May 13, 2019
The business of marijuana

The economic impact of legal pot is limited, as Mass. seeks the right balance

PHOTO/BRAD KANE
Good Chemistry opened on Harrison Street in Worcester on May 1 as the first of what could be 15 cannabis shops in the city.

In a span of just under four miles in downtown Eugene, Oregon, 38 marijuana shops have opened their doors since recreational marijuana became legal to buy there in 2015.

The city of 170,000 – just smaller than Worcester – has more than 50 pot shops in all.

Worcester can't legally have nearly that many shops, with a state-imposed ceiling limiting the city to 15. But with Worcester's first legal pot shop open as of May 1, questions remain about how much demand will exist in Worcester and surrounding towns for places to legally buy a joint and what the economic boost the industry could give to Central Massachusetts.

Eugene offers a compelling test case. The city, which is home to the 23,000-student University of Oregon, has seen a lot of speculative store openings in a state cannabis market more relaxed than in Massachusetts, which has had a slow rollout of pot shops.

Industry watchers in Oregon say Eugene could be due for some shop closings.

"In Eugene, we're just now – it's been three and a half years – about to hit that shakeout period," said Keaton Miller, a University of Oregon economics professor who studies the industry.

Until then, dozens of spaces across the city have found new use as pot shops with names like Cannabliss & Co., 4-Twenty Mini Mart and Grasslands. Cannabliss and 4-Twenty both opened in former real estate offices, and others have opened in a former house, hair salon and a financial services office.

But the new stores haven't brought as much street and sidewalk activity as most other retail storefronts would, said Joshua Monge, the director of economic development for the Eugene Area Chamber of Commerce. Stores often have marijuana leaf logos outside, but they can't advertise products in the window and don't allow minors inside, he said.

"What was a dead space, when there was nothing there, it can create a new dead space," Monge said.

Monge foresees some reduction in the number of pot shops in Eugene ahead.

"There's no way there would be 40 taco stands," he said. "They just couldn't survive."

As for industry wages, the Eugene area doesn't appear to have gotten a major boost from new employment. Miller described a pot shop's impact as smaller than a restaurant but bigger than a hardware store.

Oregon state government data shows annual wages of nearly $3.9 million in Lane County, where Eugene is located, among more than $50 million made by nearly 6,000 marijuana industry workers statewide. That is an average annual salary of $8,333 per cannabis worker.

But those wages are still a tiny part of overall wages. For every $10,000 earned across Lane County, only $5.90 comes from the cannabis industry. Jobs in mining, quarrying, and oil and gas extraction make up more than three times as much.

Local picture still unclear

How many shops could come to Central Massachusetts still isn't clear.

More than 30 cities and towns have passed caps on the number of stores, including Clinton, Gardner, Grafton, Millbury and Uxbridge, according to the Massachusetts Municipal Association, which is tracking local restrictions based on news and municipal reports.

A majority of the state's 351 cities and towns have passed temporary bans keeping out any shops while officials consider their options.

Worcester has approved a cap on retail locations tying the maximum number of shops to the number of liquor stores in the city. Pot shops can number 20% of the number of liquor stores in Worcester, or up to 15.

Matt Huron, the president and CEO of Good Chemistry, the first retail shop in Worcester to sell recreational marijuana, said he sees 15 shops in Worcester as a realistic number balancing supply and demand. He has worked to help customers find other nearby businesses in the Canal District and predicts an economic spillover effect from new shops.

Photo | Courtesy
Bloominus hopes to open in the former Elwood Adams Hardware store on Main Street. Pictured is a rendering of the proposed location.

"It can be very beneficial for cities and towns and the state overall," said Huron, whose company has operations in Colorado.

A national look

Eugene isn't alone in illustrating just how much demand can exist for store-bought pot.

The Oregon capital of Salem, which is just smaller than Worcester, has more than 40 shops, including nine in a three-mile stretch. In Colorado, Denver, a city of more than 700,000, has 180 shops.

Other cities have numbers more in line with what Worcester would have at its maximum. Modesto, Calif., with 214,000 people, has 13.

Modesto has a limit on where stores can operate, but it has demand for more, said Gokce Soydemir, an economics professor at nearby California State University Stanislaus.

"There's demand for more," Soydemir said of Modesto, a city southeast of the Bay Area. "Considering the population, the market can support more, easily."

In Pueblo, Colo., 25 pot shops operate in a city of 111,000. Among the operators are Jim Parco, a business professor at Colorado College and the owner of Mesa Organics. Parco studies the industry but touts the creation of new jobs and tax revenue, including the 18 who work in his retail store. His shop in Pueblo took the place of a long-vacant and vandalized restaurant.

The visible transformation of retail areas are the most notable change where cannabis is legal, he said.

"You see vacant buildings that are no longer vacant," Parco said.

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