Two months after nixing marijuana excise tax, Pueblo City Council wants to bring it back

Less than two months after Pueblo City Council approved slashing the city’s excise tax on marijuana, council is considering an ordinance to bring it back.

Marijuana grown within city limits had been taxed at 8% before city council voted 4-2 to remove the tax in late December 2023.

Council voted 4-2 Monday evening to pass on first reading a new excise tax on marijuana, although at a lower rate of 5%.

A public hearing and final vote on the ordinance are expected at a March 11 city council meeting.

The revitalization of the tax on marijuana grown within city limits is happening after big changes in city leadership and as the local cannabis industry is struggling.

Here’s why some city leaders want to bring back the tax and what opponents are saying.

Why the tax is being revitalized

City spokesperson Haley Sue Robinson said in a text message to the Chieftain that Mayor Heather Graham worked with City Council President Mark Aliff to bring back the excise tax.

Graham, along with Councilor Regina Maestri, opposed slashing the tax in December when she was a city councilor.

Graham’s predecessor in the mayor’s office, Nick Gradisar, was more friendly with the local marijuana industry and accepted some campaign contributions from local cannabis investors and businesses.

Aliff told the Chieftain that he has heard from constituents who want to see the tax on marijuana grown within city limits come back.

“I felt like it would be a good compromise,” Aliff said about bringing back the excise tax at a rate of 5%, which is the same rate that Pueblo County collects.

Some councilors want to keep the tax at 0%

The composition of city council has shifted dramatically over the past two months: only three of the councilors on the dais at the end of last year are still serving.

Dennis Flores and Sarah Martinez both voted to remove the tax in December. They cast the two dissenting votes on the first reading Monday evening.

Flores described the new ordinance reverting previous council action as “really disappointing."

“It looks like we are now a council that's going backwards to change things we don't like that a previous council said was okay,” Flores said. “It was basically just to provide some relief for an industry that's just really going down in sales” and to “protect jobs.”

“It's very frustrating to me that we're not looking forward to doing things to help the community, we're going to go back and undo what was done last year,” he added.

Aliff acknowledged that the marijuana industry in Pueblo isn’t doing well, as other states have legalized recreational cannabis. But he doubts that the 5% wholesale tax was torpedoing the local industry.

“That's just a part of economics in our society when it comes to supply and demand. That's why the (marijuana) industry is down,” Aliff said.

How the tax would work if approved

The marijuana excise tax was collected on cannabis grown within city limits at an 8% rate from 2016 to 2023. Voters approved a measure in 2015 allowing city council to set the excise taxes on marijuana cultivation anywhere between 0 and 15%.

Marijuana excise tax collections within the city peaked in 2021 at nearly $800,000 but fell dramatically in 2022 and 2023, when approximately $150,000 was collected each year.

The ordinance removing the excise tax went into effect on Jan. 1 of this year and is scheduled to end in three years, reverting the tax to 8%. This new ordinance to boost the excise tax to 5% does not have a sunset provision, interim City Attorney Carla Sikes told council Monday evening.

State law allows municipalities to assess up to 15% in excise taxes, but the 8% rate that Pueblo previously assessed was one of the highest in the state, according to data from the Colorado Municipal League. Some cities don’t assess any excise tax, but the majority of cities that do also collect around 5%.

Anna Lynn Winfrey covers politics at the Pueblo Chieftain. She can be reached at awinfrey@gannett.com. Please support local news at subscribe.chieftain.com.

This article originally appeared on The Pueblo Chieftain: Why the marijuana excise tax could already be returning to Pueblo