The Economic Impact of

COLORADO HARVEST COMPANY

and

EVERGREEN APOTHECARY
on the Denver region
and Colorado


Colorado Harvest Company (CHC) and Evergreen Apothecary (EA)

are projected to yield more than $1.4 million in local and state
revenues for 2014. Taxes paid by the two stores total 10 times the tax
revenue of both a typical retail store and restaurant in the Denver
region. The economic impact of CHC and EA includes 280 jobs and
$30 million to the Denver MSA, and thus contributes 7 times more
jobs and output than the average retail store and restaurant in the
Denver region. Payroll estimates for 2014 for both stores exceeds $2.4
million, and are 8 times higher than the average Denver retail
establishment and restaurant.

JACK STRAUSS
Miller Chair of Applied Economics
Reiman School of Business
Daniels Business School
University of Denver

THE ECONOMIC IMPACT OF THE

COLORADO HARVEST COMPANY AND
EVERGREEN APOTHECARY
ON THE CITY OF DENVER
AND THE STATE OF COLORADO

This paper evaluates the economic impact of Colorado Harvest Company

(CHC) and Evergreen Apothecary (EA) on the City of Denver and the State
of Colorado. There has been considerable speculation about the economic
impact of legalization of marijuana on both the local region and state, much
of it without concrete numbers. This report provides a detailed examination
of CHC and EAs economic contribution to tax revenue, jobs, and income to
Denver and Colorado, as a whole. Since a major impetus behind marijuana
legalization in Colorado is the generation of new tax revenue for both the
state and local municipalities, we compare the tax collections of CHC and EA
to both a typical retail store and restaurant in the Denver Metropolitan
Statistical Area (MSA).

DIRECT IMPACT ON REVENUE

Retail sales projections for CHC and EA for 2014 are approximately $8.5
million and $2.7 million, respectively. The projected state tax revenues for
Colorado for CHC and EA are $620,000 and $445,000. For the City of
Denver, local tax revenue total $295,000 and $95,000 for CHC and EA.
These stores must pay the typical state taxes of 2.9%, 3.62% for the City of
Denver taxes, 1% Regional Transportation District (RTD) taxes, and .1%
Scientific and Cultural Facilities District (SCFD) taxes for a total of 7.62%.
Additionally, they pay a 10% retail sales tax and a 15% marijuana excise tax

that is assessed on the transfer of the product from CHC and EAs own
cultivation facility. Thus, the revenue from CHC and EA yields taxes totaling
$1.07 million for the state and $390,000 for the Denver municipality.
To gain perspective, we consider both a medium to large retail store and an
average restaurant in the Denver MSA. A retail store pays only the 7.62% in
taxes, totaling $26,200 in state revenue and $43,000 in local sales taxes
(including the 1.1% in RTD and SCFD taxes). An average restaurant also pays
the 7.62% that includes nearly $28,700 in state revenue and $47,700 in local
sales taxes (again, including the 1.1% RTD and SCFD taxes). Overall, the retail
store and restaurant yield state tax collections of $54,900 and $90,700 in city
taxes. And, due to high retail and excise taxes, as well as strong retail sales,
CHC and EA pay nearly $1.5 million in state and local taxes, or 10 times
more than the average retail and restaurant establishment in the Denver
region.

OVERALL ECONOMIC IMPACT ON DENVER

CHC and EA also contribute critical sales and employment to Denver.
Using the U.S. Bureau of Economic Analysis (BEA) multipliers for the
Denver MSA, the estimated positive impact on employment to the Denver
MSA for the two stores is over 280 jobs. The impact in terms of overall
output to Denver is an increase in $30 million, due to the relatively large
and well-paid workforce of workers; current and projected construction of
new facilities, including $425,000 for the first building and a projected $1.5
million for the second facility; extensive tax payments; and substantial retail
sales. In comparison, a typical retail store and restaurant yield 40 jobs and a
combined economic impact of $3.9 million in output. Hence, CHC and EA
will deliver 7 times more jobs and output to the region.

The substantial difference in economic contribution is driven by a sharp

divergence in payroll and sales. CHC and EA employees earn an average of
$17 per hour and receive two weeks of paid vacation; maternity and
paternity leave, including 30 days at 50% pay; and 50% coverage of health
insurance costs. Average payroll at the retail store and restaurant equals
$300,000 for 2014, as compared to a projected 2014 payroll of more than
$2.4 million for CHC and EA. Overall sales for CHC and EA are likely to
exceed $11.2 million for 2014, approximately 6 times the combined sales of
$1.9 million for a restaurant and retail store.

ECONOMIC IMPACT ON THE COMMUNITY

Comparison between CHC+EA & Retail + Restaurant:

8x greater Payroll
2500

2000
10x more
Revenue
1500

1000

7x more
500 Jobs

0
Tax Revenue ($1000) Payroll ($1000) Jobs
CHC+EA Restaurant+Retail Store

Added benefits to the community also include substantial rental profits to

the warehouse industry in the Denver MSA. Since 2013, unused warehouse
facilities have dropped from 6% to less than 3%. Lastly, CHC and EA are
committed to donating $200,000 to become a founder of Levitt Pavilions
Denver, a family foundation based in New York with six locations within the
United States, including Denver. Levitt Pavilions Denver has plans to
revitalize and upgrade Ruby Hill Park, the third largest park in the Denver
Metro area.

METHODOLOGY
Bizminier provides Industry Financial Reports for the average business
revenue for average establishments by North American Industry
Classification System (NAICS) code by region over the past five years. Since
CHC and EA are retail establishments, based on these reports, we compare
their tax revenue and economic impact to other Denver retail stores. In
terms of retail establishments, we chose medium to large size Miscellaneous
Store Retailers; these stores represented average of sales from $500,000-
$2.49 million, including approximately 400 stores with sales of $500,000-
$999,999 and 155 stores with sales of $1 million-$2.49 million. Additionally,
we compare the two companies to restaurants as they represent a typical
business in the region, including approximately 1500 full-service restaurants
in the Denver region for the years 2009-2013. The average sales during this
time period were slightly over $1 million. A weighted average of the medium
to large restaurants was taken.

The economic impact multipliers came from the BEA, which is part of the
U.S. Chamber of Commerce. The BEA has provided regional input-output
multipliers (RIMS) since the early 1970s as a tool to help economists analyze
the potential impacts of economic activities on regional economies. We

used the RIMS II Type II retail sales multipliers for the Denver MSA, which
account not only for the inter-industry effect, but also for the induced
impact of a final-demand change. This impact is often called the
household-spending effect and implies that the spending of employees is
typically done in the Denver area, leading to significant spending on local
goods and services. It is important to note that approximately 50% of the
retail sales includes out-of-state persons, thereby implying that the
economic multiplier impact is actually higher than the BEA reports.
Additionally, part of the economic impact comes from CHC and EAs leasing
and/or ownership of seven buildings in Denver, several of which required
considerable and extensive remodeling. A production facility recently
purchased by CHC and EA for $1.3 million will have an additional $900,000
in improvements by the end of this year. This additional warehousing and
production facility also demonstrates how well-positioned they are for
further expansion next year in other areas of Denver. Hence their economic
footprint will continue to grow.

As previously mentioned the projected local and sales taxes for the City of
Denver equals 7.62% Taxes for other Colorado cities varied but generally
range between 7.5%-7.8%. The projected sales were based on January-May
sales for both companies, while revenue figures from 2014 use Mays figures
and project them over 12 months.