Big marijuana revenue projected if approved
SOMERS POINT — City Council has been passing around the idea of allowing marijuana sales for years but could never get any data on anticipated tax revenue.
City resident Max Slusher, a member of the Economic Development Advisory Commission, finally delivered that data during a presentation March 23.
In November 2020, New Jersey residents voted about 2-1 in favor of allowing recreational use of marijuana for adults. The Cannabis Regulatory, Enforcement Assistance and Marketplace Modernization Act created the Cannabis Regulatory Commission that regulates the statewide marketplace for cannabis products.
In 2021, each municipality had the option to prohibit or otherwise limit the six classes of cannabis businesses. Delivery businesses can be restricted but the actual delivery of the product cannot.
Many municipalities chose to opt out because there was a deadline to do so or be stuck with the nonexistent state rules for five years. Somers Point was among them, but at the time City Council President Janice Johnston said they intended to revisit the idea after the state released its regulations.
Johnston said March 23 that City Council had a lot of questions about finances and that Slusher had done extensive research for his presentation.
Slusher provided his bona fides, saying he holds dual degrees in local history and economics from Stockton University, a master’s degree in economics from the University of Delaware and expects to complete his doctorate degree from Rowan University in May. He also is a member of the city Planning Board.
Slusher explained he used numbers from the U.S. Census Bureau and a 2022 Gallup poll on adult marijuana use to come up with his projection that a Somers Point dispensary could generate about $15.846 million in sales annually, leading to tax revenue of $316,922 for the city.
Slusher said his study attempts to capture the smoking market, not consumers of edibles and tinctures, which he noted are the fastest-growing segments. He said the Gallup poll estimates that 16.7 percent of the population smokes marijuana.
Slusher said his projections are based on a lot of assumptions, which he characterized as conservative. He said he assumes for the sake of projections that one retail outlet would serve Somers Point, Ocean City and northern Upper Township.
“I chose those three because outside of Somers Point, I don’t see cannabis going in either,” Slusher said.
He assumes the outlet would capture the full market of the three areas. Slusher said he excluded Linwood, Longport and Margate because, while he believes they will remain dry, he assumes the Egg Harbor Township dispensary would get some of that market share.
Slusher also assumes the outlet would capture the residential and tourist markets of the three areas.
To temper projections, he excluded day-trippers, overnight stays and peak periods such as Memorial Day, Independence Day, Night in Venice and Labor Day.
He estimates sales of $2.84 million from the residential market and $13 million for the tourist market, based on expected expenditures of $100 per person per month.
Slusher said he came about those figures by taking the population — Ocean City has 11,229 residents, Somers Point 10,796 and northern Upper Township 4,086 as of the 2020 census — and removing all but those ages 18 to 65, those more likely to partake. That leaves 48.1 percent, 58.7 percent and 59.6 percent, respectively. Applying the estimated 16.7 percent who smoke, that amounts to 902 people on the island, 1,058 in the city and 407 people in the township.
For tourists, Slusher went even further. He added up the number of hotel, motel, B&B and campground units in the three areas and estimated three people per unit per night, then added the seasonal housing units and estimated five people per unit per night and estimated a daily visitor base of 68,293 for Ocean City, 3,656 for Somers Point and 4,154 for northern Upper Township.
Then he estimated the occupancy rate based on month, accounting for weekly turnover, and determined a total number of beds monthly at 327,806, 17,549 and 19,939. Eliminating all but those 18 to 65, then calculating the 16.7 percent who smoke results in 26,332, 1,720 and 1,985 beds per month. Multiplied by $100, that amounts to $13,005,841 of total revenue.
Slusher admitted he is not an expert in the cannabis industry, recommending the city seek out advisers before moving forward.
“If Somers Point decides to go forward with a dispensary, I highly recommend that a consultant who specializes in the New Jersey marijuana industry be contracted to structure the bid process so it adheres to state law,” Slusher said.
He said the city could rebid the contract every five years to ensure the operation is performing at an acceptable level.
“It is imperative to do the bidding package and process correctly from the very beginning,” Slusher said. “The consultant fees will pay for themselves from maximizing the net present value in revenues accruing to the municipal treasury.”
City Councilman Sean McGuigan, who has spoken against allowing a dispensary due to fears that it would harm the existing business community, was a big advocate for hard numbers.
“It appears you did a rather extensive job,” he told Slusher, noting his surprise at the estimate that people would spend $100 a month.
“You’re comfortable with that assumption? Maybe I am naive,” McGuigan said.
He noted, however, that a black market still exists and was curious if Slusher had calculated what part of the 16.7 percent that smokes would continue buying from their neighborhood dealer.
Slusher admitted he didn’t have those numbers but noted McGuigan has a valid point.
“I fully admit I am not an expert, I am a numbers broker,” Slusher said.
McGuigan also asked whether Slusher had determined the effect on existing businesses, noting some people have a negative image of a pot shop.
“How can that be defined?” he asked.
Slusher said the city would want to restrict a retail outlet to somewhere with the least impact on other businesses, adding he believes there are sites that would permit that.
McGuigan then asked what size of a facility would be required to handle that amount of sales.
Slusher said he didn’t know but that his assumptions were based on one retail outlet.
By CRAIG D. SCHENCK/Sentinel staff