Nevadas Marijuana Market Economic & Fiscal Benefits Analysis - - PowerPoint PPT Presentation

Nevada’s Marijuana Market

Economic & Fiscal Benefits Analysis

Prepared for the:

October 26, 2018

Prepared by:

Back in the day

Recreational Marijuana Legalization

• Passed Nov 2016: 54% vs. 46%
• Sales Started July 2017

Medicinal Marijuana Legalization

• Passed Nov 2000: 65% vs. 35%
• Sales Started July 2015

3

Why, what, when?

 Quantify economic & fiscal benefits associated with marijuana industry from FY2018 – 2024 after 1 year of operation  Compare results to RCG’s 2016 Initiative to Tax and Regulate Marijuana (Q2) study

4

Dollar + Other Bennies

5 Source: NDA

It’s not just about the coin

Freedom to Choose Safer Product Fewer People Jailed for Non-Violent Crime Less Money for Organized Crime Police Can Spend More Time Pursuing Real Criminals

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But the coinage doesn’t hurt

Promotes Economic Activity Creates Jobs Provides Government with Tax Revenue

7

The What & the Where

(As of 12/2017)

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NV Licenses: The what

Type Count Cultivation 120 Testing 10

Manufacturing / Production

83 Distribution 34 Retail 62

Total 309

9 Source: NV Department of Taxation

Source: NV Department of Taxation 10

NV Licenses: The where

309

Survey ins & outs

To help evaluate marijuana market & effects

• n firms

RCG partnered with NDA Done online from April to May 2018 40 businesses responded representing 60 (19%) licenses

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Who talked: license types

Type Count Cultivation 20 Testing

Manufacturing / Production

15 Distribution 7 Retail 18

Total 60

12 Sources: NDA & RCG Economics

13 Sources: NDA & RCG Economics

60

Who talked & from where?

Questions, questions, questions

License Types & Location Number of Workers Hiring Practices (Direct or Third-Party) Types of Costs Types of Revenues Taxes Paid

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What we found out

15 Source: Gify

Survey says what, Cont.?

Avg. Workers: 20 Per Location (Jan-17, N=38) Avg. Workers: 35 Per Location (Dec-17, N=38) 32% firms hire at least some workers via 3rd- party services (N=38) Planning to hire more workers in next year: Yes: 76% Yes No: 24% (N=38)

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Total Yr. Firm Expenses: $107.0 Mil (12/2017, N=37) Total Yr. Firm Revenues: $132.5 Mil (12/2017, N=39) Revenue from Recreational Sales: 63% (N=30) Revenue from Medicinal Sales: 37% (N=30)

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Survey says what? cont.

Total 2017 Respondent Expenses: $107 Million (N=37).

18 Sources: NDA & RCG Economics

6% 25% 4% 3% 3% 15% 56% 0% 10% 20% 30% 40% 50% 60%

Selected Expenses as % of Total Expenses*

($6.9 M) ($26.7 M) ($4.1 M) ($3.4 M) ($2.7 M) ($16.3 M) ($60.0 M)

Survey says what, cont.?

* Based on 50% of Respondents providing sufficient detail

19 Sources: NDA & RCG Economics

Survey says what?, cont.

Tax Paid Retail Excise (2017 last 6 mos.) $9,315,000 Wholesale Excise (2017 last 6 mos.) $2,607,000 MBT (2017 last 6 mos.) $449,000 Commerce (FY2017/pre-legalization) $64,000 Sales & Use (2017) $13,654,000 Total $26,089,000

Total Taxes Paid by Respondents: Yearly & Part of Year

MJ Industry Economic Bennies 2016 vs. 2018

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State-wide bennies

IMPLAN Input-Output Model 3 Types of Economic Impact (“Total” combined)

• Direct: Industry Spending
• Indirect: Business-to-Business Spending
• Induced: Subsequent Employee Spending

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Note: Based on 2018 Department of Taxation Sales

Numbers nerd time

Method used “margining”: Looks at industry’s supply chain structure, e.g., from cultivation to production to distribution to retail

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Recommended by IMPLAN

Numbers nerd time, Cont.

 Data Sources

• Taxable Retail Sales of Marijuana (Taxation)
• Excise Revenues (Taxation)
• NDA Survey

 Assumptions

• No Substitution Effects
• Supply/Demand Pooling (Industry demands accommodated

in-state)

• Economic Leakage (Leakage still exists)
• Annual Growth Rate based on 2016 Report (70% to 90% to

95%)

• No shift in preference (Marijuana popularity won’t change)

23

*Includes Excise Tax Revenues

2016 vs. 2018 Total MJ NV Economic Output ($) : 2018–2024

24 Source: RCG Economics

Nevada economy to benefit a lot

$990 $1,113 $1,157 $1,174 $1,190 $1,205 $1,219 $917 $1,032 $1,073 $1,088 $1,103 $1,117 $1,130 $850 $900 $950 $1,000 $1,050 $1,100 $1,150 $1,200 $1,250 2018 2019 2020 2021 2022 2023 2024

In Millions $*

2018 Output/Spending 2016 Output/Spending

7-Yr Total (2018): $8.0 Billion 7-Yr Total (2016): $7.5 Billion

2016 vs. 2018 Total Projected MJ NV Jobs: 2018 – 2024

25 Source: RCG Economics

Jobs up, up &…steady as she goes

8,300 9,300 9,700 9,800 10,000 10,100 10,200 5,000 5,700 5,900 6,000 6,100 6,100 6,200 2,000 4,000 6,000 8,000 10,000 12,000 2018 2019 2020 2021 2022 2023 2024

Total Employment

2018 Employment 2016 Employment

2016 vs 2018 Total MJ NV Worker Income ($): 2018 – 2024

26 Source: RCG Economics

MJ industry workers also benefit

$443 $499 $518 $526 $533 $540 $546 $212 $238 $247 $251 $254 $258 $261 $0 $100 $200 $300 $400 $500 $600 2018 2019 2020 2021 2022 2023 2024

In Millions $

2018 Labor Income 2016 Labor Income

7-Yr Total (2018): $3.6 Billion 7-Yr Total (2016): $1.7 Billion

Paying the Man

27

Some taxes more equal than others

 Sales & Use (Varies by County)

• 7.6% - 8.265%

 Wholesale Excise (15% on Cultivators)  Retail Excise* (10% on Dispensaries)  Commerce (Varies by License Type: 0% up to $4M)  MBT (1.475% on Payroll over $50,000 per quarter)  License Fees (Varies by Jurisdiction)

• ~3% of cultivator & dispensary revenue

* Retail Excise Tax was not part of original ballot initiative

28

The winners

Sales & Use – State, Counties & Jurisdictions Wholesale Excise – Schools Retail Excise – State Rainy Day Fund Commerce – State General Fund MBT – State General Fund License Fees – Local Jurisdictions

29

2016 vs. 2018 FBA

Most projected tax revenues can’t be directly compared to 2016 study

• Sales & Use, MBT & License Fees rates changed
• Retail Excise Tax not part of ballot initiative

Commerce Tax & Wholesale Excise didn’t change

• Commerce Tax: $0.5 M (2016) vs $2.5 M (2018)
• Wholesale Excise Tax: $147 M (2016) vs $212 M

(2018)

30

31 Source: RCG Economics

Total Annual MJ NV Taxes & Fees: 2018 – 2024

Government always wets its beak

$113 $145 $151 $153 $155 $157 $159 $100 $110 $120 $130 $140 $150 $160 $170 2017 2018 2019 2020 2021 2022 2023 2024 2025

In Millions $s

7-Year Total: $1+ Billion

32 Source: RCG Economics

Total MJ NV Taxes & Fees, by Type: 2018 – 2024

Government always wets its beak, cont.

$349 $212 $336 $3 $19 $112 $1,031 $0 $200 $400 $600 $800 $1,000 $1,200

In Millions $s

Sales and Use Tax Wholesale Excise Tax Retail Excise Tax Commerce Tax Modified Business Tax License Fees Total

The competitive price chain

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1. As taxes go up, so do production costs, & supply declines 2. Less supply results in new, higher break-even price leading to less demand 3. As price rises in legal rec. market, the black market price doesn’t change, becoming more attractive 4. Some consumers will opt for black market MJ 5. Conclusion: higher taxes will lead to higher legal market prices, causing higher black market sales & slowing legal market takeover

The End

34

Questions?

35 Source: Gify

36 Source: Gify

Contac t: John Re str e po jr e str e po@r c g1.c om 702- 967- 3188 e xt. 401