sold in Colorado, The Denver Post reported last month.

Olympic City USA doesn't allow recreational sales, because the Colorado Springs City Council opted out in July 2013 in a 5-4 vote. The ban was backed by Don Knight, Merv Bennett and Andres Pico, who still are on the council, and Val Snider and Joel Miller. It was opposed by Jill Gaebler, Helen Collins and Keith King, also still on the council, plus Jan Martin.

In adjacent Manitou Springs, two retail pot stores boosted sales tax revenues by 62 percent, from $2.4 million in 2014 to more than $3.8 million last year.

"It's been an incredible shot in the arm for Manitou," said former Mayor Marc Snyder.

Meanwhile, Colorado Springs collected $166,343 in medical marijuana sales tax revenue this January, up 31 percent from $126,830 in January 2015.

The Colorado Cannabis Cup, a festival held each April for the past three years, is morphing into the California Cannabis Cup. The sponsor, High Times magazine, couldn't get a permit in Denver, so it turned to Pueblo County. But that permit wasn't produced promptly enough for them.

The economic impact from that event could have been significant. In 2014, for example, the Cannabis Cup attracted 37,000 people to the Denver Mart on April 19 and about the same number April 20, each paying $75. About 600 vendors each paid $2,500 per booth. Add the hall rental, deposit, security and other costs, and about $9 million probably changed hands in two days, calculated Bruce Barcott in Fortune magazine last April.

But while marijuana is the fastest-growing business in the U.S., any economic impact from cannabis clubs in Colorado Springs is impossible to calculate.

Tuesday, as the City Council prepared to enact the ban, club owners and patrons alike begged to be licensed, taxed and regulated like other marijuana enterprises and like liquor establishments. The fact that they aren't regulated - and won't be supervised much for another eight years - is a major problem, owners say.

The typical tourist, for example, would take a cab to the Speakeasy Cannabis Club, pay to join only to discover pot wasn't available there. They could take a cab to Manitou and back, but instead, they turned to social media and Craigslist to make a buy.

"After a while, drug dealers would just stay here and operate their businesses from our club, instead of leaving and coming back," said Speakeasy owner Jaymen Johnson. "Tourists said, 'I only wanted to smoke a couple of joints, but the guy I called would only sell me an ounce.' Also, these drug dealers go beyond cannabis; they offer other drugs as well. When we introduced cannabis only as a bar model for on-site consumption, we eliminated the problem entirely."

Johnson agreed with Knight's concerns. A person signs a document to let the club "assist me in exercising my right of personal use of marijuana." Then the patron "can provide reimbursement for direct or indirect costs" to the business for having produced the six pot plants every Coloradan can grow.

But the individual isn't tracked, so he can sign the same document at multiple clubs for "six plants" each. Tourists sign the same form but aren't Colorado residents so don't qualify for six plants, Knight noted.

Alaska allows public consumption, but Colorado doesn't. Landlords and hoteliers impose fines if their "no smoking" rules are broken. So smokers have nowhere to go once the clubs all close, creating more black market trade and smoking in parks and alleys, club supporters testified Tuesday.

At that council meeting, the club owners begged to be licensed, taxed and regulated.

"We've all gone and asked for that. It's like a teenager asking for more rules," Johnson said. "We're asking for a license, for a required contribution to the community."

Until the remaining clubs start paying taxes and licensing fees, though, there's no telling how much potential city revenue already has been lost.

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