De Beque dilemma: Town now struggles with declining revenues

For the Town of De Beque, which had reaped the revenue rewards of being a pioneer in recreational marijuana, the result of a recent proliferation of stores elsewhere has been a sharp slowdown in marijuana sales and accompanying tax revenues. That’s particularly been the case this year, after recreational marijuana outlets started opening up in Grand Junction last fall after voter approval of recreational marijuana sales in 2021. Eight dispensaries are now open in Grand Junction and the final two winners of the city’s lottery to allocate dispensary licenses plan to open in 2025.

De Beque Mayor Shanelle Hansen hasn’t been happy to see that development.

“It was rather frustrating for the City of Grand Junction to want another pot of money,” she said. “De Beque, the one source of revenue we could have that Grand Junction didn’t already have that would give us any kind of tax revenue was the marijuana industry. Nobody wanted it at the time and so we took the risk and got into it to give ourselves a way to get out of the red. The town was operating in the red for many years prior to that.”

“That was our only hope, literally, and it really helped, it really did. It definitely made a good economic change for us. We were able to be smart with the money and work on getting some infrastructure that otherwise we could never have. And then Grand Junction decided they needed more tax revenues and took away our only source of revenue.”

De Beque voters approved retail marijuana sales in 2014. Palisade voters approved such a measure in 2016 after rejecting the idea in 2014, and that town’s first retail marijuana outlet opened in 2017, and a second opened there in 2019. Palisade is expecting about a $1.6 million drop in overall sales tax revenues this year compared to last year at least partly due to the opening of marijuana outlets in Grand Junction.

Even after Palisade’s stores opened, De Beque’s marijuana tax revenues continued to rise, peaking at $780,756 in 2020, compared to $348,783 in 2015 as its retail stores began opening. It currently has four stores, the most the town currently allows, and it also has two marijuana grow facilities. However, one of its recreational marijuana stores, Buds, recently was allowed by the town to shift to a seasonal store. Hansen said that store didn’t have enough business to operate year-round.

De Beque’s marijuana tax revenues were $767,508 in 2021, about $611,000 in 2022 and about $409,000 last year, and it’s anticipated that they will total only about $193,000 for this year.

‘MINI-BUST’

Katherine Boozell, the town’s treasurer, describes the situation for De Beque as being a “mini-bust,” in a town that’s used to a boom-bust economy related to the oil and gas industry.

The current mini-bust follows an initial boom related to recreational marijuana as the local oil and gas economy was slowing down.

“Recreational marijuana was the first time that we were able to kind of diversify into a new revenue-making economic activity,” Boozell said.

Roberts remembers Kush Gardens being super-busy, particularly during the months of 2015 before a second dispensary, Elk Mountain Trading Post, opened in De Beque.

“Ten years ago we were essentially the only (retail marijuana) place on the western seaboard. We had people coming from all over the world. People would fly into Las Vegas and drive all the way up,” he said. “We had people driving from Washington.”

IMPACT OF OTHER STATES

Over time, marijuana sales were allowed in other western states, and Roberts thinks that has had more of an impact on sales at Kush Gardens than the opening of stores in Grand Junction has.

“A lot of out-of-state traffic that we saw in the beginning, we don’t really see that as much as before,” he said.

Roberts said Kush Gardens sought a Grand Junction retail marijuana license through the lottery process, which had 47 applicants for those 10 licenses.

“Unfortunately our name just wasn’t picked,” he said.

While Kush Gardens has seen revenue impacts and had to reduce staff over time due to increased competition, “at the same time, being less busy we can offer more of a kind of catered experience without the big lines and waits,” Roberts said.

And there’s more product to offer because the store is almost always fully stocked.

“I think at the end of the day it’s good for the overall consumer,” he said of the proliferation of marijuana stores in the region.

”… The free market is a good thing. We’ve always felt that’s what we wanted to see with the industry,” he said.

Julie Graham, a co-owner of Kush Gardens, said in an email that the emergence of the dispensaries in Grand Junction “has significantly impacted the economic landscape of De Beque, a small town that took a pioneering chance over a decade ago by permitting retail marijuana sales. Once thriving as an early adopter in the industry, De Beque now faces a sharp decline in retail sales, driven by increased competition from Grand Junction’s larger market.”

But she said Kush Gardens still provides quality products and expert service, and Roberts said he feels good about the long-term prospects for Kush Gardens. Buds and Elk Mountain Trading Post didn’t respond to requests for comment for this story and a representative of De Beque’s fourth marijuana store, Tumbleweed Dispensary, said it is declining to comment.

Roberts said the shift by Buds to a seasonal business makes sense. He said Kush Gardens gets a lot more highway traffic during the warmer months. Kush Gardens, Buds and Tumbleweed are all just off Interstate 70.

Regarding the switch by Buds to a seasonal operation, Hansen said competition from Palisade stores was just a small hit for Buds, “but then when the Grand Junction stores opened it was quite a bit of a bigger hit. They just weren’t making enough money to sustain and all (four of De Beque’s pot stores) were actually hurting in that way, but these guys were the first ones to make that type of a decision.”

De Beque’s overall tax revenues, not just from marijuana but from other sources, were just over $2 million in 2023. For next year, they are projected to be about $1.84 million, according to a town budget document.

Said Boozell, “As far as the town of De Beque’s functioning, we’ve always operated on a really lean budget anyways so we’re not looking at cutting any services at this time.”

The town has focused over the years on using marijuana tax revenues not for ongoing operating costs but to help pay for infrastructure projects, something it will be able to do less of now. It has been using marijuana money to go after matching grants to pay for things such a water plant project, broadband upgrades, sidewalk improvements and a sewer project that expands sewer service to the south side of I-70.

“We’re hoping that that kind of breeds some economic development on the other side of the interstate,” Boozell said of the sewer project.

She said a gas station/retail area, possibly with a fast-food store, is in the planning stages for the south side of I-70 and will be able to use the new sewer line. She said the town is hoping that infrastructure projects more broadly might attract some economic development that could help replace some of the lost marijuana revenue.

ANTICIPATED COMPETITION

Hansen said the town always knew there would be a window of time before De Beque marijuana stores faced other competition in Mesa County. She said the town always thought that competition would emerge in Fruita, which De Beque probably wouldn’t begrudge as much as Grand Junction because Fruita doesn’t have all the sales tax revenues that Grand Junction does with all its big box stores. Fruita voters defeated a retail marijuana measure in 2014.

Hansen said that with the slowdown in marijuana revenues in De Beque, “we’re just going to have to be really smart with what moneys we do have coming in.”

“… We’re just trying to make what small improvements we can to try to guard against the day when all the (marijuana) tax revenues go away. I don’t know how long the pot shops will hold out,” she said.

As for what impact the slowdown in marijuana sales might have on other commerce in De Beque, Hansen said she thinks the current gas station and convenience store right of I-70 tends to get most of the ancillary business related to marijuana customers being in town.

She and her husband, Troy, are business owners in De Beque, owning a rooming house and the De Beque Country Store. She said that occasionally marijuana store workers will stay at the rooming house. While the De Beque Country Store sometimes will have people stop by while they’re in town to buy marijuana from Elk Mountain Trading Post, which is located in the town core, for the most part her store is supported by local residents, she said.

Rae Nelson, a bartender shift lead at the Reckless Roadhouse restaurant in De Beque, said business there has gotten quite a bit slower in recent months. She said she has no idea if it has anything to do with the slowdown in local marijuana sales, but it would make some sense that that’s a factor.

She said not too many customers mention to her whether they also are in De Beque to purchase marijuana. Most of the restaurant’s customers are from the Grand Junction area or are passing by on I-70, she said. She said it’s possible part of the reason for the recent slowdown is that Reckless Roadhouse recently opened another location in Fruita and a lot of customers might be checking out that location, she said.

Meanwhile, Roberts said that hopefully oil and gas development will pick up locally in the next couple of years and fill in some of the void from falling marijuana sales. As for what prospects there may be of that happening, he points to the mantra often repeated by Donald Trump, now the president-elect.

“Well, drill baby drill, that’s what (Trump) says, right?” said Roberts.