Recreational sales of cannabis is due to begin next spring, and jurisdictions around the state are preparing by passing ordinances, which will mandate the few areas left to their control by the state — time, place and manner.
Valencia County took a bit of a different approach in the hopes of establishing the Rio Grande Valley as a prime place to cultivate and grow cannabis. In July, the county commission unanimously adopted an ordinance that limits licensed growers to planting and growing female clones or using feminized seed.
“We are trying to set up an opportunity for these businesses to succeed,” said Nancy Jo Gonzales, the county’s community development director. “We have an agricultural county, with a lot of farmland. There are farmers who may be having a hard time with other crops right now. This is an opportunity farmers in an agricultural county to capitalize on this industry.
“The commission is trying to set these farmers up for success. With one male seed able to ruin an entire crop, they wanted to get ahead of things and make this a safe place to grow.”
The county’s ordinance allows for the use of male seeds and plants only for producing feminized seeds and seedlings, and they can only be used for production in an enclosed greenhouse equipped to prevent any transfer of pollen to the air outside.
County attorney Adren Nance said Socorro County passed a similar ordinance in reference to male seeds.
“Other counties were looking at copying it but I’m not sure if they did,” Nance said. “It is a very unique ordinance designed to insure that Valencia County is an ideal place to grow high-quality cannabis because non-feminized seed won’t be allowed.
“I think — though I’m not 100 percent sure — it may be the first in the nation. Non-feminized plants growing next to a farm that has invested heavily in feminized seed can destroy the whole crop with cross pollination. This ordinance should help prevent that from happening.”
In keeping with state regulations, any type of cannabis establishment in the unincorporated parts of Valencia County have to be at least 300 feet from a school or day care, a requirement that will be verified when businesses apply for a license.
Being a traditional farming and agriculture community, coupled with swaths of cheap land, seem to be drawing cultivation enterprises to the county, Gonzales said.
“We’re not anticipating a huge number of retail dispensaries, but more production, manufacturing and extraction,” she said. “We have gotten a lot of calls about where and how people can grow.”
One part of the cannabis industry the county does want to regulate fairly strictly is the extraction part, Gonzales said. There are a number of ways to extract cannabis oil, she said, but the process that uses solvents seems to be the most risky, resulting in explosions and fires that have injured employees of extraction operations.
“We want to allow this activity but in a very careful way, where it’s away from residences, other commercial businesses,” she said. “We are still drafting those regulations.”
As the industry makes inroads into the county, Gonzales said the process is going to be “a lot of trial and error, unfortunately. Right now, it’s a little bit cart before the horse because the state is letting people apply, but they want them to have a business license from their local jurisdiction.
“How do we issue business licenses without someone having an approved license from the state? There’s been a lot of back-and-forth communication with the state. We’re issuing temporary licenses applicants can take to the state and when they’re licensed by the state, they bring that information back to us and we can finalize their license.”
Gonzales predicted as the recreational cannabis industry grows across the state, a lot of counties and municipalities would need to establish their own staff of cannabis specialists and inspectors.
“This really could end up being a full-time job, someone that will have to work with the state, with their staff,” she said. “We are asking our code enforcement officers to be on the look out for operations that might not be licensed, but we’re putting that on top of illegal dumping, abandoned properties and all the other things they do.
“Plus, with our own ordinance, growers can only have female seeds. Am I going to send them out to look up the skirts of plants? I think with the interest we’re seeing, we are going to need dedicated personnel for this industry who aren’t doing five other things.”
With the anticipated need for more people to regulate cannabis establishments of all types, Gonzales says she hopes the county will actually see increased tax revenues to pay for new positions.
The majority of the county’s tax revenue comes from property taxes, rather than GRT, Gonzales said. While the cannabis crops grown in the county might be high value, the property itself will still have an agricultural use and assessment is based on that rather than a crop’s value.
“The county may not see this huge boom that maybe municipalities are anticipating, since they get a lot of tax revenue from GRTs” she said. “The unincorporated areas of the county just don’t have a lot of retail activity.”
In addition to the current gross receipts taxes imposed on most retail sales, the state has imposed a 12 percent excise tax on retail sales of recreational cannabis sales, a third of which is dedicated to the municipality where the sale happened. Unincorporated parts of a county also get a third of any retail sales that take place in those areas.
The New Mexico excise tax on retail sales begins at 12 percent for sales starting no later than April 1, 2022, then increases by 1 percent a year, starting July 1, 2025, until it maxes out at 18 percent in 2030.
The Legislature also removed gross receipts taxes from the sales of medical cannabis. As of June 29, medical cannabis dispensaries and patients no longer had to pay GRT.
According to a May 2021 Forbes article, since Colorado legalized adult-use, recreational cannabis use in the state in 2012, it has collected more than $1.6 billion at the state level in taxes and fees.
Unlike the New Mexico regulations, Colorado specified uses for some of its new revenue stream, mandating that the first $40 million or 90 percent — whichever was greater — go into a capital construction grant program, where schools, districts, and various education providers could apply for money to build new buildings or renovate existing facilities.
Revenues from a 15 percent special sales tax on recreational cannabis, minus a local share, goes to the state’s general fund, according to the article, with a fraction taken for the Department of Education’s State Public School Fund and the remainder going to The Marijuana Tax Cash Fund.
“Since retail sales became legal in 2012, 16.4 percent of the Marijuana Tax Cash Fund’s budget, has gone to education initiatives,” Robert Hoban reported in the Forbes article. “According to the Colorado Sun, lawmakers also set aside $25 million to help school districts set up full-day kindergarten programs.”
Every Colorado jurisdiction that allowed recreational cannabis sales allocated their tax revenue differently.
Between 2014 and 2019, about $29 million of the city of Denver’s marijuana tax revenue dollars went toward marijuana regulation and enforcement. Another $16 million went to youth prevention. After 2017, $16 million went to affordable housing, $3.1 million went to opioid intervention and $19 million went to city capital improvements.