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Viewpoints: Letters / Opinions


By David G Hanger, EA, MBA


March 25, 2015
Wednesday PM

Mr. Timmerman, let me make note in the first instance that I do not put my initials behind my name unless I am writing a professional document; and that is what this is. Before I get into that detail, though, let me duly note that while I think it is great that you don’t drink and another committee member smokes dope I do not think you and your little group are capable of anything but a really, really stupid result. And what you didn’t tell us about yourself is actually more interesting than what you did. I cannot forget that this is the town that elected Jack Shay every time he ran for office, nor that the system of government of which you are a part is specifically designed to ensure one-way, one-dimensional results.

So it will be the biggest of surprises if you don’t do something really, really stupid.
My point from the beginning has been very simple. The time for moralizing is over; the time for determining how to profit from a legal product is here. That is what business is all about, and this happens to be one of your biggest businesses in town already; has been one of your biggest businesses for decades. Pure capitalism, supply meeting demand with no tax whatsoever except the indirect tax of the cost of smuggling.

Were you listening to the radio just yesterday morning you might have heard state observers reporting about the prospect of $20-$25 a barrel oil; the $3.5 billion deficit facing the state right now; and the $500 million a new state tax totaling 10% of what you pay the Feds will bring in. That’s if you were listening to the radio yesterday.
Now in the meantime the road from the Coast Guard base to Shoup Drive is fast falling apart, and I am sure there are any number of other local projects that require consideration; and where is all that money for all that stuff about to come from? A broke state government?

Are you starting to catch on now, Mr. Timmerman?

The focus of your marijuana committee should be how to make money off the stuff.

It is a legal product.

Let’s get down to cases, as in little old Ketchikan here. There are what? Twelve to 15 thousand on this rock? How many are kids or old people? How do we get to how many people in this town smoke dope? Try this.

Say in Ketchikan there are 3000 users who consume one-quarter ounce a week. Some people I have talked to say this figure is low. I don’t know. That means that 3000 users will each consume one ounce a month (obviously actually slightly more) for an aggregate total of 3000 ounces a month, or 187.5 pounds of marijuana consumed a month. The average price per quarter ounce is as much as $150 a quarter, per ounce $400 or so.

By rounding off the 187.5 to an even 200 pounds a month we arrive at what would be an average inventory total for a business, slightly more than the demand. Sixteen ounces times a minimum of $400 is a minimum retail price of $6400 a pound. Times 200 pounds that is $1,280,000 a month. At this moment all literally up in smoke.
Times 12 months that is $15,360,000 a year. That’s a pretty damned big business by local standards.

One of the advantages of this benchmark is its convenience as a sliding scale. If by some chance the local demand is only half this, then you still have a very substantial local business grossing more than $7.5 million a year. I do think it is more than that.
In the event that it is double this benchmark amount we are talking about a $30 million a year local business. From this we can easily develop grids and matrices. Could it really be this high? Or higher (indeed)? I really do not know.

The next issue of consequence, of course, is how is the product provided? I would guess that no more than 20% to 25% of what is consumed is grown locally, and that number is probably high. That means that 80% of the product, or more is imported from down south (primarily), which means that as much as $1 million or more in hard cash is leaving this community every month to pay for next month’s load. I think this is a product that actually could be provided 100% locally. What advantage is there in having $12 million and more in hard cash staying in the community every year? Buy local, grow local.

At an average sales tax rate of 4% a local business grossing $15,360,000 a year should be paying $614,400 in sales taxes. If stamp taxes are 20%, then an additional $3,720,000 in tax revenues are available. Then there is income tax. But at the local level as much as $4.3 million in extra tax revenue is available. If the consumption level is half the benchmark amount, you are still talking about $2.2 million in extra local tax revenue. If by some off the wall chance it is double that, look at the windfall. Suddenly it ain’t all going up in smoke.

This is business; good business. As a government you do not leave one of your largest industries untaxed in perpetuity for whatever reason. The revenues are needed to cover what is in process of happening now. Quit wasting time because time is in fact money, lots of it.

Again, moralizing is not the issue; cannot any longer be the issue. It is a legal product. Simple business logic says be opportunistic, and here we are talking literally millions.

So are you going to overtax the ordinary locals and businesses, and just leave the up in smoke business alone? Show me how you are planning to get out of the really, really stupid box.

David G Hanger, EA, MBA
Ketchikan, Alaska


Received March 25, 2015 - Published March 25, 2015

Related Viewpoint:

letter Re: Marijuana Committee Rant By Dave Timmerman



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