GAYLORD — When the Gaylord City Council approved an ordinance allowing marijuana enterprises to operate in the city in May of 2021, the council was mainly focused on two goals: adding jobs and tax revenue.

By most accounts the ordinance has delivered on those objectives.

Gaylord began granting licenses to marijuana business a little over a year ago and at the end of August, 27 licenses had been approved by council. Of those, 22 are for retail outlets, two are for micro-retail operations, one is for a transportation business and two are for growing facilities.

A rough estimate shows that anywhere from 70 to over 100 jobs have been added to the city's economy by the cannabis businesses. Next year, Gaylord and Otsego County will share in the distribution of adult-use marijuana tax revenue. This year, more than $42 million was distributed to 163 municipalities and counties as a part of the Michigan Regulation and Taxation of Marijuana Act.

There have been other economic benefits. Many vacant commercial properties have experienced six-figure investments and in some cases blighted property has been eliminated. All of this has bolstered local real estate and building materials companies and eventually will result in additional property tax revenue.

"I think the ordinance has worked out fine and exactly liked we hoped it would," said Gaylord City Attorney Paul Slough.

In his research in writing up the marijuana ordinance, Slough discovered that some municipalities attracted litigation when they rejected license applications, especially if the ordinance called on applicants to meet specific criteria such as giving local applicants an advantage.

Litigation can be expensive and time consuming for local governments. To avoid that, Slough proposed the city only limit the geographic areas where the businesses can operate and basically grant a license to all who meet state and city rules and regulations.

His philosophy was the market will decide how many is enough.

"We have not had any threats of litigation and the entire process of working with the (license) applicants has been smooth," Slough said. "Through the special use process from the planning commission and city council we have been able to address the public's concerns and work with the applicants to set reasonable restrictions on a case-by-case basis."

Going back to the 1960s, Gaylord has carefully crafted an image of a friendly community with a distinctive Alpine motif. It has served the area well helping to build the tourism business into a year-round economic generator.

So far, it doesn't appear that the marijuana enterprises have affected the city's image.

"The (marijuana businesses) tend to fly low and under the radar," said Gaylord City Manager Kim Awrey. "The (businesses) are not in your face that they are marijuana establishments. We have less marijuana establishments than ones that sell alcohol."

"We have had a lot of response from (marijuana businesses) that are established in other parts of the state," Awrey added. "They were eager to come to Gaylord and its crossroads location with M-32 and I-75."

How many is enough?

By far, retail licenses are the most popular option for investors in the city's cannabis industry. The vast majority of licenses have been for stores selling marijuana and its byproducts to consumers.

Even though the city has approved over 20 licenses, right now only seven are open for business and there could be another two or three by the end of the year. That could give the city 10 retail outlets.

"I was concerned that with the amount of licenses that were applied for we would have 20 retail stores open by now," Awrey said. "We have not seen that. The market is deciding as a handful of licenses were applied for and people placed purchase agreements on property and some have fallen through. They are not purchasing them anymore and the market is dictating that."

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More:First marijuana store to open in Gaylord on Tuesday

Awrey believes that city is still benefitting even if all of the licenses fail to open a store right away.

"Even if the stores opening don't make it they are rehabbing those buildings. One store took down an old gas station (on Main Street) that had been an eyesore for years," she said.

Gaylord Police Chief Frank Claeys isn't sure if the proliferation of retail stores is too much for the city.

"I understand people's concerns — we don't want to see a million of anything in our town whether it's pizza shops or marijuana businesses. I think the market will sort this out," he said.

Awrey believes that the market will be hard pressed to absorb more than 10 retail stores.

Paul Schmitz Jr. is the president and CEO of Core Investment. His company was just granted a retail license by council at the end of August and he is not worried about having nine or 10 competitors by the time he opens his store sometime next year.

"The beauty of the capitalistic society is the consumer determines that and I think nine isn't a bad number. I know of different municipalities that probably share a similar population number when you take into account Gaylord's tourism that have stores in the double digits and they are all successful," said Schmitz.

Nick Piedmonte is the CEO of Dunegrass, which opened a store on South Otsego Avenue in the spring.

"Dunegrass Gaylord is absolutely meeting our expectations. Locating on the south side of town near the south I-75 exit ramp and in close proximity to tourist homes and RV parks near Otsego Lake was a highly strategic decision for us. We had an excellent response from both locals and visitors to the Gaylord area, keeping us in line with our brand strategy as Northern Michigan's cannabis outfitter," he said.

Piedmonte believes that the market may be at its limit right now.

"The market likely cannot service anymore dispensaries. Effectively, the customer base has been usurped by the existing stores and any new competitors will need to draw customers from existing businesses versus entering an under-serviced market. Our theory that most competitors would set up shop on (or) around Main Street has proven true while our south-side location remains underserved," he said.

Schmitz and his company's involvement in Gaylord illustrate how the city is benefiting from cannabis-related development even without the store actually being open. They have acquired a vacant building at 1523 S. Otsego Ave.

"We will be doing quite a bit of remodeling, including adding a drive-thru window for express pick-up," said Schmitz, who added that his firm will be making a six-figure investment in the project. "It's been vacant a long time and that is part of the reason we were attracted to it."

Schmitz said his company will be looking to hire 18 employees for the store.

"They will have a starting salary of $16 an hour with full benefits," he added.

Next year, the city and the county will share in the tax revenue derived from the marijuana sales. In 2022, local governments earned about $56,000 for each retail operation. Assuming Gaylord has nine or 10 stores operating by the end of the year, the city and Otsego County each will receive over $500,000 if the payout stays at $56,000 per outlet.

"I was afraid (tax sharing) was going to get watered down so when I made my projection for the city budget I didn't go as high as $56,000," Awrey said. "I was between $25,000 and $50,000. Now I see there were record (marijuana) sales in the state for the month of July."

Claeys said his department has adjusted to the demands from the ordinance and he hasn't noticed an increase in crime.

"We haven't seen a lot of change in our day-to-day operations over it. We haven't been swamped with calls. We had one incident at a store (a break-in) which would be on par for this many buildings anyways," Claeys said.

He also said he hasn't noticed an increase in the so-called nuisance crimes like loitering, littering and graffiti.

"I had some concerns about that after speaking to other communities and I don't think we have seen an increase yet," said Claeys.

Claeys also said his department's role in the license application process has gone well so far.

"There is a vetting process by the state and then a vetting process for us. We review their site plan and make sure their security plan is safe for the employees and the public," he said. "The ordinance has worked as intended. We now have enough stores that at this point the ordinance has provided us with what we wanted, which was to allow access to our market and to keep our community safe. We haven't had any violations or reports of violations."

More:Michigan cannabis companies struggle to survive in increasingly competitive market

The state outlook

In July, the Detroit Free Press published a report and noted that the state marijuana industry was going through a shakeup. The price of cannabis flower had declined, making it difficult for growers to turn a profit, and at the same time, new companies continued to open grow operations, processing facilities and retail stores, leading to an increasingly competitive marketplace.

Piedmonte said Dunegrass is a stand alone multi-location retail business.

"We have no grow or processing operation. The biggest challenge as I see it exists for mid-sized, vertically integrated companies who're dealing with a plummeting price in cannabis flower. The price per pound will continue to decrease through the fall and winter," he said when asked to assess the state's cannabis industry.

"I think (the industry) is now at an inflection point when you look at supply and quality," said Schmitz of Core Investment. "I think now is the point where quality starts to show through when there is an overabundance of supply out there. It gives customers a better choice of premium products at a more reasonable price."

This article originally appeared on The Petoskey News-Review: Gaylord's marijuana economy is thriving one year after launch