Nevada’s Marijuana Market Economic & Fiscal Benefits Analysis Prepared for the: Prepared by: October 26, 2018
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 Source: NDA 5
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 6
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) 8
NV Licenses: The what Type Count Cultivation 120 Testing 10 83 Manufacturing / Production Distribution 34 Retail 62 Total 309 Source: NV Department of Taxation 9
NV Licenses: The where 309 Source: NV Department of Taxation 10
Survey ins & outs To help evaluate marijuana market & effects on firms RCG partnered with NDA Done online from April to May 2018 40 businesses responded representing 60 ( 19% ) licenses 11
Who talked: license types Type Count Cultivation 20 Testing 0 15 Manufacturing / Production Distribution 7 Retail 18 Total 60 Sources: NDA & RCG Economics 12
Who talked & from where? 60 Sources: NDA & RCG Economics 13
Questions, questions, questions License Types & Location Number of Workers Hiring Practices (Direct or Third-Party) Types of Costs Types of Revenues Taxes Paid 14
What we found out Source: Gify 15
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 3 rd - party services (N=38) Planning to hire more workers in next year: Yes: 76% Yes No: 24% (N=38) 16
Survey says what? cont. 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) 17
Survey says what, cont.? Total 2017 Respondent Expenses: $107 Million (N=37). Selected Expenses as % of Total Expenses* ($60.0 M) 56% 60% 50% 40% ($26.7 M) 30% 25% ($16.3 M) 20% 15% ($6.9 M) ($4.1 M) ($3.4 M) ($2.7 M) 6% 10% 4% 3% 3% 0% * Based on 50% of Respondents providing sufficient detail Sources: NDA & RCG Economics 18
Survey says what?, cont. Total Taxes Paid by Respondents: Yearly & Part of Year 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 $26,089,000 Sources: NDA & RCG Economics 19
MJ Industry Economic Bennies 2016 vs. 2018 20
State-wide bennies IMPLAN Input-Output Model 3 Types of Economic Impact (“Total” combined) • Direct: Industry Spending • Indirect: Business-to-Business Spending • Induced: Subsequent Employee Spending Note: Based on 2018 Department of Taxation Sales 21
Numbers nerd time Method used “margining”: Looks at industry’s supply chain structure, e.g., from cultivation to production to distribution to retail Recommended by IMPLAN 22
Numbers nerd time, Cont. Data Sources • Taxable Retail Sales of Marijuana (Taxation) • Excise Revenues (Taxation) • NDA Survey Assumptions • No Substitution Effects • Supply/Demand Pooling (Industry demands accommodated in-state) • Economic Leakage (Leakage still exists) • Annual Growth Rate based on 2016 Report (70% to 90% to 95%) • No shift in preference (Marijuana popularity won’t change) 23
Nevada economy to benefit a lot 2016 vs. 2018 Total MJ NV Economic Output ($) : 2018–2024 In Millions $* $1,219 $1,250 $1,205 $1,190 $1,174 $1,200 $1,157 $1,150 $1,113 $1,130 $1,100 $1,117 $1,103 $1,088 $1,050 $990 $1,073 $1,000 $1,032 7-Yr Total (2018): $8.0 Billion $950 7-Yr Total (2016): $7.5 Billion $900 $917 $850 2018 2019 2020 2021 2022 2023 2024 2018 Output/Spending 2016 Output/Spending *Includes Excise Tax Revenues Source: RCG Economics 24
Jobs up, up &…steady as she goes 2016 vs. 2018 Total Projected MJ NV Jobs: 2018 – 2024 Total Employment 12,000 10,200 10,100 10,000 9,800 9,700 10,000 9,300 8,300 8,000 6,000 6,200 6,100 6,100 6,000 5,900 5,700 5,000 4,000 2,000 0 2018 2019 2020 2021 2022 2023 2024 2018 Employment 2016 Employment Source: RCG Economics 25
MJ industry workers also benefit 2016 vs 2018 Total MJ NV Worker Income ($): 2018 – 2024 In Millions $ $600 $546 $540 $533 $526 $518 $499 $500 $443 $400 $300 $261 $258 $254 $251 $247 $200 $238 $212 7-Yr Total (2018): $3.6 Billion $100 7-Yr Total (2016): $1.7 Billion $0 2018 2019 2020 2021 2022 2023 2024 2018 Labor Income 2016 Labor Income Source: RCG Economics 26
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
Government always wets its beak Total Annual MJ NV Taxes & Fees: 2018 – 2024 In Millions $s $170 $159 $160 $155 $151 $157 $150 $153 $145 $140 $130 $120 7-Year Total: $1+ Billion $113 $110 $100 2017 2018 2019 2020 2021 2022 2023 2024 2025 Source: RCG Economics 31
Government always wets its beak, cont. Total MJ NV Taxes & Fees, by Type: 2018 – 2024 In Millions $s $1,200 $1,031 $1,000 $800 $600 $349 $400 $336 $212 $200 $112 $19 $3 $0 Sales and Use Tax Wholesale Excise Tax Retail Excise Tax Commerce Tax Modified Business Tax License Fees Total Source: RCG Economics 32
The competitive price chain 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 33
The End 34
Questions? Source: Gify 35
Contac t: John Re str e po jr e str e po@r c g1.c om 702- 967- 3188 e xt. 401 Source: Gify 36
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