No medical marijuana (MMJ) business located in unincorporated El Paso County may operate without a license from the County Board of Commissioners. Licensed businesses may not be located within 1,000 feet of any location that has been denied a license within the past two years. Additionally, it may not be located within 1,000 feet of residential zones, schools, colleges, universities, seminaries, public parks, religious institutions, drug or alcohol treatment facilities, or childcare facilities.
Marijuana cultivation facilities, manufacturing facilities, testing facilities, and retail marijuana stores are prohibited in unincorporated El Paso County as the majority of voters there voted against Amendment 64 in November 2012.
In the city of Colorado Springs, all MMJ facilities (dispensaries, cultivators, or infused products manufacturers) are subject to the following standards:
The cultivation and sale of retail (recreational) marijuana is currently prohibited in Colorado Springs.
A sales tax of 7.63% applies for all MMJ transactions in Colorado Springs. This sales tax drops to 5.13% in unincorporated El Paso County.
Tensions between Colorado Springs police and dispensary owners have been relatively high in the past few years. In May 2010, police searched seven medical marijuana dispensaries as part of an unspecified, “ongoing investigation”. This was in addition to a string of other aggressive enforcement actions undertaken that year that were attributed to an overzealous District Attorney. In 2014, El Paso County had one of the highest rates of marijuana-related traffic arrests in Colorado. In February 2016, the Colorado Springs City Council outlawed the display of green crosses on the exterior of dispensaries, and in March 2016, the council officially outlawed marijuana clubs. These actions demonstrate a consistently ambivalent attitude against the medical marijuana industry.
As of August 2016, a moratorium against new marijuana businesses in the city of Colorado Springs has not yet been allowed to expire, essentially freezing growth in the number of medical marijuana businesses in the region. The moratorium is expected to last until 2017.
The Colorado Springs Police Department began a training class entitled “Introduction to Marijuana for Law Enforcement” in June 2015 to “introduce different scenarios and clarification around marijuana laws”. This suggests the regulations surrounding legal cannabis consumption are not fully understood, making it difficult to determine the appropriate course of legal action to be taken in certain situations.
Licenses for three new marijuana dispensaries (two retail and one medical) in unincorporated Pueblo County were approved in April 2015, as well as a set of new zoning restrictions on dispensaries. Since that time, the county has placed a moratorium on new licenses until January 1, 2017.
Medical marijuana centers (dispensaries) may only be open from 8:00am to 7:00pm, while retail stores may only be open from 8:00am to 11:00pm. No marijuana may be consumed on any premise open to the public unless the premise is limited to only those who are 21 and older, it is clearly marked as place where marijuana is being consumed, and the premise complies with the Colorado Clean Indoor Air Act and the Pueblo County Smoke Free Air Act.
Neither retail nor medical marijuana dispensaries may be located within 1,000 feet of each other. Dispensaries require a special permit if they are located within 250 feet of a residence.
In the City of Pueblo, medical marijuana may be grown at home only in enclosed, ventilated spaces up to 100 square feet. Outdoor grows and greenhouses are prohibited, as is indoor growing in any location other than one’s primary residence. All cultivation must first be registered with the Pueblo Police Department.
Medical marijuana centers (dispensaries) and infused products manufacturers in the City of Pueblo are only permitted in specially designated business and industrial zones. They are prohibited in the following locations:
Medical marijuana centers and infused products manufacturers may only be open from 8:00am to 7:00pm, and must cultivate at least 70% of their own cannabis. Centers may apply for an optional on-premises cultivation license. All cultivation must be indoors.
Like medical marijuana, retail marijuana cultivation, infused product manufacturing, and research facilities are only permitted in certain industrial and business zones. Retail marijuana stores are not permitted in the City of Pueblo. No retail facility may be located within 1,000 feet of a school and all must operate in compliance with the applicable municipal codes.
The open or public consumption of cannabis of any kind is prohibited within city limits.
The City of Pueblo levies a special tax of 4.3% on the sale of medical marijuana and paraphernalia, a general sales tax of 7.4% that incorporates both city and county sales taxes, and a 2.9% medical marijuana sales tax levied by the State of Colorado.
Pueblo County levies a 3.5% sales tax on recreational marijuana, in addition to the county sales tax of 3.9%. Recreational marijuana is also subject to an additional 12.9% sales tax levied by the State of Colorado.
Pueblo County Sheriff Kirk Taylor has been a vocal critic of Amendment 64 since it was first introduced. In an interview in early 2015, he commented that the county did not do enough to exercise the authority given to it by Amendment 64 to prohibit cannabis businesses from operating there. He believes the County Council is making decisions based on a false belief they have no choice but to allow cannabis businesses into their jurisdiction. He has also expressed concern about the increasing potency of the drug, particularly in infused products, which has also been expressed by Pueblo Police Chief Luis Velez. During the first half of 2016, Sheriff Taylor’s office was also responsible for a rash of raids against illicit grow operations in the county.
Velez believes the appearance of marijuana is responsible for a recent increase in juvenile crime and the black market has not suffered any noticeable setbacks since legalization. He has also expressed concern over the possibility of police officers becoming impaired by secondhand smoke while on duty. Velez is also a chief supported of Proposition 200, a local ballot initiative that, if passed in November, would ban all retail marijuana businesses in the county.
The Pueblo City Council had prohibited patients from growing medical marijuana in their homes until February 2015. The 5-2 vote suggests that municipal authorities, though strongly opposed to the proliferation of retail cannabis in their city, support the notion of allowing access to cannabis for legitimate medical purposes.
Growth rates in the Colorado Springs area (El Paso and Pueblo Counties) are somewhat smaller than the statewide growth rate, indicating the market is still relatively underdeveloped, most likely due to the ambivalence of local government. For example, although legal marijuana sales in Colorado grew by 82% following legalization, sales in the Colorado Springs area grew by only 66%. However, the area is expected to post year on year growth of approximately 9.5%. It should be noted if local prohibitions or moratoriums against marijuana businesses are lifted, these growth rates would likely increase.
By 2020, the region’s medical market is expected to grow to over $176 million, while its recreational market is forecasted to grow to over $35 million. This disparity is most likely a result of the fact most municipalities in El Paso County retain bans against recreational dispensaries within city limits, restricting the county’s recreational market to two recreational dispensaries operating in the small community of Manitou Springs. Pueblo County allows recreational dispensaries but only 24 dispensaries are currently operating, indicating the market is still in the process of expanding and maturing.
Despite current sluggishness, growth rates in the Colorado Springs area are expected to outpace state growth average by 2020. Current estimates forecast medical sales to grow by roughly 9% per year, compared with 3-2% for the state, and for recreational sales to spike in 2016 before settling at roughly 9% to 10% per year. Given that the local market is still dominated by flower products, it is expected an increasing availability of edibles and concentrates will contribute to continuing market growth.
In addition to difficulties associated with banking and taxation common to markets across the state, the Colorado Springs area is noted for its municipal prohibitions against recreational marijuana, issues with private cannabis clubs, and a rapidly developing marijuana cultivation sector.
While Denver and other Colorado cities have experienced tremendous growth in tax revenue since legalization, Colorado Springs (the state’s second-largest city) continues to maintain the recreational sales ban it implemented in 2013 and is also imposing a moratorium on new medical marijuana businesses until 2017. Consequently, El Paso County’s recreational market has been confined to two dispensaries in the small community of Manitou Springs, where tax revenue from marijuana sales has been instrumental in the town’s recent financial recovery. It remains uncertain whether the Colorado Springs city council will allow residents to vote on allowing recreational sales in the foreseeable future.
The ban on recreational sales in Colorado Springs has resulted in the appearance of several unregulated cannabis clubs. In March 2016, the Colorado Springs City Council moved to ban cannabis clubs, giving clubs established before September 2015 eight years to phase out operations (a decision meant to protect the investments of the owners). As of August 2016, several cannabis clubs were still in operation.
Pueblo County’s marijuana cultivation sector is undergoing rapid expansion. Currently, the county has 3 million square feet of land devoted to marijuana cultivation, and 3 million more is planned for new license holders. As of August 2016, the county had issued nearly 300 licenses related to marijuana cultivation, marijuana processing, and even hemp cultivation. Abundant land and water resources, as well as strong demand for recreational products from consumers not only in Pueblo but El Paso County, and even nearby states such as Texas continue to drive growth in the area. It remains to be seen whether Proposition 200, which seeks to ban retail marijuana businesses within city limits, will put an end to the area’s thriving industry.
The most significant challenges facing Colorado Springs cannabis businesses are those common to all cannabis businesses throughout Colorado. Dispensaries are forced to carry out all transactions in cash as federal banking regulations discourage banks from working with businesses that produce or sell marijuana. Federal tax laws prohibit marijuana businesses from deducting business expenses, creating significant financial burden. Limited access to financing and additional tax burdens prevent otherwise successful cannabis businesses from expanding, artificially restricting the market.
In addition, the Colorado Springs ban on recreational sales prevents local medical dispensaries from tapping into recreational demand, as their counterparts in Denver and other areas have done. The moratorium on new medical marijuana businesses in Colorado Springs presents another limiting factor until 2017 at least.
A significant amount of marijuana cultivation takes place in both El Paso and Pueblo Counties. Although a municipal prohibition on recreational marijuana establishments effectively prevents retail cultivation in the area, demand for marijuana remains strong and nearly all of the city’s dispensaries maintain licenses to cultivate medical marijuana (even after regulations requiring vertical integration were lifted).
Among the region’s larger medical marijuana growers is the dispensary chain Maggie’s Farm, which specializes in outdoor cultivation and organic farming techniques. Maggie’s Farm also operates some of the region’s larger retail outdoor grow operations. The city of Colorado Springs itself is also home to a large number of indoor grow operations.
Pueblo County is the center of the region’s recreational cultivation and contains a large number of both indoor and outdoor growing operations. One of the major players in the market is newly formed GrowCo Inc., a subsidiary of Denver-based Two Rivers Water & Farming Co., which builds fully-equipped marijuana greenhouses in Pueblo County and leases them to marijuana growers.
Both indoor and outdoor retail cultivation is popular among the county’s independent dispensaries, such as Cannasseur.
The region’s medical marijuana processing facilities are concentrated in Colorado Springs, while the bulk of recreational processing facilities are located in Pueblo. Although many of the market’s popular edibles and concentrates are produced by processors in Denver and Boulder, there are also a significant number of local processors
Notable medical marijuana processors in Colorado Springs include hash processor Dabble Extracts and infused edibles manufacturers Mountain Medibles and Canna Creations. One of the most popular recreational processors in the area is Pueblo-based TinctureBelle, maker of tinctures and infused edibles. A sizeable amount of the region’s processing also takes place in individual dispensaries.
Presently, there are 157 medical dispensaries and 24 recreational dispensaries in the region. The city of Colorado Springs, where recreational dispensaries are banned, contains 91 medical dispensaries. Much of the city’s demand for recreational marijuana is supplied by the two recreational dispensaries operating in Manitou Springs. In nearby Pueblo County, there are currently 22 retail dispensaries and 66 medical dispensaries.
Demand for recreational marijuana is strong in the region and likely has significant room to grow, especially in El Paso County, where recreational dispensaries are prohibited in most areas. The county’s only community that allows the sale of recreational marijuana, Manitou Springs, has engineered an economic turnaround in part thanks to substantial sales tax revenue from the town’s two recreational dispensaries. The number of recreational dispensaries in Pueblo is also expected to continue to increase, provided the political environment does not become ambivalent.
There are currently no commercial testing facilities operating in the Colorado Springs region. Most local dispensaries and processors outsource their testing to facilities in Denver in order to meet state requirements for marijuana testing. This situation is likely to change as the number of dispensaries operating in the region continues to grow.
Pueblo and El Paso counties of the Colorado Springs region are vastly different in size and composition, with El Paso’s demographic features being more similar to those of the state than Pueblo´s. El Paso holds over 12% of the state’s residents, and Pueblo’s population is approximately one-fourth the size of El Paso’s.
El Paso has a younger population when compared to Pueblo and the state, with a larger percentage of El Paso’s population falling into each of the under-30 age groups. Also, only 12% of El Paso’s population is above the age of 65, versus the 13% of Colorado’s population and 18% of Pueblo’s population in this age group.
The greatest ethnic variations between the two counties and the state lie among the white and Hispanic populations. Pueblo’s Hispanic population is nearly 45%, more than double the percentage of El Paso’s Hispanic population (18%) and almost exactly double the proportion of the state’s Hispanic population (23%). The vast majority of El Paso and Colorado’s populations are white, comprising 73% and 69% of their populations, respectively. Pueblo’s white population makes up a slim majority at 55%.
With regard to wealth, El Paso and Colorado show similar characteristics, with a median income of around $60,000 and mean income around $80,000. Pueblo County is much less wealthy, with a median income of just over $40,000 and a mean income of roughly $54,000.
El Paso’s education levels are also similar to Colorado’s, with 36% and 39% of their populations holding a Bachelor’s degree or higher, respectively. In Pueblo, this figure is a mere 22%.
In terms of faith groups, El Paso County is the heartland of Colorado’s evangelical community, and the highly influential Focus on the Family Christian ministry is based here. In 2010, El Paso County´s Colorado Springs was ranked the most religious city in the United States. Proportionately, however, less than 34% of El Paso County is religious, remarkably low when compared to Pueblo´s 62%, Colorado´s 38% and the United States´ 49%. While it may be small in numbers, Colorado Springs´ religious community is highly influential both inside and outside of the region.
Because El Paso County has banned retail marijuana facilities in the unincorporated areas of the county, and Manitou Springs is the only jurisdiction in the county that has allowed the licensing of regulated retail marijuana, the demand for marijuana in El Paso County now largely originates from medical marijuana users. However, the ban of retail cannabis sales did not dampen the local demand for marijuana or its availability. The number of El Paso County residents on Colorado’s medical marijuana registry grew. In fact, over 16% of medical marijuana registrants (18,388) in Colorado are currently from El Paso.
Both El Paso’s larger population under the age of 30 and its smaller population above the age of 65 are conducive to high demand for medical marijuana in the county. The largest group registered for medical marijuana in the state are those ages 21 to 30 (23%), whereas those over 60 make up less than 16% of those registered.
With nearly three quarters of its population consisting of white residents and a relatively small Hispanic population, El Paso´s ethnic composition also makes it a likely location for continued demand and public approval of marijuana. While most races show similar marijuana use and approval rates, according to the Pew Research Center´s data from 2015, only 40% of Hispanics share the view that marijuana should be legal. Thus, El Paso´s ethnic makeup may help generate popular acceptance and support of marijuana measures in the county, where Amendment 64 legalizing recreational marijuana use failed by only a very slim margin.
El Paso´s wealth and education levels, on the other hand, may impact its marijuana demand negatively. Those who live in high-income families earning above $75,000 (which includes the average El Paso resident) are less than half as likely as those who live in low-income (under $20,000) families to use marijuana moderately or heavily. Furthermore, federal survey data has shown nearly half of marijuana users are those with no college education whatsoever. Also, college graduates only account for around 17% of marijuana use although they make up about 29% of the adult population (or in El Paso´s case, 36%). Given the propensity of college-educated people to use less marijuana, this may signify that El Paso´s residents are less likely than those in neighboring counties to support or use the substance.
Although El Paso’s religious community has taken a less stringent stance on marijuana in recent years (as discussed further below) this influential demographic is certainly less likely to approve of or support the marijuana market than its secular counterparts. The national study on drug use revealed that those who value their religious beliefs more tend to use marijuana less frequently (if at all) than those who do not, and the majority of Christians are also against legalizing marijuana.
Conversely, Pueblo´s large religious base does not appear to have the same political influence that El Paso´s does. Political officials in Pueblo are much more supportive of marijuana than those of El Paso County, even indicating plans to become the leading marijuana-growing county in the state.
As of May 2015, Pueblo holds just over 3% of the state´s registered medical marijuana patients, but due to the county´s small size, this figure is relatively large (though proportionately it is still not as large as the El Paso figure).
Pueblo County residents are also much less wealthy than El Paso residents and those of the state, and the county has substantially lower education levels when compared to the rest of the Colorado Springs region and the state as a whole. Both of these factors tend to make the county comparatively more likely to demand marijuana, the use of which is permitted both medically and recreationally in Pueblo.
El Paso County contains about 15% of Colorado’s registered Republicans, the largest share of any county in the state, as well as a heavy evangelical presence. The religious community in El Paso is known for its socially conservative views on public policy, which are influenced by Colorado Springs’ “evangelical Vatican,” an El Paso stronghold of more than 120 parachurch groups presided over by Focus on the Family. Evangelical and other religious groups have adamantly opposed marijuana use and legalization in the past. However, according to Slate Magazine, the evangelical position on marijuana is shifting on a national scale and although it is nuanced and slow, nowhere demonstrates this reorientation better than Colorado.
A number of post-election surveys show the use of marijuana is becoming more politically accepted among the public (across all demographic groups) and includes the evangelical community. The best evidence of this is probably in Colorado Springs and El Paso.
In 2006, voters in El Paso County, which typically votes 2-to-1 Republican, eviscerated Amendment 64’s predecessor (Amendment 44) which would have legalized recreational marijuana. It was one of Amendment 44’s severest losses in the state. However, six years later, Amendment 64 lost there by a mere 1.2 points. Furthermore, what’s been called the country’s most religious city (Colorado Springs) now finds itself second only to Denver in the number of dispensaries in the city with more than 180, most of them established since the 2009 “green rush.”
Despite the increasing popular support for marijuana, political representatives in local governments have hesitated to convert these social shifts into policy shifts, in many cases disregarding the will of the voters. Many strongly Republican cities and counties in Colorado (including Colorado Springs and El Paso County) are continuing to opt out of allowing recreational marijuana sales. While 53 Colorado cities have chosen to permit retail marijuana, with 27 levying special taxes, more did not. The Colorado Municipal League counts 165 cities and towns that decided to opt out of recreational marijuana sales, and an additional 16 municipalities have moratoriums on the idea of legalized recreational marijuana.
Pueblo County, however, not only passed Amendment 64 by a wide margin (55% for and 45% against, similar to the statewide voting numbers) but the largely Democratic county has also allowed retail marijuana sales to take place. In fact, Pueblo county officials told The Denver Post it plans to become the leading cannabis-growing county, thus - in strong contrast with El Paso County - Pueblo´s local politics seem to play a strong, positive role in the legalization and acceptance of marijuana and should encourage market growth there.
Pueblo and El Paso counties of the Colorado Springs region are vastly different in size and composition, with El Paso’s demographic features being more similar to those of the state than Pueblo´s. El Paso holds over 12% of the state’s residents, and Pueblo’s population is approximately one-fourth the size of El Paso’s.
El Paso has a younger population when compared to Pueblo and the state, with a larger percentage of El Paso’s population falling into each of the under-30 age groups. Also, only 12% of El Paso’s population is above the age of 65, versus the 13% of Colorado’s population and 18% of Pueblo’s population in this age group.
The greatest ethnic variations between the two counties and the state lie among the white and Hispanic populations. Pueblo’s Hispanic population is nearly 45%, more than double the percentage of El Paso’s Hispanic population (18%) and almost exactly double the proportion of the state’s Hispanic population (23%). The vast majority of El Paso and Colorado’s populations are white, comprising 73% and 69% of their populations, respectively. Pueblo’s white population makes up a slim majority at 55%.
With regard to wealth, El Paso and Colorado show similar characteristics, with a median income of around $60,000 and mean income around $80,000. Pueblo County is much less wealthy, with a median income of just over $40,000 and a mean income of roughly $54,000.
El Paso’s education levels are also similar to Colorado’s, with 36% and 39% of their populations holding a Bachelor’s degree or higher, respectively. In Pueblo, this figure is a mere 22%.
In terms of faith groups, El Paso County is the heartland of Colorado’s evangelical community, and the highly influential Focus on the Family Christian ministry is based here. In 2010, El Paso County´s Colorado Springs was ranked the most religious city in the United States. Proportionately, however, less than 34% of El Paso County is religious, remarkably low when compared to Pueblo´s 62%, Colorado´s 38% and the United States´ 49%. While it may be small in numbers, Colorado Springs´ religious community is highly influential both inside and outside of the region.
Because El Paso County has banned retail marijuana facilities in the unincorporated areas of the county, and Manitou Springs is the only jurisdiction in the county that has allowed the licensing of regulated retail marijuana, the demand for marijuana in El Paso County now largely originates from medical marijuana users. However, the ban of retail cannabis sales did not dampen the local demand for marijuana or its availability. The number of El Paso County residents on Colorado’s medical marijuana registry grew. In fact, over 16% of medical marijuana registrants (18,388) in Colorado are currently from El Paso.
Both El Paso’s larger population under the age of 30 and its smaller population above the age of 65 are conducive to high demand for medical marijuana in the county. The largest group registered for medical marijuana in the state are those ages 21 to 30 (23%), whereas those over 60 make up less than 16% of those registered.
With nearly three quarters of its population consisting of white residents and a relatively small Hispanic population, El Paso´s ethnic composition also makes it a likely location for continued demand and public approval of marijuana. While most races show similar marijuana use and approval rates, according to the Pew Research Center´s data from 2015, only 40% of Hispanics share the view that marijuana should be legal. Thus, El Paso´s ethnic makeup may help generate popular acceptance and support of marijuana measures in the county, where Amendment 64 legalizing recreational marijuana use failed by only a very slim margin.
El Paso´s wealth and education levels, on the other hand, may impact its marijuana demand negatively. Those who live in high-income families earning above $75,000 (which includes the average El Paso resident) are less than half as likely as those who live in low-income (under $20,000) families to use marijuana moderately or heavily. Furthermore, federal survey data has shown nearly half of marijuana users are those with no college education whatsoever. Also, college graduates only account for around 17% of marijuana use although they make up about 29% of the adult population (or in El Paso´s case, 36%). Given the propensity of college-educated people to use less marijuana, this may signify that El Paso´s residents are less likely than those in neighboring counties to support or use the substance.
Although El Paso’s religious community has taken a less stringent stance on marijuana in recent years (as discussed further below) this influential demographic is certainly less likely to approve of or support the marijuana market than its secular counterparts. The national study on drug use revealed that those who value their religious beliefs more tend to use marijuana less frequently (if at all) than those who do not, and the majority of Christians are also against legalizing marijuana.
Conversely, Pueblo´s large religious base does not appear to have the same political influence that El Paso´s does. Political officials in Pueblo are much more supportive of marijuana than those of El Paso County, even indicating plans to become the leading marijuana-growing county in the state.
As of May 2015, Pueblo holds just over 3% of the state´s registered medical marijuana patients, but due to the county´s small size, this figure is relatively large (though proportionately it is still not as large as the El Paso figure).
Pueblo County residents are also much less wealthy than El Paso residents and those of the state, and the county has substantially lower education levels when compared to the rest of the Colorado Springs region and the state as a whole. Both of these factors tend to make the county comparatively more likely to demand marijuana, the use of which is permitted both medically and recreationally in Pueblo.
El Paso County contains about 15% of Colorado’s registered Republicans, the largest share of any county in the state, as well as a heavy evangelical presence. The religious community in El Paso is known for its socially conservative views on public policy, which are influenced by Colorado Springs’ “evangelical Vatican,” an El Paso stronghold of more than 120 parachurch groups presided over by Focus on the Family. Evangelical and other religious groups have adamantly opposed marijuana use and legalization in the past. However, according to Slate Magazine, the evangelical position on marijuana is shifting on a national scale and although it is nuanced and slow, nowhere demonstrates this reorientation better than Colorado.
A number of post-election surveys show the use of marijuana is becoming more politically accepted among the public (across all demographic groups) and includes the evangelical community. The best evidence of this is probably in Colorado Springs and El Paso.
In 2006, voters in El Paso County, which typically votes 2-to-1 Republican, eviscerated Amendment 64’s predecessor (Amendment 44) which would have legalized recreational marijuana. It was one of Amendment 44’s severest losses in the state. However, six years later, Amendment 64 lost there by a mere 1.2 points. Furthermore, what’s been called the country’s most religious city (Colorado Springs) now finds itself second only to Denver in the number of dispensaries in the city with more than 180, most of them established since the 2009 “green rush.”
Despite the increasing popular support for marijuana, political representatives in local governments have hesitated to convert these social shifts into policy shifts, in many cases disregarding the will of the voters. Many strongly Republican cities and counties in Colorado (including Colorado Springs and El Paso County) are continuing to opt out of allowing recreational marijuana sales. While 53 Colorado cities have chosen to permit retail marijuana, with 27 levying special taxes, more did not. The Colorado Municipal League counts 165 cities and towns that decided to opt out of recreational marijuana sales, and an additional 16 municipalities have moratoriums on the idea of legalized recreational marijuana.
Pueblo County, however, not only passed Amendment 64 by a wide margin (55% for and 45% against, similar to the statewide voting numbers) but the largely Democratic county has also allowed retail marijuana sales to take place. In fact, Pueblo county officials told The Denver Post it plans to become the leading cannabis-growing county, thus - in strong contrast with El Paso County - Pueblo´s local politics seem to play a strong, positive role in the legalization and acceptance of marijuana and should encourage market growth there.
The Colorado Springs area is one of Colorado’s larger legal marijuana markets outside of Denver, accounting for approximately 11.8% of all legal marijuana sales in the state. However, the market is somewhat underdeveloped as the city of Colorado Springs is the largest municipality in Colorado to prohibit the sale of recreational marijuana. As a result of the ban, most of the area’s recreational dispensaries are limited to the smaller city of Pueblo.
The local recreational market accounted for close to $23.3 million of the region’s $123 million 2016 marijuana sales, a much smaller percentage than in other markets such as Denver or the Colorado Mountain region. Projections indicate the saturation of neighboring markets and increasing demand for recreational marijuana should lead to growth on both the recreational and medical sides of the market within the next few years, especially if the local prohibition against recreational marijuana were to be repealed. Under such a scenario, the Colorado Springs area would be among the state’s fastest growing markets by 2020.
Although edibles and concentrates are expected to comprise larger parts of the Colorado Springs area market over the next five years, flower is anticipated to remain the dominant method of cannabis consumption. Flower comprised approximately 62% of the recreational market in 2016 and is projected to remain at or around 40% in 2020 as the market matures. By 2020, edibles are expected to account for 45% and concentrates for 13.5% of the recreational market.
In the medical market, flower currently accounts for 60% and is projected to decrease to only 39% by 2020. Edibles are expected to grow by 20 percentage points over the next five years, from 25% to 38%, while concentrates are expected to grow from 13% to 20.5% over the same period. In terms of total volume demanded, the medical market is expected to remain close to four times as large as the recreational market for the foreseeable future, barring drastic changes in local law.
Although Colorado Springs is the second largest metropolitan area in the state by population size (a combined population of approximately 800,000 for El Paso and Pueblo Counties) there are only 24 recreational dispensaries in the area. In contrast, Denver has over eight times as many recreational dispensaries despite being only four times larger than Colorado Springs. The currently large number of medical dispensaries operating in the city of Colorado Springs, in addition to the city’s growing number of legally questionable private cannabis lounges, indicates sizeable underlying demand for recreational marijuana that is currently constricted by municipal prohibitions. While it is unknown whether the city’s ban on recreational marijuana will continue, saturation in other Colorado markets will likely make the Colorado Springs area an attractive target for investment. Furthermore, Pueblo County’s relative proximity to the state border suggests consumers from neighboring states without legal marijuana markets will also be a source of market growth. Accordingly, the market’s growth rate is expected to spike within the next two to three years before leveling out at an annual growth rate of approximately 8-9% in 2019, compared to the statewide growth rate of approximately 6.8%.
Another area of opportunity for the Colorado Springs market will be the development of additional cultivation and processing facilities. Currently there are virtually no recreational cultivators or processors in El Paso County. This is due to recreational prohibitions against marijuana and most of the regions 64 medical processors and 17 recreational processors being located in Pueblo County. Pueblo County is becoming an increasingly attractive area for new cultivators due to its abundant land and water resources, and will most likely become a key area of Colorado cultivation.
Marijuana testing labs present another opportunity for the Colorado Springs market. There are currently no commercial testing facilities operating in the Colorado Springs region, and most local dispensaries and processors outsource their testing to facilities in Denver. Given the market’s projected growth, it is believed regional marijuana testing will provide a unique opportunity for those looking to capitalize on the industry’s development.
In addition to federal laws against marijuana, the most significant threats to the Colorado Springs market are local prohibitions against recreational marijuana. Currently, the sale of recreational marijuana is banned in all parts of El Paso except the community of Manitou Springs, although a number of members-only cannabis clubs in the city of Colorado Springs provide marijuana in exchange for “donations.” However, most cannabis clubs are expected to end operations in the wake of a March 2016 ban. Presently, such clubs are banned in unincorporated areas of El Paso County. The area’s potential as a major legal marijuana market will be severely constrained as long as such laws are in place.
Should Pueblo County voters approve Proposition 200 in November 2016, retail cannabis businesses would be forced to leave, severely limiting market growth. However, given the large amount of tax revenue flowing into the region, opposition to the proposition is expected to be strong.
Regulatory Environment
Although cannabis clubs have been formally banned as of March 2016, the ban will not take full effect until 2023, leaving ample room for further changes, especially since most clubs have threatened lawsuits against the ban.
The legal evolution of members-only cannabis lounges in the area should be closely monitored. Cannabis lounges play an important, if unregulated, role in the Colorado Springs legal marijuana market because they provide a place for recreational users to obtain marijuana. While most clubs bill themselves as “bring your own marijuana” establishments in order to get around local prohibitions on recreational marijuana sales, it is commonly understood many clubs will provide marijuana to members who make monetary “donations.”
Clubs also provide an avenue for social consumption, claiming regulations against public consumption do not apply to members-only establishments. Since Colorado indoor smoking laws also prohibit indoor marijuana smoking, many clubs favor dabbing. If local governments were to regulate and license cannabis clubs, such legislation may provide political momentum for the city of Colorado Springs to reconsider its ban on recreational dispensaries.
Supply
Given Colorado’s abundant marijuana cultivation, it is unlikely the Colorado Springs area will face difficulties with supply. In fact, the area is poised to become a center of marijuana cultivation as many marijuana cultivators are applying for grow licenses in Pueblo County. It remains to be seen whether the area will also attract similar numbers of processors, although this is a possibility as more developed markets such as Denver grow increasingly competitive. Of course, much of this potential growth will depend on favorable political shifts in attitude towards recreational marijuana on the part of local governments.
Demand
Although recreational demand accounts for only a third of the total Colorado Springs area market, it is believed local prohibitions against marijuana are artificially constricting demand and driving many potential consumers to unregulated cannabis clubs, neighboring areas, and the black market.
Local recreational demand has been sufficient to boost tax revenue in Manitou Springs (the only El Paso community to allow recreational dispensaries) much higher than initially estimated. The recreational market in Pueblo County continues to develop steadily as dispensaries continue to be established. A number of the county’s larger dispensaries, such as Cannasseur, cater to a large number of consumers from out of state, illustrating the region’s potential for marijuana tourism. This advantage may wane in the long term should neighboring states such as Kansas and Texas also legalize marijuana. However, as these states are not expected to do so in the near future, consumers who cross state borders will play a key role in the development of the local marijuana industry for the foreseeable future.
Competition
A relatively low level of competition due to the small number of recreational dispensaries in the market will likely attract chains from other parts of Colorado who are seeking to expand their businesses. A number of local chains will also develop as successful medical dispensaries in El Paso County open locations in Pueblo County to tap into the recreational market.
Given the relatively undeveloped nature of the market, most dispensaries will likely seek to maximize their share of the market by stocking large selections of marijuana products in an effort to attract as many recreational consumers as possible. Recreational dispensaries that are easily accessible from neighboring states are expected to have a particular competitive advantage.