Local roads, fire departments, parks and development projects are just some of the ways that Michigan municipalities allowing retail recreational cannabis sales are spending their first yearly allocation of cannabis excise tax revenue.
The state’s 2018 voter-initiated law that legalized recreational cannabis includes a 10 percent excise tax on retail recreational sales. The Marihuana Regulation Fund distributes 15 percent of revenues to municipalities, 15 percent to counties, 35 percent to the statewide School Aid Fund and 35 percent to the Michigan Transportation Fund.
Nearly $10 million total from excise taxes was distributed to 38 cities, seven villages, 21 townships and 38 counties earlier this year. Each municipality and county received $28,000 for each licensed cannabis retail store or microbusiness that was operating within its jurisdiction as of Sept. 30, 2020.
Leaders from smaller cities and townships told MiBiz that the cannabis revenue stream should be prioritized for one-time expenses instead of longer-term projects because of the unpredictable nature of the funding.
A new infusion
However, the extra infusion of cash is much more noticeable in townships with smaller budgets compared to larger cities or counties.
Glenn Rowley, supervisor of Bangor Charter Township in Bay County, views the new cannabis tax revenue as one of the only ways townships can get additional funding without passing a new millage.
“State revenue sharing has been going down each year, there are a lot of townships struggling,” Rowley said. “The biggest thing we need is (funding) for roadwork. The only thing a municipality can do other than go into its general fund is use a millage. This additional money from the marijuana industry is kind of a solution to that.”
With a population of a little more than 14,000, Bangor Township had the most retail cannabis dispensaries — 10 — of any township in Michigan in last year’s round of cannabis excise tax funding. The township received $280,013 from the cannabis excise taxes that were allocated this year, and more than $200,000 in annual permit fees that were collected from cannabis business owners.
“We had a big first wave of people who wanted to open as soon as possible, and some got a permit from us but not from the state,” Rowley said. “Then there were people being bought out by national companies. We don’t have a bunch of people applying for permits anymore.”
Permit fees go mostly to policing for inspections or background checks of applicants, while the excise tax revenue was put into the township’s general fund, Rowley said. Some of the money was spent on roadwork, and the township is now looking at using some of the funds for installing air conditioning in the township hall, new signage and additional roadwork.
“This marijuana excise tax pretty much gave us a second job, a second income coming in for things we couldn’t do before,” Rowley said.
Crockery Township in Ottawa County is using its first $56,002 in cannabis excise taxes on projects that would likely not be funded otherwise, said township Supervisor Erik Erhorn. This includes the purchase of a generator for the township fire station. The other half of the funding will likely be spent on new playground equipment or to cover other expenses for a park that is under development, Erhorn said.
“I don’t think the township ever went about this thinking we would get all of this excise tax money from the state,” Erhorn said. “To count on this as a method of funding going forward would be a mistake for any jurisdiction, but it is a big help for one-time use of funds.”
Crockery Township was early to opt in to recreational cannabis sales, and remains the only municipality in Ottawa County to do so. Even though Ottawa County and the rest of the municipalities within it have been early detractors of recreational cannabis, the county still received $56,002 from the cannabis excise tax pie because of the two dispensaries — New Standard Exit 9 and Skymint Nunica — in Crockery Township.
Property values increasing
The city of Lowell had just one dispensary open before last September’s cutoff date for the 2021 excise tax allocation, but the city is seeing benefits from significant increases in taxable property values at cannabis business, said City Manager Mike Burns.
The city’s downtown development authority captures tax assessments where now two cannabis retailers are located. The city has seen a roughly $6 million increase in taxable property value, leading to a $200,0000 increase in funding for the city’s DDA.
The additional DDA funding will likely be used to repair downtown roads now and into the future, Burns said.
“If we plan it out properly, we probably could fix a lot of streets, maybe even more than we planned to,” Burns said. “We’re trying to be conservative about how we use the funds because I don’t want to be too reliant on them, but want to be practical about how we use them.”
Outside of retail, the city also stands to benefit financially from a commercial growing facility that’s slated to open soon. The operation would become the city’s largest electricity customer and ratepayer for the publicly owned Lowell Light & Power. The utility provides annual payments in lieu of taxes to the city.
“We project significantly higher payments will be made to the city from that,” Burns said.
The plan for some of those funds is to allow the city’s part-time police detective to become full-time, Burns said.
“We have needed for many years to make that detective position full-time,” Burns said.
Meds Cafe and Lume Cannabis Co. are currently the only two dispensaries operating in the city, but two more dispensaries are expected to open soon, Burns said. The city hopes to have one more dispensary open by the Sept. 30 cutoff that determines next year’s allocation of cannabis excise tax funding.
Emmett Township in Calhoun County has seven cannabis licenses, earning it a $196,000 allocation from the state. The township board has not determined how the funds will be used, said township Supervisor Deb Belles.
In addition to the township’s cannabis excise tax payout, business owners have made significant improvements to what used to be dilapidated buildings, Belles said.
An increase in the taxable value of land in the township is being used as the launching pad to establish a downtown development authority.
“We’re just in the beginning stages,” Belles said. “It’s a good way to utilize the growth of the tax base to better our township. If something happens and one of the (cannabis) businesses fails, we will still have a nice, new building for a new business to move into.”