Legalized marijuana is a profitable venture, report says

By Terrapinzflyer · May 25, 2010 · ·
  1. Terrapinzflyer
    Legalized marijuana is a profitable venture, report says

    An economic-impact analysis prepared for a East Bay entrepreneur underscores one of the truths behind the "Tax Cannabis 2010" marijuana legalization measure on November's ballot: It could make some people very, very rich.

    Jeff Wilcox of Lafayette, who sits on the ballot measure steering committee, in November formed AgraMed Inc., a nonprofit that commissioned this analysis from Bay Area consulting firm Brion & Associates.

    According to an executive summary, the analysis examines AgraMed's proposal to redevelop a big parcel near Interstate 880 and the Embarcadero in Oakland — four buildings totaling 172,000 square feet on a 7.4-acre site — as an industrial-scale, 24-hour-a-day marijuana-growing facility as well as manufacturing space for grow lights and other equipment; a bakery for edible cannabis products; a job-training center; a research lab; and some office and retail space.

    The grow operation would produce about 21,100 pounds of medical-grade cannabis per year, about 58 pounds per day on average, according to the analysis, with a wholesale price of about $2,800 per pound. And the analysis assumes the city would impose a "production tax" similar to the special tax Oakland already has put on retail sales at the city's medical marijuana dispensaries.

    Given various production and taxation scenarios, gross annual sales would range from $47 million to $71 million per year, with gross operating costs estimated at $31 million per year, the analysis says. That means Oakland could get $1.4 million to $2.1 million from a special production tax set at 3 percent of gross sales, not counting any other sales, utility, business-license and other taxes. Property taxes from the project are estimated at about $281,000 per year. Because the project is in the Coliseum redevelopment project area, these taxes would accrue to the Oakland Redevelopment Agency. The business could create about 371 union jobs, of which a little less than half would be in the grow facility and the rest in the other facets of the business. The average salary would be $53,700, plus benefits.

    Assuming the project's total construction and development costs are $17.1 million, the analysis projects an added $8.6 million direct and indirect benefit to the county's economy.

    Remember, all of this is for a nonprofit company producing marijuana under the state's existing medical-marijuana law. But what if voters approve Tax Cannabis 2010 in November, and Oakland subsequently exercises its new right to regulate and tax commercial production and sales of marijuana for recreational use?

    Already lucrative, a facility like that could be transformed overnight into a gold mine.

    "Hypothetically," Wilcox agreed this morning. "We looked at the numbers and I couldn't believe them. "... There's a big cash basis for this."

    Wilcox, 49, said he was in commercial construction and real estate until his health forced him to retire. He said he's interested in this for a variety of reasons, including his belief that the current prohibition on nonmedical marijuana is a hypocritical, costly failure that has made it easier for his teenage daughter to get the drug than alcohol. Better regulation will keep it out of kids' hands; legalization will deprive criminals of a key money stream; commercial production will be a job-creating economic boost; and taxation will raise money for local governments, he said, echoing the Tax Cannabis 2010 talking points.

    "Anyone can get rich growing a lot of pot, but can we do it legitimately?" he said, venturing that he can if voters approve the measure this November.
    "I'm optimistic."

    Given this week's less-than-promising poll numbers on legalization, however, I'd guess he might have to stick to medical cannabis for a while — a gold mine, too, but not as deep.

    Posted: 05/24/2010 12:00:00 AM PDT
    May 21, 2010

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  1. blink1989
    Why on earth was a report needed to come to this conclusion?

    Surely its just common sense. And its not just money we'd be saving, but also LIVES due to reduced crime which in turn would ease prison overcrowding etc..
  2. Terrapinzflyer
    keep in mind there is a bit of a veiled jab with this article. Under CA law, the compassionate care act, profit is forbidden but one is allowed to recoup costs for times and material - which is extremely vague.

    The "tax cannabis" act is very controversial in the marijuana community, as many see it as a power grab by a select few who have profitted enormously. This report shows this "Non-profit" looking to clear 16-40 million dollars a year if medical marijuana is industrialized. There are several folks with similiar plans in the wings for recreational marijuana if the tax cannabis act passes.

    Industrial weed, with a few "execs" making millions while the pot growers themselves barely make enough to live on. progress?
  3. bcubed
    Well, I guess it depends on what "progress" means.

    Legalization of any drug will result in that drug being treated as any other commodity. Mega-corporations such as ADM control soybeans, corn, reason to think that an ADM-like company won't dominate cannabis (I can see it now...Monsanto(TM) Round-Up Ready cannabis?)

    If one were strongly anti-capitalist (or anti-conglomerate), one might actually be against legalization...I'm not so strongly opined, but it does cause me pause: Lizard discovered sex, pot, and "real" rock-and-roll roughly at the same time, and associated all three with rebellion. What happens when the "drug of the rebellion" becomes "another (hash) brick in the wall" of capitalism?
  4. Terrapinzflyer
    ^^ some good points- but for the turtle and many of his ilk the issue of this is that it is not true legalization being proposed. The average person in limited to a whopping 25square feet of grow space, and the costs and red tape associated with being able to grow "commercially" - ie, anything more then 25sq ft, are so steep only the independently wealthy or those that already made their millions in the growing game can buy in.

    There are some other serious flaws- mandatory minimums for smoking marijuana in a house/property where children are present? FFS, turtles of the age where 90% of his friends have children, and while no one he knows would smoke in the presence of their children, this law WILL criminalize them. (far more seriously then they currently are)

    The turtle supports legalization, but not this bill. IF someone wants to grow 10 outdoor plants to provide themselves and their non-grower friends, they should be allowed, not made worse criminals then they already are. This bill in a gamble that people will trade a culture for "legalization" , and make a handful of people very, very, very rich in the process.

    And one can only guess how the Feds will respond to this...
  5. coolhandluke
    the article said the business will create 371 union jobs, swim wonders what union they would belong to.
  6. Terrapinzflyer
    medical marijuana workers in CA recently voted to join the United Food and Commercial Workers Union- though not sure if this is what they are referring to. Presumably there will also be trucking, electricians, etc which will probably be union as well. But the "average salary" of ~$53,000 a year seems low for a union worker in Oakland- basically poverty level.
  7. coolhandluke
    thanks for the info, swim wondered if there was a pot growers union in the works or something :laugh: . around here (a city of around 60,000 in wisconsin) 53 k is well over the poverty line, my father has been working as a chemist at a the same factory for 25 or 30 years and makes about 55,000 a year. its funny how money is worth so much less in big cities, but drugs are still cheaper in big cities. :s anyway thanks for the info, swim appreciates it.
  8. RaverHippie
    That's surprising to hear in the 53K/yr critique. in Brooklyn I was able to survive with some spending money clearing 18K a year. In my limited assessment of this I would say corporate, taxed, marijuana businesses would be a step in the right direction vs illegal cartel run, environmentally destructive, grow ops.
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