Collinsville’s marijuana dispensary is offering the city some insulation from economic damage caused by the coronavirus outbreak.
The city can depend on the sales tax revenue it collects from Illinois Supply and Provisions since cannabis sales in Illinois are not slowing down even during the coronavirus pandemic. The city currently collects a 2.25% sales tax on every recreational marijuana sale, and that will jump to 5.25% on July 1.
“It’s a backstop,” said Collinsville City Manager Mitch Bair. “This is a revenue source that has not been impacted, and it’s actually gone up.”
In April, dispensaries across the state sold $37 million of recreational cannabis, their second-best month behind nearly $40 million in January when recreational marijuana became legal in the state. Illinois Supply and Provisions consistently sells the most of any dispensary in the state, between $4.5 and $5 million a month, Bair said.
He anticipates the city will bring in between $1.5 and $2 million this year just from taxes on marijuana sales. Originally, that money was split between capital projects like stormwater, street and other infrastructure improvements, and operations, Bair said.
“To help offset the cost of taking over the Gateway Convention Center and create a parks department,” he said. “In a normal period after this pandemic and even before this pandemic, it has the ability for us to go above and beyond and really transform some services we can offer the community.”
Now revenue from marijuana sales will go entirely to pay for the cost of operating services like police, fire, permitting and others that need to stay open, Bair explained.
“Being able to plug that gap is probably going to be the critical difference in, ‘Does that get us through, or do we have to furlough employees and not cut the grass at the parks?’” he said. “In times like this, it’s a really good safety net.”
Cities around the region, including Edwardsville, Fairview Heights and Belleville, have laid off workers, or considered doing so because of the economic downturn caused by the coronavirus. But Collinsville hasn’t had to make any of those decisions yet, thanks to its marijuana dispensary.
“It represents that ability for us to make sure we can really offset the drops in the other revenues, especially when we budgeted for half of it to go to capital projects,” Bair said.
Marijuana will likely take on a similar stabilizing role in budgeting at the state level, said Bethany Gomez, managing director of Brightfield Group, a market research firm focused on the legal cannabis industry.
“As the state starts to get COVID under control more, there will be a very distinct look at budgeting and a need for additional revenue sources,” she said. “People don’t want to go back to a black-market environment, and they certainly don’t want to sacrifice their tax revenue.”
Gomez expects legal marijuana will be one of the consistent revenue sources the state leans on and pushes to develop when its economy reopens.
“It’s a really big win for the industry that it has gone from illegal to essential in a matter of weeks,” she said.
It’s difficult to tell exactly how much sales tax revenue local cities are losing right now because the state processes the tax and then disburses money back to municipalities, Bair explained.
“The normal delay is about a month,” Bair said. “Right now, the governor is allowing some businesses to defer their sales tax payments to the state, and then the state’s delaying those payments to us.”
Even without the data, Bair expects the dispensary will be the city’s top single revenue generator ahead of the Laura Buick GMC dealership and a few big-box stores.
“It’s pretty obvious that we’re going to see Illinois Supply and Provisions take that lead spot by a pretty wide margin,” he said. “We’re going to be closer to that $2 million mark for sure.”
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