--:-- [Theme music fades out]
--:-- Jessica Mendoza: Welcome to The Journal, our show about money, business, and power. I'm Jessica Mendoza. It's Friday, April 18th.
--:-- [Discussion begins]
--:-- Jessica Mendoza: So this is Pueblo County, and this is where all the pot stuff started. And this whole area was filled with pot stuff. Karen Randall lives in Pueblo, Colorado, one of the first cities in the country to develop a legal marijuana industry. We're in cannabis country here.
--:-- Karen Randall: That's right. We're in the heart of it.
--:-- Jessica Mendoza: I'll show you the greenhouses over there, you can see. Karen took our colleague Julie Wernow on a tour of Pueblo late last year. As they drove around, they spotted signs of the cannabis industry everywhere.
--:-- Karen Randall: I mean, that looks like a giant sort of like industrial warehouse-sized building.
--:-- Jessica Mendoza: Yeah, exactly. I guess I'm just surprised how packed together it all is. And you can smell, like, smell it.
--:-- Karen Randall: Oh, yeah. Yeah, right. That signature smell was hard to miss.
--:-- Jessica Mendoza: And yet, many of the marijuana greenhouses and dispensaries that Julie saw seemed to be shuttered.
--:-- Karen Randall: Well, it looks like a lot of abandoned businesses. You see anything in there?
--:-- Jessica Mendoza: It looks empty, right? So this is a big pot place. A lot of these are closed.
--:-- Karen Randall: Right here is a dispensary, so this is the second one you've seen. It's not like a third.
--:-- Jessica Mendoza: I'm not seeing like big full parking lots. No, I never see cars there.
--:-- Karen Randall: Pueblo was a city that dreamed of being a marijuana hotspot, and it went all in on Colorado's growing legalized pot industry.
--:-- Jessica Mendoza: Julie went there to see how it was faring a decade later. Pueblo was a place that was on track to be what they said was the Napa Valley of cannabis.
--:-- Karen Randall: And then everything went wrong.
--:-- Jessica Mendoza: When I showed up there, it was definitely not that. This was a place full of failed businesses.
--:-- Karen Randall: So what would you say happened to Pueblo?
--:-- Jessica Mendoza: The message I got from people in the town, and this is on both sides, is there people who are in the marijuana business and people who are against the marijuana business, is this is not what we signed up for. this is not working out the way that I was promised.
--:-- Jessica Mendoza: Welcome to The Journal, our show about money, business, and power. I'm Jessica Mendoza. It's Friday, April 18th. Coming up on the show, how one Colorado town's cannabis dreams went up in smoke.
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--:-- [Discussion continues]
--:-- Jessica Mendoza: Pueblo is a city two hours south of Denver with a population of just over 100,000 people.
--:-- Karen Randall: When recreational weed became legal in Colorado in 2014, Pueblo saw an opportunity to establish itself at the center of the cannabis boom.
--:-- Jessica Mendoza: Pueblo did a really good job of convincing the rest of the country that they were the destination for weed.
--:-- Karen Randall: The county commissioner at the time called it the Napa Valley of Cannabis.
--:-- Jessica Mendoza: Advocates like him imagined Pueblo would draw marijuana lovers from around the country.
--:-- Karen Randall: Why was this so important to Pueblo?
--:-- Jessica Mendoza: Pueblo was a place full of hardworking blue collar workers who just couldn't catch a break. They had been this huge steel town.
--:-- Karen Randall: They were shedding those jobs for years
--:-- Jessica Mendoza: There was a local slaughterhouse that also closed up shop
--:-- Karen Randall: And so they just kept trying to get back on their feet and were struggling
--:-- Jessica Mendoza: And this new industry sort of showed up in America and said, you know, we can help you with that.
--:-- Karen Randall: And they were going to be among the first.
--:-- Jessica Mendoza: And so it was a lot of excitement around that.
--:-- Jessica Mendoza: The idea was that embracing the legal cannabis industry could bring new jobs, tourism, and tax revenue to Pueblo.
--:-- Karen Randall: And at first, it seemed like that's exactly what was going to happen.
--:-- Jessica Mendoza: Leading up to the first day of marijuana sales, people literally like packed up everything they owned, got in their vehicles, and just drove to Colorado with no plans.
--:-- Karen Randall: This is people from all over the country?
--:-- Jessica Mendoza: People from all over the country.
--:-- Karen Randall: One local newspaper reported that the day after legalization, 50 people were camped out in front of one of the first weed shops in Pueblo, waiting for the doors to open.
--:-- Jessica Mendoza: And in the first month of legalization, the two licensed shops in Pueblo County rang up a combined $1 million in sales.
--:-- Karen Randall: That amounted to $56,000 in taxes for the county.
--:-- Jessica Mendoza: Pueblo couldn't get more shops licensed fast enough.
--:-- Karen Randall: People are comparing it to, they're saying it's the new Amsterdam.
--:-- Jessica Mendoza: One group that does have a cannabis business there told me, you know, that there was so much demand to get one of these licenses that people would like rush to the steps of the county building and try to get there first so that they would get the best spot.
--:-- Karen Randall: You know, one of the places had like Girl Scouts selling cookies in the parking lot.
--:-- Jessica Mendoza: I mean, it really was like a huge, exciting moment for the city. and the county.
--:-- Karen Randall: One local joint that sprung up during that exciting moment was called Sticky Ickies.
--:-- Jessica Mendoza: In 2016, the owners set up shop on a popular route from the city to a local lake, which brought a lot of business in the summertime.
--:-- Karen Randall: There's like a doorbell that goes off when you walk in.
--:-- Jessica Mendoza: Hi. I'm looking for Daniel.
--:-- Daniel Swick: Daniel Swick was the manager there and he, you know, welcomed us in.
--:-- Jessica Mendoza: This is the first point of entry.
--:-- Daniel Swick: Once we know that their IDs are verified and not expired or underage, then they're able to go to the fun part.
--:-- Jessica Mendoza: And then you sort of are let into this beautiful back room.
--:-- Daniel Swick: Okay. I guess we'll go where all the customers would first start.
--:-- Jessica Mendoza: You've got lit glass shelves and a display board with sort of, you know, different levels of cannabis that you can buy.
--:-- Daniel Swick: There's three shelves from top to bottom. The very top shelf we call our platinum. The middle shelf is our gold shelf.
--:-- Jessica Mendoza: Okay, bottom shelf. A1 steak sauce.
--:-- Daniel Swick: There's a lot of strains that are actually have really humorous names to them. Very funny names.
--:-- Jessica Mendoza: By 2017, Sticky Icky's was riding Pueblo's cannabis high.
--:-- Karen Randall: At one point, its daily sales rang up to about $20,000.
--:-- Jessica Mendoza: But that boom didn't last long.
--:-- Karen Randall: And soon, things started looking sticky for businesses like Sticky Icky's.
--:-- Jessica Mendoza: Things really started to kind of go downhill shortly after the pandemic around 2021.
--:-- Karen Randall: When you actually go and look up all the licensees, the marijuana licensees in that area, you can see that boom and bust.
--:-- Jessica Mendoza: For one thing, competition was fierce.
--:-- Karen Randall: The number of cannabis businesses that flooded into this city and the surrounding county were pretty outsized for the demand.
--:-- Jessica Mendoza: You had a situation where it's a city that has like seven to ten Starbucks, maybe.
--:-- Karen Randall: That's a pretty good indicator usually of, you know, how many of these businesses there should be.
--:-- Jessica Mendoza: And they had, you know, more than 200 cannabis businesses at one point.
--:-- Karen Randall: And so inevitably, you know, some of those folks didn't have enough demand that they were going to fail.
--:-- Jessica Mendoza: The 200 shops faced a lot of competition from each other.
--:-- Karen Randall: And it didn't help that the taxes on marijuana products were so high.
--:-- Jessica Mendoza: Colorado levies a 15% marijuana sales tax and a 15% excise tax on marijuana.
--:-- Karen Randall: And then Pueblo County tax on another 5% excise tax and a 6% sales tax.
--:-- Jessica Mendoza: And then if you have a cannabis business that's in the city of Pueblo, you're going to pay an additional 10% excise tax, which is one of the highest in the state.
--:-- Karen Randall: I mean, I can see why businesses didn't love that.
--:-- Jessica Mendoza: There was definitely some lobbying on behalf of some of the local businesses saying, you know, these taxes are too high and that's why all these businesses are failing.
--:-- Karen Randall: And if you were to remove this tax then we would actually be able to thrive and we would be able to compete
--:-- Jessica Mendoza: And some sellers were skipping the license process and going through the black market instead
--:-- Karen Randall: One of the unexpected things for Pueblo was that everybody sort of thought, well, if we legalize this stuff, the illegal stuff will go away, right?
--:-- Jessica Mendoza: I mean, why would they bother? Not only did that not happen, but the law enforcement there said that it actually got worse.
--:-- Karen Randall: And one of the reasons was that when there's all this legal marijuana around, it's a little bit easier for the illegal marijuana to hide.
--:-- Jessica Mendoza: Why was there so much illegal dealing?
--:-- Karen Randall: Well, what people didn't anticipate is that if you are in the illegal marijuana market, you can charge less.
--:-- Jessica Mendoza: I mean, it's a really simple economic argument, right? If you're not paying for, you know, sales tax, excise tax, marijuana sales tax, county tax, city tax, state tax, you can charge way less than the legal competition.
--:-- Karen Randall: And so they continued to thrive under the legal regime.
--:-- Jessica Mendoza: At the same time, this was around 2020, other states started legalizing marijuana, creating even more competition.
--:-- Karen Randall: What did that mean for businesses like Sticky Ickies?
--:-- Jessica Mendoza: They told me that for a long time, they were pulling in something like $20,000 a day in sales.
--:-- Karen Randall: And since then, it's plummeted to about $2,500 a day in sales.
--:-- Jessica Mendoza: They've also shed some employees.
--:-- Karen Randall: And so one of the things that happened is Sticky Icky's owner, in the time that I was talking to him, decided to pull out his stake in that enterprise because he had another business he'd started in New Mexico.
--:-- Jessica Mendoza: And in New Mexico, he said the taxes were about half what they were in Colorado.
--:-- Karen Randall: As the marijuana industry in Pueblo has struggled, the county's tax revenue has plunged.
--:-- Jessica Mendoza: Dispensaries have closed down, going from more than 200 businesses in 2017 to just 45.
--:-- Karen Randall: The profitability has dropped dramatically for the businesses.
--:-- Jessica Mendoza: So only like a quarter of these businesses are even profitable.
--:-- Karen Randall: So the trends are not going in the right direction.
--:-- Jessica Mendoza: And as Julie spent more time in Pueblo, she heard from residents who felt strongly that the failure of the marijuana industry was hurting their town.
--:-- Karen Randall: That's next. We'll see you next time.
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--:-- Jessica Mendoza: Pueblo's marijuana business boomed and quickly went bust.
--:-- Karen Randall: Now, local law enforcement, along with some city officials and residents, say the experiment wasn't worth it.
--:-- Jessica Mendoza: One of the lingering problems has to do with the people who came to Pueblo from out of town, drawn by the industry's promise.
--:-- Karen Randall: While some did start their own shops, that wasn't the case for everyone.
--:-- Jessica Mendoza: Generally, what was happening is there were a lot of people who had some kind of, you know, criminal record, something that was making it difficult for them to find a job, and they also loved cannabis.
--:-- Karen Randall: And so when they heard about how there was going to be all these jobs, You know, they sort of imagined themselves working in the marijuana fields or at a dispensary and that this would be this kind of golden age where they'd be able to find something to support their families.
--:-- Jessica Mendoza: But even as the cannabis industry took a nosedive in Pueblo, a lot of the newcomers stuck around.
--:-- Karen Randall: Crime and homelessness started to rise, and some residents that Julie talked to blamed marijuana.
--:-- Jessica Mendoza: Local police told Julie that before legalization, there were only about 15 unhoused people in Pueblo, and they knew all their names.
--:-- Karen Randall: Now, that population has grown to more than 500.
--:-- Jessica Mendoza: Julie went on a ride-along with Ryan Masterson, who's with the local police department.
--:-- Ryan Masterson: He said that unhoused people he's spoken to have told him that they came to Pueblo for the marijuana.
--:-- Jessica Mendoza: Did they ever tell you their story? Like, where are they from? Why are they here?
--:-- Ryan Masterson: Sometimes. Sometimes.
--:-- Jessica Mendoza: Someone from South Dakota coming why are you here in Pueblo of all places
--:-- Ryan Masterson: And it was a very typical story of well I wanted to land in Denver I wanted to land in Boulder I wanted to land in Aspen, the places you really think of when you think of Colorado.
--:-- Jessica Mendoza: And then realize quickly that they couldn't afford it.
--:-- Ryan Masterson: And where could they look to a place to come?
--:-- Jessica Mendoza: And Pueblo would end up being a good landing spot for them.
--:-- Ryan Masterson: There are people who, you know, eyewitness coming through sort of on a cannabis journey.
--:-- Jessica Mendoza: And some of that led to problems, you know, where law enforcement were having to show up to large encampments for all kinds of issues that they don't know anymore.
--:-- Ryan Masterson: You know, did this stem from marijuana? Is it fentanyl now? Is it meth? What's going on?
--:-- Jessica Mendoza: It just kind of became this messy soup that nobody can really, really sift through anymore.
--:-- Jessica Mendoza: Whether there's a distinct connection between homelessness and cannabis legalization is still being debated.
--:-- Ryan Masterson: Regardless, city officials say the tax revenue they're bringing in from marijuana isn't enough to meet the costs of some of the new problems they blame on the industry.
--:-- Jessica Mendoza: And social organizations trying to address these issues are feeling the strain.
--:-- Ryan Masterson: There's definitely a couple of longstanding organizations there.
--:-- Jessica Mendoza: But to give you a sense, the executive director that I spoke to at one of the only organizations that really can provide like shelter for families.
--:-- Ryan Masterson: She said that she grew just so overworked and burned out from the situation that she left.
--:-- Jessica Mendoza: She left not only the organization, but she left Pueblo altogether.
--:-- Jessica Mendoza: There are still some weed shops in Pueblo, though many of them are working with fewer employees and slower business.
--:-- Ryan Masterson: You know, Sticky Icky's is still there.
--:-- Jessica Mendoza: It's still open. It has a couple other owners.
--:-- Ryan Masterson: I know there was some talk of selling.
--:-- Jessica Mendoza: They have, you know, significantly fewer customers than, you know, they did in the past.
--:-- Ryan Masterson: But they sort of feel like the longer they hang on, the fewer competitors they have.
--:-- Jessica Mendoza: And one of the things they have going for them is that they were among the first.
--:-- Ryan Masterson: And so they snatched some customers who know about them, stopped by, you know, regularly.
--:-- Jessica Mendoza: What would it take at this point for Pueblo to have a strong economy or even a stable economy?
--:-- Ryan Masterson: Well, I talked to the local economic development corporation.
--:-- Jessica Mendoza: You know, these are the guys whose job it is to sort of sell Pueblo to businesses and help create a better economic picture.
--:-- Ryan Masterson: And what they told me essentially is that they're kind of leaving marijuana behind, that they're focusing on their legacy kinds of industries, growing those, supporting those, and that they just don't see recreational marijuana as a part of the economic picture for Pueblo.
--:-- Jessica Mendoza: Pueblo was one of the first communities to go all in when Colorado led the legalization of recreational marijuana.
--:-- Ryan Masterson: Now, 24 states around the country have done the same.
--:-- Jessica Mendoza: What's your takeaway from your reporting on Pueblo?
--:-- Ryan Masterson: I think there's a lot of lessons to be learned from a place like Pueblo that was first when it came to legalizing marijuana.
--:-- Jessica Mendoza: You know, we have communities that are just starting now with this experiment.
--:-- Ryan Masterson: And so if we want that to go well, we really need to look to the communities that have been there and say, what could we do differently?
--:-- Jessica Mendoza: So it isn't that Pueblo is an example of why this is not going to work.
--:-- Ryan Masterson: It's more of a, it's not going to work this way.
--:-- Jessica Mendoza: Exactly. It hasn't really worked out for Pueblo.
--:-- Ryan Masterson: Does that mean that it won't work out down the line for somewhere else?
--:-- Jessica Mendoza: Not necessarily.
--:-- Ryan Masterson: This is really early days still for this industry.
--:-- Jessica Mendoza: There's a lot of things that need to still be worked out.
--:-- Ryan Masterson: And I'm not sure we have the answers.
--:-- Jessica Mendoza: That's all for today, Friday, April 18th.
--:-- Ryan Masterson: The Journal is a co-production of Spotify and The Wall Street Journal.
--:-- Jessica Mendoza: The show's made by With help from Trina Menino
--:-- Ryan Masterson: Our engineers are Griffin Tanner, Nathan Singapok, and Peter Leonard.
--:-- Jessica Mendoza: Our theme music is by So Wiley.
--:-- Ryan Masterson: Additional music this week from Katherine Anderson, Emma Munger, Bobby Lord, Nathan Singapok, Peter Leonard, So Wiley, and Blue Dot Sessions.
--:-- Jessica Mendoza: Fact-checking by Mary Mathis and Kate Gallagher.
--:-- Ryan Masterson: Thanks for listening.
--:-- Jessica Mendoza: See you on Monday.
