Few people nowadays would have difficulty finding a local pot shop. If you drive along Highway 101, you will see store after store. It may even seem like there’s one on every street corner. In Salem, South Commercial is being called The Green Mile. Another Green Mile exists along River Road in Keizer. This abundance of shops begs the question: how many is too many?
Initially the OLCC estimated issuing about 850 licenses. As of May 19th, OLCC has issued 1186 licenses, with 446 retail store licenses issued. Applications currently total 2560. With an unlimited number of licenses on the market, competition has become very stiff. Marion and Polk County support 9 liquor stores. When Salem City lifted their 1000 foot rule for cannabis stores, the number went from 16 in the Fall of 2016 to 33 and counting today. These numbers would seem unsustainable. Salem, for instance, has a certain number of potential customers for cannabis stores. As more and more stores open, the potential market share for each store diminishes. An over saturated market can become a concern for state and local governments wishing to collect taxes, as well as business entrepreneurs trying to follow a business plan. As more stores open, that pool of tax money is split amongst more businesses. The potential risk to government lies in the fact that smaller or mismanaged stores that are unable to compete will unlikely be paying their taxes as they shut their doors. This will, of course diminish the overall tax base. Many cannabis entrepreneurs are paying very steep rents because landlords want a piece of the pie that hasn’t even been baked yet due to the perception of wildly inaccurate and/or unsustainable profits. The Cannabis business like any other business needs a business, plan that makes sense, but with the landscape changing underneath each of these businesses so drastically, it is hard to plan for the future.Gross sales volumes today, could be halfed again, if licensing continues at this pace.
Recently the small town of Monmouth, Oregon, which was notably a dry town for alcohol until 2002, approved a recreational ordinance. Even before the legislation was in effect, three cannabis stores had already applied for licenses in Monmouth. Independence, right next door, already has two retail stores with a third one coming. That brings the total to six in Monmouth/Independence alone, while I mentioned earlier, the entire Marion and Polk County area sustains only 9 liquor stores.
Overtaxation as well as oversaturation both threaten the new marketplace. Legislative Bill HB 2204 currently on hold in the House Revenue Committee, would raise the cannabis tax by another five percent. Increasing taxes on the market now would put tremendous pressure on our newly launched, struggling industry. state and local governments need to support the industry in a way that will create jobs and revenues for the long term. One way governments can support the industry is by not helping to oversaturate the market, nor to overtax it. More stores does not mean more tax dollars in local government coffers. Many municipalities went from banning stores early on, to allowing unlimited numbers to be licensed.Temporary restraints on the number of stores would make sense at this point to give the market a chance to stabilize. Salem and other cities should consider temporary measures that will allow the industry some breathing room. Such measures could include reinstating the 1000 ft rule between retail stores as was once the case or placing temporary caps on the number of stores. The OLCC has the ability in legislation to restrict licensing based on area and population, as they do now for liquor stores. New licensing saturation should be considered carefully, so as not to weaken the market and therefore strengthen the black market we are all competing with already. Cannabis business entrepreneurs, as well as cannabis consumers, should be contacting their elected officials at all levels to see that the industry is supported in a way that makes sense for the long haul. An unlimited number of stores does not serve the industry or our communities. A steady tax base from a strong cannabis industry will serve to augment local and state budgets. Let’s work together to move this industry and the tax base associated with it upward and onward.
Margo Lucas is the owner of West Salem, Monmouth Cannabis, and Cowgirl Cannabis. A believer in good communication and education, Lucas has advocated for the industry at city, county and state levels.