COLLINSVILLE — Collinsville City Manager Mitch Bair has managed a budget that’s seen between $1.5 million and $2 million in extra sales tax revenue since 2020 from the addition of recreational marijuana.
But the sales tax generated from Illinois dispensaries is expected to drop now that Missouri approved its first shops to sell recreational marijuana this month.
Listen to this story here.
“It’s been really a great benefit to this community,” Bair said. “It’s been extra funding for capital projects and operations.”
Ascend, one of two companies with dispensary locations in the Metro East, has made somewhere around $55 million to $60 million in gross sales in the past three years, Bair said. The Collinsville location has been one of the top locations in the state.
While most of the revenue set aside for the capital projects hasn’t been spent yet, the extra cash played an important role at the height of the pandemic.
“They made great revenues during the pandemic,” Bair said of Ascend. “So really what it did was it allowed us to get through the pandemic and not worry about funding for those services.”
While Metro East city leaders like Bair are optimistic that some St. Louisans will still make a trip across the river, the added competition is likely to hurt Collinsville, Fairview Heights and Sauget.
“Well sure it’s bad for Collinsville,” Bair said.
Illinois cannabis taxes are ‘outrageous’
Some St. Louis residents who previously drove across state lines for Metro East dispensaries said there’s a number of reasons why they’ll likely quit crossing the Mississippi River: the longer drive, Illinois’ higher taxes and their desire to support the state where they live.
That’s the case for Logan, a St. Louis resident who requested he only be identified by his first name because it’s still illegal to cross state lines with cannabis. He said he would like to see the tax dollars from his purchases benefit his community.
“I would like to see my vices be somehow spun productively,” he said. “I want to support that industry, especially if it’s helping support other social programs.”
He used to make trips every few months to the Metro East for recreational marijuana. Most recently, he went to one of the two Beyond/Hello dispensaries in Sauget.
The steeper taxes in Illinois became a burden over time, as did the drive and the stigma of being seen in public doing something that may be illegal or viewed with certain negative connotations, he said.
Missouri’s taxes on recreational marijuana will be much friendlier to consumers than its eastern neighbor. For recreational purposes, Missouri will take a 6% sales tax. Illinois, on the other hand, gets 6.25% for every purchase plus up to an additional 10% depending on the strength of the cannabis product. Illinois and Missouri also allow municipalities to levy up to an additional 3%.
“The taxes for Illinois cannabis are outrageous in my opinion — especially from comparing them to other western coast states,” said Crystal, another St. Louis resident who used to buy marijuana in the Metro East.
Originally from California, Crystal, who also requested to only be identified by her first name, said she occasionally brought marijuana back from her home state when she visited.
Now that Missourians have voted to legalize recreational cannabis, Crystal said she’s excited to support local Black-owned businesses and a dispensary just around the block from her house. The proximity is also something that Logan believes will bode well for St. Louis dispensaries.
“I think people who smoke pot are very much creatures of convenience,” he said.
One of the businesses hoping to keep St. Louisans buying in Missouri is Good Day Farms. Based in Little Rock, Arkansas, Good Day has five St. Louis locations from the Central West End to O’Fallon, Missouri.
“We expect traffic from Illinois,” CEO Ryan Herget said, citing Missouri’s lower taxes for consumers.
Good Day’s locations, which just sold medicinal marijuana, were among those that got approval Friday from Missouri’s Department of Health and Senior Services for a recreational license.
“We feel like Good Day stores are a very attractive place to shop whether you live in Missouri or anywhere else,” Herget said.
What does that mean for Illinois cities?
Metro East city officials said they’ll be watching Missouri sales.
“We’re pretty optimistic that it will continue,” Fairview Heights Mayor Mark Kupsky said of strong sales in his community.
Kupsky said Ascend’s location right on the interstate has been good for business. His city has seen nearly $1 million in tax revenue from Ascend’s location.
Half of the revenue has been used by the city to pay for the police department’s pension fund, while the other half has been used to pay off the city’s recreation center and stored in the general fund.
“We anticipated that as cannabis grows, and as more places start to offer it, that we would see some decrease in sales tax over time,” Kupsky said. “So it’s been built into our long-term plans.”
While the extra cash has been beneficial for Fairview Heights, the city has not become dependent on it, he said.
The village of Sauget has also enjoyed the extra sales tax revenue. Mayor Rich Sauget Jr. said the city’s made hundreds of thousands since 2020 and has funneled the money toward its police force.
“This has really allowed us to maintain a really good staff,” he said, citing recent contract negotiations with the department’s union that landed four-year contracts.
Beyond/Hello’s two locations near the Mississippi River are both near the highway. Sauget said he hopes the convenient location will keep business coming back even after dispensaries open elsewhere because the money has been a nice addition to the community.
“Long term, I don’t know if that’s going to be there,” he said.
Bair said it will be interesting to see how the competition plays out.
“We’re living through just a real social experiment right now as to how the business model plays out and how competition, quite frankly, will impact those established dispensaries and businesses already in place in legalized states like Illinois.”
Beyond/Hello did not return repeated requests for comment. Ascend declined to comment.
Bair and the two other mayors said the dispensaries have been solid community partners. While some in the Metro East communities anticipated negative consequences like higher drug or crime rates, neither has happened.
“The negative impacts really have been a whole two parking tickets,” Bair said. “And there was an accident where somebody thought their car was in drive, and it was in reverse.”