The nation’s first government-owned cannabis store
Editor’s Note:
This is another one of those “future of cannabis” types of stories that proved, with time, to be more hype than reality. The Cannabis Corner opened in 2015 as the country’s first government-run marijuana retailer. At the time, it seemed like a creative way for a small city to support itself, but almost right away, the numbers were not hitting the projections. When we tried to do a follow-up story years later, the mayor at the time — not the mayor who pushed through the approval of the shop — told Marijuana Venture in an email that the business model was “unsustainable.”
With hindsight, I agree with his take that the previous administration was so interested in becoming the first government-run cannabis company that they didn’t stop and evaluate whether they should.
The following is from the April 2015 issue of Marijuana Venture.
“Unsustainable”
In February 2020, Brian Sabo, who replaced Don Stevens as mayor of North Bonneville in 2018, told Marijuana Venture in an email that The Cannabis Corner had become a liability and would be put on the market before the end of the year, citing an over-inflated original business model and increased competition from nearby Oregon and other cannabis retailers in the region.
“In 2019, the store posted a $53K loss, a big loss for a City with a total annual budget of a little over a million dollars,” Sabo wrote. “Because of the losses, drastic immediate measures were needed as the business was unsustainable and projected to be bankrupt by the Fall of this year (2020). … In the 5 years the city has owned the store, there has been little to no financial support to the city. The time and effort needed to oversee the operation has proven the business to be more of a burden than an asset. … I believe the rush by some administrators at the time to have the city labeled the country’s ‘First Government Run Pot Shop’ and the notoriety associated with that label, did not allow the time necessary to better craft a business plan, which greatly contributed to the store’s failure over the long period.”
The Pacific Northwest recently witnessed another big first in the cannabis industry — the first municipally owned marijuana retail store opened its doors to the public on March 8, 2015.
Located along the southern border of Washington State, The Cannabis Corner is operated by the North Bonneville Public Development Authority, a municipal corporation that was set up specifically to manage the retail operation. It could be a much-needed source of revenue for a town that has fewer than 1,000 residents, no retail sector to speak of and has been teetering on the edge of bankruptcy for years. City officials hope it can be a significant source of income for a town that has an annual operating budget of about $600,000.
Consultant John Spencer, a former North Bonneville city administrator who orchestrated the business model for The Cannabis Corner, described the city as being “so destitute that we have resorted to selling drugs to stay alive.”
Not everybody is going to be thrilled about the opening of The Cannabis Corner.
There’s a definite question about the reach of government authority, and whether or not a municipality should insert itself into private enterprise.
The PDA designation also gives The Cannabis Corner an advantage that no other marijuana retailer in the state can match — exemption from federal income tax. The potentially devastating effects of IRC 280E — a massive concern for nearly everybody in the cannabis industry — have no impact on The Cannabis Corner.
“It’s not a level playing field — and I love it,” Spencer acknowledged.
Because of a significantly lower tax obligation, The Cannabis Corner can sell products at a lower price, while maintaining higher margins than other stores, Spencer said.
Spencer said he generated his pro forma based on the basic assumption that the store would draw customers only from Skamania County residents and traffic along Highway 14. It’s currently the only marijuana retail store for about a 70-mile stretch between the handful of shops in Vancouver and Margie’s Pot Shop in Bingen.
Spencer’s numbers indicate the store will be successful. But the city has put a lot of faith in him. It didn’t seek out another independent analysis of the revenue projections.
During the store’s first week of operation, sales averaged about $2,200 a day — well below initial projections — according to a story in The Washington Post.
“In my worst nightmares, this PDA will earn $150,000,” during its first year of operation, Spencer said.