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New Mexico marijuana legalization poses a serious threat to Colorado’s lucrative border-town pot shops

Trinidad, Antonito and San Luis are towns along the Colorado-New Mexico border that have clusters of cannabis shops that could go up in smoke. How will local governments that rely on marijuana tax revenue fare?

The CannaCo recreational marijuana shop in Trinidad is one of the closest places to buy marijuana when driving between Colorado and New Mexico. (Tamara Chuang, The Colorado Sun)
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TRINIDAD —When Colorado legalized the retail sale of marijuana in 2012, savvy entrepreneurs saw an opportunity beyond setting up shop in population centers like Denver and Boulder. 

They realized if they opened cannabis businesses in small towns along the state’s borders, they could attract customers from Kansas, Nebraska, New Mexico, Texas, Utah and Wyoming, where pot remained against the law but was still plenty popular. 

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“The border model was a great model,” said Josh Bleem, who lives near Fort Collins but owns CannaCo in Trinidad, one of the first dispensaries people pass as they enter Colorado on Interstate 25 from New Mexico. “We took advantage of that.”

Nowhere have marijuana entrepreneurs taken more advantage than Trinidad, which has 25 cannabis shops, according to potguide.com. The entire population of Las Animas County, where Trinidad is the county seat, is just over 14,000. The shops rang up almost $71 million in cannabis sales last year.

But the border business model soon will be tested. New Mexico this month legalized recreational cannabis, threatening not only the livelihoods of the rural Colorado shop owners and employees but also local governments that have come to rely on cannabis tax revenue to pad their coffers. 

Simpson’s Rest, a popular bluff overlooking the town of Trinidad, Colo. It’s named for George Simpson, who settled in the area in the mid-19th century. (Mike Sweeney, Special to The Colorado Sun)

And New Mexico’s legalization decision may not be the last threat to Colorado’s $10 billion recreational marijuana industry. An increasing number of states are signing off on recreational marijuana sales, and U.S. Senate Majority Leader Chuck Schumer says he wants to make recreational cannabis sales legal under federal law.

What’s playing out on the Colorado-New Mexico border is likely to be repeated across the country. New Jersey and New York recently legalized recreational cannabis, and some politicians in neighboring Pennsylvania want to follow suit, so their state doesn’t cede millions in tax revenue. 

“I knew that eventually it was going to happen,” Bleem said of New Mexico legalizing marijuana, “just like I’m very confident federal legalization is going to happen as well.”

Bleem said he factored expanded legalization into his business plans, and he’s optimistic his store won’t take too big of a hit. “Will it have an impact on our business? It probably will,” he said. “I don’t know exactly what that looks like yet. I’m not 100% sold that it’s going to diminish a lot of the business in southern Colorado.”

Ricardo Baca, who leads the Denver-based marijuana marketing agency Grasslands, said people who built shops along Colorado’s borders were always making a “calculated bet” against our neighbors signing off on recreational cannabis. And, so far, it’s a bet that’s paid off.

“A lot of these border town stores have been raking in the cash for years,” said Baca, a former Denver Post reporter who covered the marijuana industry for years before going into marketing. “Denver will always rule the roost when it comes to cannabis retail. But of course there is a pretty penny to be made in these border town locations and these tourist locations.” 

Antonito and San Luis, two tiny Colorado towns along the New Mexico border south of Alamosa, also have several cannabis shops despite their small populations. The northwest Colorado town of Dinosaur, which has no stoplights and is a 5-minute drive from the Utah state line, has three pot shops.

Men wait outside of Rocky Mountain Cannabis located on U.S. 40 near downtown Dinosaur Colorado. Dinosaur has three recreational cannabis shops that contribute about $25,000 in tax revenues to the town, which has only 320 residents. (William Woody, Special to The Colorado Sun)

But there is uncharted territory ahead for cannabis retailers at the southern border as green chile won’t be the only green substance Colorado and New Mexico fight over. 

The sale of medical marijuana is already legal in New Mexico. Before recreational shops can open, regulators must create a new framework. It must be complete in time for shops to open no later than April 1, 2022. 

The state will at first tax cannabis at a rate lower than Colorado, and consumers in New Mexico will be able to purchase up to 2 ounces of pot per store, compared with Colorado where customers can only buy 1 ounce per day. 

New Mexico also will not allow counties, cities and towns to opt out of recreational marijuana sales like Colorado did.

“We’re very optimistic that we are a better choice than practically every surrounding state,” said Duke Rodriguez, president and CEO of New Mexico-based Ultra Heath, a large medical cannabis company. “But the big question for New Mexico: Will it have enough product?”

Rodriguez estimates that New Mexico is losing more than $200 million annually in sales to medical marijuana patients because people are traveling to Colorado to get cheaper, recreational weed.

“They are clearly supplying their medical needs with cannabis purchased in Colorado,” Rodriguez said. “We’ve got medical patients buying in Colorado and we’ve got every day adult consumers buying in Colorado. And it’s a big, big number.”

Cannabis plants grow inside a cultivation facility near Lafayette on Thursday, Dec. 13, 2018. (Andy Colwell, Special to The Colorado Sun)

How big a number is unknown, but Rodriguez — whose company plans to enter the recreational marijuana space — thinks New Mexico will take a major piece of the cannabis market from Colorado’s border towns. 

“While we’re not trying to initiate a race to the bottom with Trinidad, or any other border city along the New Mexico-Colorado area, I will tell you that we will be very able and active competitors,” he said. “It would be naive not to recognize that we will be able to not only keep our own home grown New Mexico customers within our own state, we are certainly going to be able to capture our fair share of Texans long before they cross into Colorado. No longer are people going to have to pass through us and just fill up with gas.” 

(Marijuana remains federally illegal and transporting cannabis across state lines is against federal law, even if it’s legally purchased. A sign outside of CannaCo in Trinidad warns patrons of that fact.)

Ultra Health is already taking a page from Colorado’s recreational marijuana playbook by opening a new dispensary in Clayton, New Mexico, which is about 5 miles from the border with Texas and on the route for Colorado-bound Texans heading to high country getaways.

Ultra Health’s marijuana dispensary in Clayton, which is in northeast New Mexico, about 5 miles from the Texas border. (Handout)

Rodriguez thinks Trinidad stores can expect marijuana sales to drop between 50% and 80%.

Leonard Garcia, co-owner of the Green World Express marijuana shop in Antonito, says he’s “somewhat, not majorly” concerned about New Mexico legalizing recreational marijuana. He says some of his customers are from Colorado’s southern neighbor, but he’s been able to build a dedicated base of clients that he thinks won’t abandon his shop.

“I think everything will be fine,” he said.

Representatives for LivWell and The Green Solution, two large marijuana chains with shops in Trinidad, declined to speak to The Colorado Sun for this story.

Despite the optimism, a Sun analysis of 2020 cannabis sales hints at real problems for marijuana shops and local governments along Colorado’s border. 

Read more business stories from The Colorado Sun.

In Las Animas County, every resident — adults and children — would have had to purchase nearly $5,000 in pot last year to account for the $70.8 million in cannabis sales the county had. On a recent weekday, an unscientific poll of license plates in the parking lot of the two Trinidad marijuana shops closest to the New Mexico border indicated a big chunk of their revenue was coming from New Mexico. 

“Convenient access from I-25 just minutes inside state lines,” The Spot 420, a downtown Trinidad cannabis shop, advertises on its website.

But it’s not just Trinidad and Las Animas County that could take a big hit. 

In Costilla County, which includes San Luis, each resident would have had to spend $1,827.59 in pot shops last year to account for the county’s $6.8 million in cannabis sales. 

In Archuleta County, which includes Pagosa Springs, each resident would have had to purchase $1,172 of marijuana to cover the $15.5 million sold in 2020. 

Trinidad has seen its marijuana tax collections grow to more than $3.5 million in 2020, up from $2 million in 2017. The taxes the city collected from dispensaries in 2020 went to cover declines in the general fund as well as rental assistance during the pandemic, paying down debt on a new fire truck and buying a new street sweeper. 

City leaders and economic development champions in Trinidad have been anticipating a decline in marijuana business since New Mexico began to ponder legalization. 

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“How much of a drop, we don’t know,” said Trinidad Mayor Phil Rico. “But even if it’s a 50% drop, I think we will be OK.”

With the new Fishers Peak State Park, the growing popularity of Trinidad Lake State Park and a swelling roster of festivals and events, the city has “big opportunities right now,” Rico said. 

Colorado Parks and Wildlife is expanding trails at Fishers Peak with a long-term vision of access to the iconic mountaintop above the city. The city just approved the first stages of a plan with the Greenway Foundation to upgrade access and amenities around the downtown Purgatoire River.

“I think people who come from Texas and New Mexico, they may buy marijuana and turn around and go home, but a lot of them come for recreation in Colorado as well,” Rico said. “And we are growing our recreation attractions.”

A row of marijuana dispensaries line a city block on North Commercial Street in Trinidad. The town of just over 8,000 people has over 15 dispensaries, seven of which are in the lower Commercial Street area. (Mike Sweeney, Special to The Colorado Sun)

Rico said he and the city council will have plenty of time to prepare for a potential decline in cannabis sales. He expects it will take two years, at least, for New Mexico towns to review and approve dispensary applications.

“With all the additional revenue streams we are building right now, we might see reduction, but not this year and probably not next year either,” Rico said.

But Rodriguez, of Ultra Health, points out that New Mexico could start recreational sales sooner than April 1, 2022, if its regulators can move quickly to finalize the rules. 

“And we’re certainly going to advocate sooner rather than later,” he said.

Colorado Sun staff writer Tamara Chuang contributed reporting from Trinidad. 

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