Marijuana projections in budget plan

When Zachary Maas and his business partner opened The Releaf Center, a medical-marijuana dispensary, they expected business would double in the first year. Instead, business tripled at the center just outside of Denver. Even with hundreds of other centers as competitors, the center estimates it has served more than 3,000 customers since opening in August 2009. Business, in a nutshell, is good and getting better.
The three nonprofit medical-marijuana centers coming to Rhode Island are expecting similar growth, and Gov. Lincoln D. Chafee already has a small stake in the outcome. His budget proposes taxing sales at the so-called compassion centers, using the average projections of the 18 applicants for the three centers to predict expected state revenue. Budget staff has since revised those figures upward to match specific sales forecasts of the chosen applicants.
In applications filed with the state, all three centers expect customer counts to at least double within three years. Revenue will increase too, with one, Summit Medical Compassion Center in Warwick, anticipating sales of medical marijuana will jump tenfold to $23.4 million a year. Greenleaf Compassionate Care Center in Portsmouth says sales will increase to $1.2 million from $134,280, or almost a nine-fold increase. The Thomas Slater Compassion Center believes sales will reach $3.6 million, an almost three-fold increase.
None of that counts the $3.5 million the centers anticipate making off related supplies during their first three years in existence.
The number of customers – which the centers term patients – will rise from a combined 2,283 to 10,033 within three years, the centers project. That’s almost three times as many people now using medical marijuana with a doctor’s permission.
Greenleaf takes the most conservative view of the three in terms of patient numbers. Patients there would rise to 533 by the third year from 133 in the first. Greenleaf CEO Seth Bock, a Middletown acupuncturist, attributed some of the projected increase to patients and their doctors feeling more comfortable using or recommending the drug as the centers establish themselves. But how high sales will reach before leveling off is anybody’s guess, Bock said.
Bock said in drawing up his estimates he looked at centers elsewhere but aired on the conservative side, believing that New Englanders may not be as quick to embrace medical marijuana as they have elsewhere.
The R.I. Department of Health, which authorized and oversees the centers, keeps no estimates on the projected demand for medical marijuana or the number of patients. Colorado, however, offers a possible picture of the future.
In 2009, a judge ruled the state could not limit how many medical-marijuana patients a so-called caregiver could provide marijuana to. That led to an explosion of medical-marijuana dispensaries and a steady rise in the number of patients on the state’s medical-marijuana registry.
The Colorado Department of Public Health and Environment had 4,720 people on the registry in 2008, spokesman Mark Salley said. By the end of 2009, that number had climbed to 41,107 people. Then – just before the legislature passed a law in 2010 seeking to clamp down on the centers – enrollment soared again with the health department receiving 12,320 applications in February 2010 alone. Now, the department has more than 120,000 people on the registry.
Of course, Colorado has about five times the 1.05 million population of Rhode Island. And its centers benefited from a span of no regulation and, unlike in Rhode Island, may be operated as for-profit corporations.
But Mass thinks the centers in Rhode Island will do just fine, especially since the state is limiting their competition.
“I don’t think those numbers are crazy at all,” he said of Rhode Island projections. Clifford Schaffer, editor of the Marijuana Business News website and a prominent national advocate for medical marijuana, said it was difficult to tell just how many people will shop at the centers. He said Slater – which anticipates an almost three-fold increase in revenue – appeared to coincide most closely with experiences of centers in other states that allow dispensaries. But there is little doubt, he said, that the centers will gain traction, especially in the first few years and especially if they stay out of trouble with law enforcement.
“I see it more as a system of people coming out of the woodwork,” Schaffer said.
As they come out of the woodwork, they may also be paying taxes. Chafee has proposed taxing medical-marijuana sales at 6 percent. (Sales of medical marijuana are currently exempt from the state’s sales tax.) He would also levy a 4 percent surcharge on the gross sales recorded by compassion centers, less returns and allowances.
Budget staff estimates that the state would collect $973,171 in sales tax for the fiscal year that starts July 1 and another $1.7 million the following fiscal year. The gross-receipts surcharge would deliver $693,693 in fiscal 2012 and $1.2 million the following year, said Paul L. Dion, chief of the Office of Revenue Analysis at the R.I. Department of Revenue.
“We thought this was the best information we could get as far as getting an idea for what they would do,” Dion said of the administration’s choice to use the applications to build projections.
Some center owners may welcome the tax, Schaffer said. Owners may believe the tax will make the state far less likely to close the centers or limit their operations, risking a loss of money flowing into state coffers.
“This is going to make a few people very rich, very quickly and then they will use their political clout to say there shouldn’t be any more medical-marijuana [centers],” Schaffer predicted. •