It didn’t take long for the city of Los Angeles to reap the financial benefits of legalizing recreational cannabis. Since its legalization January, the city cannabis revenue already totals over $2.2 million in pot sales licensing fees, with about $800,000 currently outstanding. To date, 101 cannabis businesses have been authorized to operate legally.
Through the licensing program run by the Department of Cannabis Regulation, Los Angeles has collected more revenue from licensing fees than initially anticipated. The department projects that this number will reach $3.5 million by June and that the recreational industry will generate over $100 million each year from all sources of revenue, reports the Los Angeles Times.
Other new marijuana markets are also seeing green following the legalization of recreational cannabis. Alaska recently released tax revenue data that showed that the state has collected $6.3 million in tax revenue from cannabis cultivators since recreational marijuana sales began. There are currently 82 cultivators of marijuana presently licensed to sell cannabis to retailers or manufacturers, and many others whose licenses are pending, suggesting that the state is poised to collect even more in the next fiscal year.
Managing Exponential Industry Growth for Sustainable Cannabusiness
By 2020, analysts predict that California will generate $1.4 billion in tax revenue, a figure that reflects the vast potential that the state has in terms marijuana profits — Los Angeles itself is about as populous as the entire state of Colorado. The city already faces challenges in meeting these profit expectations. Leafly reported that the Department of Cannabis Regulation only has three full-time employees to handle licensing applications at this time; in contrast, Colorado has 35 employees.
“We’re at the point where we have many responsibilities, and not a lot of capacity,” said Cat Packer, the executive director of the Los Angeles Department of Cannabis Regulation in an interview with Leafly. “In order for us to move this conversation forward responsibly, we’re going to at least need to quadruple our team.”
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Challenges that Retailers Face to Operate Legally
Currently, the city is prioritizing awarding licenses to existing businesses that have been operating as medical cannabis dispensaries, but the growth of the marijuana business must keep step with consumer demand to ensure that the legal recreational industry can sustain itself.
Between the cost of becoming a legally licensed business to the inability of shops to use traditional banking services to operate, some retailers are still willing to risk getting hit with a hefty fine for operating illegally. Otherwise, these organizations have no financially viable pathway to legalize their operations — depriving the city of revenue that will support a functional, legal marijuana industry.
The initial data on revenue will likely spur the city to find ways to at least streamline the licensing process as a way to encourage business owners to become licensed operators.
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