Medical Cannabis Economic Impact Report April 9, 2013 AN ECONOMIC IMPACT REPORT (EIR) ON THE MEDICAL CANNABIS INDUSTRY IN THE PRODUCED FOR SENATOR TICK SEGERBLOM (S.B. 374) AND THE NEVADA STATE LEGISLATURE PUBLISHED BY M. MAX DEL REAL AND CALIFORNIA CAPITOL SOLUTIONS LLC
DISCLAIMER This report is produced in the spirit of goodwill to examine the economic impact of a medical cannabis industry in the State of Nevada. All numbers, figures, and economic forecasts are derived from various studies and industry analysis based on the experience of other states and similar markets. This report is published as a legislative compliment to Senate Bill No. 374 (Segerblom) and does not make any financial guarantees nor promises. The writer wishes to thank the Senate Judiciary Committee and Chairman Segerblom for the opportunity to produce this report in support of S.B. 374 and economic development in the State of Nevada. HISTORY In 1996, the voters of the State of California passed Proposition 215, or the Compassionate Use Act of 1996. California was the first state in the nation to implement a medical cannabis program for qualified patients. In 2001, the State of Nevada instituted the Nevada Medical Marijuana Program (NMMP). This statewide program allows for ill Nevada residents to apply to the Department of Health to use medical cannabis for their ailments. This program does not, however, provide for the safe and effective cultivation and distribution of medical cannabis. In 2009, the US Attorney General, Mr. Eric Holder, made public comments in favor of the medical cannabis industry and states with existing programs. Across the country, there was an immediate and impressive Green Gold Rush led by emerging medical cannabis businesses and entrepreneurs. Today, there are eighteen (18x) states in the Union that have implemented a medical cannabis program for qualified patients. These states include: Alaska, Arizona, California, Colorado, Connecticut, Delaware, Hawaii, Maine, Massachusetts, Michigan, Montana, Nevada, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, and Washington. The District of Columbia (DC) currently supports a medical cannabis program. Additionally, last year, voters in Washington and Colorado passed a law that legalizes cannabis for adults and recreational use. PURPOSE The purpose of this is to support the passage and implementation of S.B. 374 by producing evidence in support of a medical cannabis industry in the State of Nevada. H-2 Page 2
CURRENT NEVADA PROGRAM The Nevada Medical Marijuana Program is a state registry program within the Nevada Department of Health and Human Services, Nevada State Health Division. Their role is to administer the provisions of the Medical Use of Marijuana law as approved by the Nevada Legislature and adopted in 2001. It is important to note that the current program does not have a DISTRIBUTION category. Dispensaries do not exist under the current program. Today, accessing medical cannabis for qualified patients is costly and unsafe. Page 3 H-3
MEDICAL CANNABIS MARKETS The medical cannabis industry in the United States today is a vibrant and growing industry valued in between $65 billion to $115 billion. In California, the estimated value of the medical cannabis industry is $14 billion. In Arizona, the estimated value of their newly implemented medical cannabis program is $1.5 billion. It is important to recognize that an emerging medical cannabis industry in any given state includes not only a sustainable cottage industry but also many ancillary businesses that go well beyond retail operations. In Nevada, with the passage of S.B. 374, the following businesses will be created to support a medical cannabis industry: Retail Dispensary Operations Retail Employees and Patient Specialists Cultivation Operations and Real Estate Cultivators, Vendors, and Processors Hydroponics and Equipment Stores Testing Facilities and Laboratories Security Companies and Consultants Human Resource Staffing and Support Health Care Professionals Legal and Educational Centers Insurance Companies and Policies Tourism Industry and Financial Institutions Each of these businesses will increase economic development at both the state and local level in Nevada. Additionally, these businesses can generate significant revenues through permitting fees and licensing renewals when applicable. PATIENT RECIPROCITY PROGRAM (PRP) Senate Bill No. 374 will create a Patient Reciprocity Program (PRP) in the State of Nevada. A reciprocity program would recognize the legitimacy of qualified patients from other states in America who have legally obtained the necessary medical cannabis license or doctor s recommendation. With the creation of storefront dispensaries in Nevada, the number of Nevada residents seeking medical cannabis cards will increase exponentially. Furthermore, within the next two to three years, it is estimated that the number of US States that support medical cannabis programs will increase from eighteen (18x) to over twenty-five (25x). Such an increase in medical cannabis states across the nation will significantly support a Patient Reciprocity Program (PRP) and economic development in Nevada. H-4 Page 4
PATIENT NUMBERS It is estimated that approximately 1-2% of a state s population will participate in an approved medical cannabis program that includes safe and affordable access to medical cannabis through storefront dispensaries. (Note: Urban areas have a larger population of participating patients.) *The following figures represent estimations. STATE PATIENTS POPULATION Arizona *33,601 6,553,255 California *380,414 38,041,430 Colorado *107,667 5,187,582 Nevada *27,589 (projected) 2,758,931 Washington *99,943 6,897,012 *It is important to note that the number of dispensaries in any given municipality will affect the number of patients in that area or demographic. **California, Colorado, and Washington do not have a limit on the number of state licensed dispensaries. ***The State of Arizona identified approximately 125x dispensary permits throughout the state to be awarded to qualified applicants in their new medical cannabis program. Arizona received over 556x applications in a one-month period (May of 2012). Applications included a nonrefundable $5,000 fee from all applicants. PROGRAM FEES The following figures reflect possible revenues for a Medical Cannabis Program in the State of Nevada with the passage of S.B. 374. The projected figures reflect and assume the following: 1) Dispensary Applications will include a nonrefundable fee of $5,000. (See Attachment) 2) Dispensary Licenses will include an annual fee of $25,000. 3) Vendor Applications will include a nonrefundable fee of $5,000. (See Attachment) 4) Vendor Licenses will include an annual fee of $25,000. 5) A state sales tax of 6.85% can be levied on dispensaries and vendors. A local excise tax of 4% can be levied on dispensaries and vendors. H-5 Page 5
PROGRAM FEES (continued) The following figures reflect possible revenues for a Medical Cannabis Program in the State of Nevada with the passage of S.B. 374. The projected figures reflect and assume the following: A) Dispensary Applications will total 500x applicants. B) Vendor Applications will total 250x applicants. C) An average, for-profit dispensary in Nevada could gross $5,000,000 is sales. DISPENSARY APPLICANTS APP FEES LICENSE FEES 10x Permits 500x $2,500,000 $250,000 25x Permits 500x $2,500,000 $625,000 50x Permits 500x $2,500,000 $1,250,000 100x Permits 500x $2,500,000 $2,500,000 VENDOR APPLICANTS APP FEES LICENSE FEES 10x Permits 250x $1,250,000 $250,000 25x Permits 250x $1,250,000 $625,000 50x Permits 250x $1,250,000 $1,250,000 100x Permits 250x $1,250,000 $2,500,000 SALES TAX TAXES GROSS REVENUE 1x Dispensary @6.85% $5,000,000 $342,500 50x Dispensaries @6.85% $250,000,000 $17,125,000 EXCISE TAX 1x Dispensary @4.00% $5,000,000 $200,000 50x Dispensaries @4.00% $250,000,000 $10,000,000 TOTALS APPLICATIONS $3,750,000 LICENSES $2,500,000 TAXES $27,125,000 YEAR ONE $33,375,000 H-6 Page 6
SUMMARY In summary, Senate Bill No. 374 (Segerblom) can be a driving force behind economic development in the State of Nevada. A statewide Medical Cannabis Program should be focused on the fundamental issues surrounding each and every community throughout the state: job creation, public safety, community wellness, and economic development. Considering the following findings of this, the following industry recommendations are respectfully submitted to the Nevada State Legislature to advance this program and promote its long-term success: 1) Approve S.B. 374 and implement its program in a reasonable timeline. 2) Amend S.B. 374 to include fifty (50x) dispensary permits and fifty (50x) vendor permits during Year One of the program. 3) Adopt the Senate Judiciary Committee s recommendation of a for-profit medical cannabis program to include a Patient Reciprocity Program (PRP). 4) Create a statewide Medical Cannabis Task Force to oversee the implementation of the program and support local governments and their communities. 5) Create a points-based application award process to determine winning applicants during the application process; this would replace a lottery program. The writer wishes to again thank the Senate Judiciary Committee and Chairman Segerblom for the opportunity to produce this report in support of S.B. 374 and economic development in the State of Nevada. Respectfully submitted by, M. Max Del Real President/CEO California Capitol Solutions LLC (916) 717-2664 info@calcapsol.com H-7 Page 7