On July 28, Oregon Gov. Kate Brown signed Senate Bill 460. This measure opens up retail sales of marijuana to any adult over age 21 in Oregon at any of the state's licensed medical dispensaries, at least in those communities that decide to allow it, starting Oct. 1
There was never any doubt that she'd sign the measure, it passed through committee unanimously and was passed by both houses by overwhelming margins. Brown is a progressive Democrat, and even once briefly – before her marriage, while she was a member of the legislature – dated a legalization advocate who was also a medical marijuana grower.
The initiative that established legal marijuana possession and cultivation by adults, Measure 91, left it up to the Oregon Liquor Control Commission (OLCC) to establish rules and regulations for the adult use retail market. That means everything from seed to sale, including rules for growers, processors and sellers. The time limits the measure set were rather open-ended. The OLCC plans to start accepting applications for growers, processors and retail outlets by Jan. 4, 2016; they have until an unspecified date in 2016 to get everything going.
Some would argue that the OLCC is taking so long because they're being thorough and cautious and want to get the details right. I don't buy that, personally.
Midway through the session State Sen. Ted Ferrioli suggested that the state should start retail sales on July 1 – the same day that possession and cultivation became legal – using existing licensed dispensaries. After all, they already had rules and regulations in place that were designed to pass muster with the Cole Memo guidelines.
Ferrioli is the Senate minority leader, so he pulls quite a bit of weight. Not enough though. The committee chose instead to delay until Oct. 1. That was to give cities and counties time to opt out of the early start. This also allows time for outdoor marijuana to be harvested and get to market.
Measure 91 requires that any decision to ban retail sales has to be through a local initiative, not by a simple vote by a county commission or city council.
I believe that the OLCC has been taking its time on implementation of retail sales in order to give cities and counties the chance to enact bans.
It's also possible that some far-sighted person in the alcohol industry has heard of the substitution argument, which says that people will use legal marijuana when it's available instead of using alcohol. If that comes true, then liquor sales would decline, and the revenue and political power that the commission gets from liquor sales would also plummet. How much of it would be replaced by legal cannabis sale revenue is an open question. Also, there have long been allegations that the OLCC is strongly influenced by the alcoholic beverage industry – some might even characterize it as under their thumb.
The tax structure for legal retail marijuana sales is one of the biggest changes in Oregon's adult-use law. Measure 91 originally set up excise taxes based on weight, which were applied at the point of production. Harvested bud was to be taxed at $35 per ounce, leaf at $10 per ounce and plants at $5 apiece.
The problem with that is the consumer was never going to simply be paying an extra $35 per ounce. In reality, the producer would add on the $35, and presuming the marijuana went directly to a retail outlet, that would be doubled – at least. That's a basic retail concept called the “keystone mark-up.”
The idea is that retailers regard what they pay for goods as their cost. They base retail prices on that cost, and they don't exclude the taxes that the producer paid from that equation – that's just common sense. The excise tax the producer pays is simply part of the cost.
Say a store buys a pound of cannabis for $1,600. That's $100 per ounce. Under the original M-91 tax proposal, that ounce would actually cost $135 per ounce from the grower. The store could price that ounce at $235, but that's only a mark-up of about 74%. Given the high cost of doing business in the highly regulated cannabis market, that's not likely to happen. It's certainly not what happens at dispensaries I'm familiar with. It's more likely that the retail price of that ounce would end up at $270.
That, of course, presumes the weed goes directly from the grower to the retailer. If there's another step in between, the mark-up would be larger. In short, the consumer would get hosed.