News

Can Illinois draw marijuana tourists from out of state? Retailers take a gamble on border towns

Medical dispensaries already open in Fulton and Milan near Iowa state line

A thriving marijuana plant is seen in December 2013 at a grow operation in Denver, Colorado. With Illinois set to legalize recreational marijuana Jan. 1, some towns along the state’s borders are looking to cash in on sales to out-of-state residents. Medical dispensaries already have opened in two Illinois towns close to the state’s Iowa border: Fulton and Milan. (Reuters file photo)
A thriving marijuana plant is seen in December 2013 at a grow operation in Denver, Colorado. With Illinois set to legalize recreational marijuana Jan. 1, some towns along the state’s borders are looking to cash in on sales to out-of-state residents. Medical dispensaries already have opened in two Illinois towns close to the state’s Iowa border: Fulton and Milan. (Reuters file photo)

CHICAGO — Recreational marijuana sales are set to begin next year, and some of the potential store locations getting scouted suggest Illinois residents aren’t the only customers cannabis companies hope to attract.

Illinois border towns say they’re fielding calls from operators in search of sites that would make it easy for customers to cross into their communities to shop, bringing tax dollars with them. None of the neighboring states have legalized recreational marijuana.

One company already has received the go-ahead. South Beloit, Ill., approved plans Tuesday for a store operated by Chicago-based Cresco Labs to open just off Interstate 90, less than a mile from the Wisconsin border.

“It’s the perfect site,” South Beloit Mayor Ted Rehl said. “Location, location, location.”

Illinois’ new marijuana law allows municipalities to ban recreational marijuana sales, and many are grappling with whether the tax revenue from weed sales will outweigh the potential downsides. But with the start of legal sales fast approaching Jan. 1, there’s an incentive for towns — particularly along the border — to decide quickly.

Washington sales data provides case study

The benefits of drawing out-of-state consumers could start to evaporate if Illinois’ neighbors move toward legalization, said Dan Tausk, a partner at Mid-America Real Estate Group, a commercial real estate firm.

Sales data from marijuana stores in Washington suggest there can be an advantage for those operating close to state lines, where there’s often less competition than in urban centers, even after a neighboring state legalizes the plant.

Differing state laws also can encourage cross-border shopping, because customers may have access to a different selection of products on each side of the state line, according to Chicago-based cannabis research firm Brightfield Group.

ARTICLE CONTINUES BELOW ADVERTISEMENT

In July, the three Washington counties that saw the highest average sales per store were along the state’s border with Oregon, where marijuana also is legal. One county also borders Idaho, where recreational marijuana is not legal.

A chance for cities to earn more revenue

“It seems to me that until national regulation takes place, we are likely to see some cross-border purchasing behavior,” said Claire Kaufmann, director of client services at Brightfield Group.

Cresco, one of the bigger players in Illinois’ marijuana industry, looks for locations where it “can service unique pockets of adult-use cannabis consumers, and tourists coming in to Illinois are certainly one of those audiences,” spokesman Jason Erkes said.

Another cannabis company, Chicago-based Green Thumb Industries, is “actively evaluating various locations in supportive communities that are eager to have a cannabis store, tax revenue and the new job opportunities GTI will offer,” spokeswoman Linda Marsicano said in a statement.

One of those locations is Quincy, a city on Illinois’ border with Missouri that voted this month to allow recreational marijuana stores. Quincy’s border location is not a factor in GTI’s interest, Marsicano said.

For South Beloit, knowing some consumers likely would take purchases across state lines made the decision to allow marijuana more difficult.

“You always feel responsible for the health and well-being of citizens. You need to dwell on this awhile before making some arbitrary decision, and we did, and think in this case, it’s so highly regulated we’re not going to be jeopardizing people to any significant degree,” Rehl said.

The city also decided it couldn’t pass up the opportunity to bring in extra revenue, Rehl said. South Beloit added a 3% municipal tax on sales of marijuana, the maximum the state allows.

Officials in Wadsworth and Winthrop Harbor, which also border Wisconsin, said they’d also fielded calls from marijuana companies scouting potential store sites. Both municipalities plan to impose a 3% tax on weed sales.

ARTICLE CONTINUES BELOW ADVERTISEMENT

“We are strategically located, we are a border community ... on some higher-traffic corridors,” said Wadsworth village administrator Moses Amidei.

Offsetting the costs of legalization

There has been little opposition to the possibility of weed sales in Winthrop Harbor, village administrator Gregory Jackson said.

Jackson estimates the tax on weed sales could generate $60,000 to $100,000 in revenue annually. Some of that would help offset costs associated with legalization, such as a potential uptick in calls to emergency medical services and law enforcement from inexperienced consumers who may misjudge the appropriate dose, he said.

Nonresidents will be able to buy and possess 15 grams of cannabis, half the amount Illinoisans are allowed.

Lansing, on the border between Illinois and Indiana, is grappling with whether the potential tax revenue “is really worth all the regulation and the attention it’s going to draw,” especially if the state issues additional retail store licenses, village administrator Dan Podgorski said. He estimated he’s fielded at least a half-dozen calls from people interested in opening dispensaries.

“While the revenue might be good at first, the more there are, it gets spread around,” he said.

Medical sales already along Iowa border

But in Quincy, officials were so confident a company would set up shop in their area they wanted to ensure the city got the tax benefit.

“It was pretty apparent a dispensary was going to come, it was just whether it would be inside the city or just outside,” Mayor Kyle Moore said. “The council decided we might as well tax sales because we’re still going to see the effects.”

Quincy is the biggest community in the surrounding area, but Moore said he thought its ability to draw out-of-state consumers also was attractive to some cannabis companies.

Marijuana used for medicinal purposes already can be sold legally in Illinois. Along the state’s borders, medical dispensaries, which can apply to sell recreational cannabis or open a second site for recreational sales, already have opened in communities such as Fulton and Milan, near Illinois’ border with Iowa, and Sauget and Quincy, near Missouri.

ARTICLE CONTINUES BELOW ADVERTISEMENT

But some commercial real estate brokers who have worked with companies looking for new recreational dispensary sites are skeptical that proximity to the border will be a major factor.

“It’s just not a sustainable long-term strategy,” said Tausk, the partner at Mid-America Real Estate Group.

Give us feedback

We value your trust and work hard to provide fair, accurate coverage. If you have found an error or omission in our reporting, tell us here.

Or if you have a story idea we should look into? Tell us here.

Give us feedback

We value your trust and work hard to provide fair, accurate coverage. If you have found an error or omission in our reporting, tell us here.

Or if you have a story idea we should look into? Tell us here.