Colorado’s perceived “cash cow” of tax revenue is still going strong three years after adult recreational use of marijuana began, but members of Denver City Council were told to expect that revenue to likely level off in the years ahead.

Adam Orens, a founding partner of the Marijuana Policy Group, was one of three officials to brief the Council’s Special Issues Committee on the latest information regarding medical and recreational marijuana use since state voters approved constitutional amendments in 2000 and 2012, respectively.

Orens cited figures from a National Survey of Drug Use and Health and a survey by the Colorado Department of Public Health and Environment that focused on 2014 and 2015.

Demand increased from 130 total metric tons to nearly 149 total metric tons between 2014 and 2015, according to the national survey. Of those totals, the regulated – or legal – market increased its share from 59 percent to 74 percent, with a corresponding drop in the black and grey markets of 41 percent to 28 percent from 2014 to 2015.

“I think the data shows that if you make a product safer and more convenient to purchase, people will do so,” Orens said of the decline in marijuana bought on the black and “grey” markets.

Most of the state’s marijuana sales growth has occurred in recreational use, which went from 45 percent of state marijuana tax revenue in 2014 to 59 percent in 2015. Orens noted state officials expect final 2016 figures to reach $1.3 billion in revenue. State data showed 2015 retail marijuana sales tax revenue lagged only cigarette sales, grain farming, gambling, oil and natural gas drilling and coal mining.

“That’s an enormous increase in marijuana tax revenue and we believe you’ll see it become more important than the revenue the state gets from gambling, alcohol and cigarette taxes (so-called sin taxes) in the near future,” Orens said.

For every $1 in marijuana sales tax revenue, there is a retail multiplier effect of $2.40, Orens added, for a total sales revenue impact of $2.39 billion in 2014. The $2.40 multiplier effect was second only to the federal government’s $2.42, his figures showed. Marijuana manufacturing, at $2.34, was third and marijuana cultivation’s $2.13 rate was fifth.

Around 20 percent of marijuana users drove close to 80 percent of the market sales, and tourists accounted for just 9 percent of users, but the survey did not include sales to tourists, Orens said.

For all its sales tax revenue, though, the legal marijuana industry created 12,591 direct jobs in 2015, and a total of 18,005 statewide when indirect jobs were added.

The surveys also found that marijuana users “either do it a little or do it a lot,” Orens said. Approximately 900,000 people in Colorado reported using marijuana sometime during 2014 and in the past month of that year when surveyed.

Of nearly 569,000 monthly consumers, more than 188,000 said they used marijuana between 26 and 31 days a month. More than 200,000 said they used it just one to five days a month.

Perceptions change risk, use as price drops

A Behavioral Rick Factor Surveillance System survey in 2014 described a typical daily marijuana user as a white man under 34 years of age, with an annual household income under $25,000 and some college education.

Youth use among those 12-17 years old in Colorado increased from 7.6 percent in 2006 to 12.6 percent in 2014, according to the national survey. Oren said that was likely due to the perception of great risk for using marijuana once a month among that age group had declined from 30 percent to 17 percent among that age group in the same period.

“I think the perception of the risk of using marijuana is going down because more states are legalizing it, too,” Orens added.

The average price of marijuana purchased from a regulated source in flower form had dropped from $14.82 a gram in 2014 to $9.98 a gram at the end of 2015, Orens’ figures showed.

“We expect the unregulated market to continue to decline as wholesale and retail prices in the regulated market go down. I think you’ll have a very difficult argument for someone to stay in the black market with its unregulated supply and quality issues you have there.”

However, the expected drop in the price of medical marijuana had not been nearly as sharp since adult recreational use began, Orens said. In fact, the share of medical marijuana concentrated edibles has risen, and Orens attributed that to the “most user-friendly delivery system.”

While there had been a “very, very sharp” growth in the regulated market from the black market in Colorado through 2014, Orens predicted that rate will plateau as more states legalize marijuana and Colorado’s population growth stabilizes.

Colorado started its legal marijuana tax rate lower than other states that have legalized it, which Orens called a smart move to garner more users from the black market. States that started with higher tax rates have not seen as large a drop in black market users as Colorado.

However, with California and Massachusetts set to begin legalized recreational marijuana use in coming years, and others that have already followed Colorado’s lead, Orens said Colorado’s sales and tax revenue rates are projected to level off.

City Councilwoman Kendra Black agreed.

“There is something like two times more binge drinkers than once a month marijuana users,” she said. “But Colorado has one of the lowest alcohol tax rates in the nation. And I can see a time soon when this won’t be such a huge cash cow.”