In a reversal of the Klondike stampede, people from the Yukon are now rushing southwards to Skagway over the Trail of ‘98 in search for a rare and valuable commodity.
Skagway’s new legal marijuana shop sold out of bud over the Victoria Day weekend and, according to the staff, visiting Yukoners did more than their share to clear the shelves.
On behalf of you, the reader, I was determined to investigate the impact of this commodity trade on the Yukon’s balance of payments and made an economic fact-finding mission to the Remedy Shoppe.
The neat and well-organized retail outlet is on 3rd Avenue, across from Glacier Smoothies. Even though there is minimal street signage other than a green light, you just have to look for a cluster of parked vehicles with Yukon plates.
Patrons have to show identification at the door to prove they are 21 years old. Inside there are friendly staff, happy to explain the product to customers or the business model and regulatory regime to visiting economists. The merchandising is well done, with a variety of bud, edible marijuana treats, hats, shirts and paraphernalia.
The product is highly regulated. They had more bud supplies in Skagway, but were unable to sell them to Yukoners on the long weekend since the testing lab in Anchorage had not completed its work on those batches.
The edibles come in caramels, cookies, brownies and other varieties. They are sold in units with 5 milligrams of tetrahydrocannabinol (THC), the psychoactive ingredient most of interest to customers. For example, a package of Frozen Budz brand Dank Chip Cookies from Fairbanks has two cookies, with half a cookie containing 5 milligrams.
The packaging is a sealed black plastic sachet that brought back memories of my chemotheraphy drugs. The label says “Warning Contains Cannabis” and “KEEP OUT OF THE REACH OF CHILDREN.”
The instructions on the back say “Break the cookie in half at the serving size line for one serving containing 5 mg of THC. Wait approximately 1 hour to feel the full effect of the infused product.”
It also warns that the product was “produced on equipment that processed nuts.”
The package cost US$40, or US$10 per dose, plus US$2.00 in local sales tax for the Skagway Borough.
Alaskans tell me there has been some complaining that legal marijuana is more expensive than the black-market variety. This is due in part to taxes, the cost of testing and complying with packaging and other regulations, and the overhead associated with retail space. The Alaska Dispatch News of Anchorage reports that an eighth of an ounce of bud costs in the $60-$88 range legally, while ADN says black-market weed in urban Alaska is around US$40 for the same amount.
One customer of the Remedy Shoppe, who seemed to also have a certain familiarity with black-market marijuana, suggested that the legal shops are more popular with newcomers to marijuana, middle-aged customers who like the convenience and legality, and those who like to know where their weed comes from and how strong it is.
Given the price difference, I expect the black market will continue to operate in parallel for the long term.
In addition to the general sales tax revenues generated for Skagway through its local sales tax (there is no Alaska or federal sales tax), the business also generates weed tax revenues for the state. ADN says that Alaska takes US$50 per ounce, and that Anchorage has an additional special five per cent marijuana sales tax. The latter raised US$57,000 for the city in March. The March take for the state-level taxes was US$220,229 based on 225 pounds of marijuana and 169 pounds of “trim” sold that month by the more than 25 legal growers in Alaska.
What could this kind of revenue stream work out to for the Yukon government, if marijuana were legalized in Canada and a similar kind of tax system set up? We don’t have city or territorial sales taxes, so GST revenue would go to Ottawa. Taking the state’s March excise-tax revenues and annualizing them, then converting to Canadian dollars and adjusting for the difference between the Alaska and Yukon populations, gets to around $190,000 in tax revenue per year.
This doesn’t look like a cash cow for the Yukon government, although the Alaskan market is still getting set up and is likely to grow in future months.
We also don’t know what the long term effects might be in terms of increased usage. Quest Diagnostics, a drug-testing company, recently released the results of a study of more than 10 million US workplace drug tests over 12 years. Marijuana positivity through oral fluid testing in the general U.S. workforce increased from 5.1 per cent in 2013 to 8.9 per cent in 2016. The increase was nationwide, but somewhat more pronounced in 2016 for states like Colorado and Washington that legalized earlier than others.
Tourism operators in the Yukon have often complained that the first thing Yukoners do with visitors is recommend they visit Skagway. Until Canada has legalized marijuana, Skagway now has yet another attraction. But tourists, and their Yukon friends, who visit the Remedy Shoppe should pay attention to the helpful warning posters on the wall. Marijuana is for the over 21 crowd only, and there are limits on amounts and where you can use it. Obviously you shouldn’t drive or operate chainsaws after enjoying the product. And don’t forget: marijuana is still illegal at the border. Customs officers who find Remedy Shoppe packaging in your car will find it even more interesting than I did.
Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. He is a Ma Murray award-winner for best columnist.