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.
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.
BAY AREA NEWS GROUP
Posted: 05/24/2010 12:00:00 AM PDT
May 21, 2010