‘Not in my backyard,’ towns say
Around half of New York cities and towns don’t want marijuana dispensaries or consumption lounges, a cautionary signal for companies hoping to do business in the Empire State.
New York is expected to start recreational marijuana sales in the next year or so, likely becoming the second-biggest market after California, with around $4.2 billion in projected sales. Yet when given a Dec. 31 deadline to opt out of participating, 47% of the state’s 1,521 municipalities opted out of having dispensaries and 54% opted out of having consumption sites, according to data compiled by the Rockefeller Institute of Government as of Jan. 7.
“At first blush it’s a large number,” said James Ansorge, a principal at lobbying firm Cozen O’Connor Public Strategies.
“But many municipalities said, ‘We want more information before making a decision’ — that’s the No. 1 reason why so many places opted out.”
Sixty percent of Americans say marijuana should be legal for recreational and medical use, according to the Pew Research Center. The “not in my backyard” mentality of many New York towns seems in part due to the fact that the state hasn’t laid out exact parameters for how cities and towns can regulate things like advertising, signage and operating hours, Ansorge said.
Municipalities that didn’t do anything were automatically opted in. So to vote down a dispensary or a consumption lounge, towns had to actively organize. Those that opted out will forgo a 4 percentage-point share of the 13% excise tax (the rest goes to the state) as well as the potential for extra foot traffic, which could help local businesses and employment overall.
They may also miss out on a rise in real estate prices. Home values increased an extra $22,090 in cities with recreational dispensaries compared to those in cities where recreational marijuana is legal but dispensaries aren’t available, according to a 2021 study of legalization in other states by Real Estate Witch, a division of Clever Real Estate.
While the opt-outs aren’t permanent, they could have an impact on the industry if Canada is any guide. The hesitancy of many Canadian cities to allow dispensaries was one of the reasons that the burgeoning industry fell victim to oversupply, falling marijuana prices and flagging stock values for some publicly traded cannabis companies.
“In the early innings of legalization in Canada, the supply-demand imbalance was impacted by a slow rollout of retail, particularly in Ontario, which is 40% of Canada’s population,” said Ty Collin, an analyst at cannabis research firm VIII Capital.
“Canada’s producers had invested in grow capacity early in legalization to satisfy an initial supply deficit, which then turned to a surplus partly because of a dearth of retail sales channels.”
For companies that already have medical licenses in New York and are presumed to become major players in the recreational market, like Curaleaf Holdings Inc. and Columbia Care Inc., the high number of opt-outs may mean tempering expectations for now.
In Canada, there were fewer than 200 cannabis stores nationwide around the start of 2019 but there are now closer to 3,000, according to Collin. The increase in locations has led to rising sales.
In the dense areas around New York City, where towns are closer together, it could become difficult for towns that opt in later. They may find cannabis companies already have enough shops nearby.
“People are already saying that if New Jersey starts legal sales first, New Yorkers will just take the ‘PATH Train to Enlightenment,’” Ansorge joked. “Why wouldn’t they just drive a town over?”
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