Oak Creek considers reducing license fees on marijuana businesses as industry sees decline | SteamboatToday.com

Oak Creek considers reducing license fees on marijuana businesses as industry sees decline

Backcountry Cannabis Company head grower Nick Neidlein and co-CEO Brian Rogers walk through the business' Oak Creek growing facility in 2017. Rogers is one of the local growers asking town officials to lower the cost of Oak Creek’s licensing fees.
Ben Ingersoll/Steamboat Pilot & Today archive

Oak Creek will review its current licensing fee structure for marijuana-related businesses — the town’s “one major industry” — as local cultivation operators say those costs have them contemplating their future in South Routt.

The catch for the town, though, is that these fees make up nearly 6% of this year’s general fund revenue, which pays for key services such as police, parks and street maintenance.

But as the marijuana industry sees sales decline by nearly 20% in Colorado since highs in 2020, Oak Creek officials worry that losing the businesses may have an even bigger impact on the town’s finances.

“If (general fund revenues) are reduced, we’re going to have to figure out where that money comes from,” Oak Creek Administrator David Torgler said. “This is Oak Creek’s one major industry, so the loss of jobs and the loss of the value of buildings and other things can contribute to hitting the town pretty significantly.”

There are three marijuana cultivators, three manufacturing operations and one retail dispensary in Oak Creek. Unlike liquor stores and restaurants, which pay licensing fees to sell booze in the hundreds of dollars each year, pot producer fees are much more.

For Brian Rogers, who has been part of Oak Creeks weed seen since the start and runs a cultivation operation, the fees are “$12,000 and some change.”

“Our industry is not a cash cow, certainly not anymore if it ever was,” Rogers told the town board. “These licensing fees maybe at one time were a little bit easier to swallow, and right now I know for some of us, they are every year kind of a deciding factor: ‘Are we going to continue to do business with these licensing fees?’”

Rogers said he was getting around $3,800 a pound for cannabis when he first started in Oak Creek. Now, it is closer to $650 a pound. While he is growing more efficiently than he used to, the licensing fees are becoming a significant budget concern as other costs like employee wages are increasing.

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Torgler said the base fee rate for each of these businesses is $5,901 each year, plus more based on the square footage of the business. A grower would also need additional licenses if they were growing or manufacturing products for both medical and recreational use. All that is in addition to state license costs.

The cost of a liquor license — the fees for which are largely governed at the state level — range from $100 to $200 each year.

Oak Creek Mayor Nikki Knoebel, who was in the same position when these fees were created, recognized that both the industry and the costs to the town associated with it have significantly changed since the fees were crafted. She said she is open to reducing these fees, potentially by thousands of dollars.  

“We made these fees … (but) we didn’t know what we were doing,” Knoebel said, adding that the fees were based on a formula of anticipated town costs at the time that are no longer as significant. “We, at the time, were spending so many hours talking about it, and now it’s just a license we need to pull together.”

Town board member Rhonda Crawford asked whether lowering fees for these businesses could lead other fee-payers in town to ask for a reduction as well. But Rogers said he feels the level of fees that he and his peers are paying is so much higher that things are already unfair.

“I think it’s always appropriate to ask the question,” Rogers said. “But I think if you look at ours compared to any other industry, it’s just insurmountably different.”

One option to replace revenue lost from the fees would be adding an excise tax, which would require Oak Creek voter approval. Knoebel said the board opted not to pursue an excise tax from the start because of the added expense running the election would have cost.

Hayden charges a 3% excise tax on its marijuana cultivators, which is lower than the 7.5% that the town initially imposed. That change was made by Hayden Town Council in 2021 in response to a request from area growers that also cited recent downturns in the industry.

Steamboat Springs does not charge a similar excise tax, but they are not uncommon. Silverthorne, Glenwood Springs and Dinosaur each have a 5% excise tax, according to the Colorado Municipal League.

The board directed Torgler to look at what other towns are charging in terms of fees before Oak Creek makes any changes. Torgler recommended that any changes wouldn’t be effective until 2024, as the current year’s budget is already relying on these fees.

The board did opt to allow the marijuana businesses to make three payments on their license fees instead of just one, as long as it is paid in full before the end of June. Previously, these businesses would have needed to pay this cost before their license would be renewed.

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