WIth $1 Million in the Bank, Tiny Colorado Border Town Considers Opening More Pot Stores

UPDATE: Sedgwick, Colorado wants more pot stores. In a one-issue election, voters approved increasing the number of licensed marijuana dispensaries allowed in the community. According to unofficial election results posted by the town clerk, the final vote was 58 in favor and 46 against. The license of the sole legal operation, Sedgwick Alternative Relief, was recently renewed by the town board. It will be possible for up to two new competitors to apply for permission to operate.

A Colorado town with a population of only 150 residents is edging closer to accumulating a $1 million budget surplus. This, just four years after it began collecting taxes and fees from the only marijuana dispensary in town.

Sedgwick, just five miles from the Nebraska border, remains the sole licensed dispensary in northeast Colorado. With easy access from nearby Interstate 80 and I-76, it became a popular stopover for "marijuana tourists" from states where marijuana remains illegal. The nearest competitors are eighty miles down the road.

The benefits of extra government revenue raised tensions in the town. Sedgwick residents have been struggling with how to best spend the windfall. They have yet to attract non-cannabis businesses. Some complain the dispensary, Sedgwick Alternative Relief, has become too strong a voice in local affairs.

There may be disagreements, but few say aloud that the town should reverse its decision and end the sale of legal weed.

The corner of 1st Street and Main smells faintly of fresh pot.

SAR takes nearly a full block. The retail space and enclosed greenhouse occupy renovated buildings. Next door is SAR's garden supply store for those cultivating cannabis at home.

Inside the retail store, customers buy edibles like THC-infused chocolates and one of 35 varieties of fresh weed grown on-site. All transactions are cash.

Faced with the abundant choices of edibles, a recent customer paused before telling the clerk, "whichever you like."

"We consider ourselves more of an educational dispensary because most of the customers who come here are tourism," explains SAR manager Kurt Hodel. "We spend a lot of time answering questions about the products."

The owners won't provide detailed sales data, but it is clear from the amount of revenue being collected by the Town of Sedgwick; it is a lucrative trade.

The tax revenue and fees have had "a huge positive impact on the community," according to Hodel. "We represent probably about 90 to 95% of the tax revenue into the town. That's really keeping the heartbeat alive in this community."

It's is not an exaggeration to say Sedgwick had a near-death experience five years ago. The bed and breakfast that catered to season hunters and the tavern across the street were the only viable businesses in town.

"Oh, my goodness. Before this it was a ghost town," said Lupe Casis, owner of the Sedgwick Antique Inn. "There was nothing here. Nothing."

No businesses and a declining population meant there was no tax revenue to pay for even essential services. "Everything was run down," Casis recalls.

The town board had few options, according to board member Peggy Owens.

She says it was a bleak choice. "Can we afford to still be a town or do we just simply need to disincorporate and drift away because we had no money?"

The moment of desperation came just as Colorado voters chose to legalize medical marijuana. Recreational pot followed. Individual local governments were given a choice to license marijuana dispensaries.

"Yeah, let's give it a try," Owens recalls thinking. "Nobody could think of a good reason not to, so we tried it."

The council made another decision that proved crucial for expanding the town's bank account.

While the state of Colorado gets most of the 15% sales tax on retail marijuana, local governments, where it's legal, also get a cut.

Sedgwick took it a step further, charging a $5 fee per transaction.

"It's a little extra for the town. It may or may not work. Let's just try it." Owens recalls thinking.

"Well, it worked"

That's a bit of an understatement. Back in 2013, tax collections for the entire town totaled $19,145. By 2018 the town hauled in $245,037, amounting to an 1100% revenue increase in five years.

"I know. It's ridiculous," Owens says with a loud laugh.

The town's population has increased slightly. "We actually have young families moving into town now," Owens said. "It was just old farmers that came here to die, but we have young families."

Four years ago, truck driver Matt Thurman moved to town "because of medical marijuana." He has a medical condition that he felt would best be treated with cannabis. He has come to like the town even as "a little bit of friction" cropped-up between the store and "the locals."

While much of the early media attention focused on the booming Denver cannabis market, the Sedgwick location capitalized on the more transient market delivered by cross-country travelers and short-hop customers from Nebraska. (Signs in the store provide warnings that carrying their products outside the state violate drugs laws in those jurisdictions).

Although the store has no signs or advertising attracting drivers on area highways, customers learned of the location through word of mouth and online searches.

From the start, it was not uncommon to see cars and trucks parked curbside on Main Street with five or six different out-of-state plates.

Watching from her building across the street, Casis was pleasantly surprised by the type of customers arriving in town.

"I see a lot of that, fancy, fancy cars going in over there instead of the stoners with an old van or old car that barely gets into town," she said.

Those are customers, she says, who are "willing to spend two, three, four hundred dollars" on a single visit to the store. "If you spend a lot of money, that $5 for that transaction isn't anything," she said.

All those transaction fees, combined with the state sales tax, build into a quarter-million dollars of annual revenue.

Owens marvels that Sedgwick went from wondering "how we were going to scrape together $2,000 a year to run our town to a town that has $50,000 to budget with some leftover to go in bank accounts."

"We have savings accounts now!" she said, smiling. "I mean, it's a whole new world."

Town board members found themselves considering how to spend the windfall. They've chosen a conservative approach.

Board member Troy Kinoshita believes "values haven't changed" in town. "There's a little bit more money here, but it's nothing crazy."

(CLICK HERE to review the 2018 audit for the Town of Sedgwick)

The board increased pay for the city workers and added a part-time clerk.

"We had big trouble with retention of employees just because it didn't pay that much," Kinoshita said.

They repaired the water tower and made improvements to one park and created another with a picnic shelter across the street from the bar.

Engineers were hired to survey the town and create an accurate map for the first time in recent memory.

Rather than buying a new tractor, the village chose to purchase the parts to fix up the John Deere used to grade residential streets that are still dirt roads.

Most roads in town remain unpaved.

"A lot of us like our dirt roads, thank you very much," Owens said. "And the fact that you've got a pile of money does not mean that you need to dash right out and spend it as fast as you can."

Some in town questioned the town board's spending priorities. "They have a park that I don't go to and don't care about," Thurman said. "Now, we have two parks."

Overall he says, "I don't see the benefits that occurred" as a result of the incoming cash.

He and others say the town moves too slow to take on the big-ticket items like repaving Main Street and upgrading water and sewer systems. Members of the town board members say engineers are creating a master plan, allowing work to advance soon.

Hodel, who moved to town from Chicago, became a vocal critic of the town board's priorities. He is especially distressed Sedgwick has not attracted new business to complement the traffic from out-of-town visitors.

"No one in the community has taken advantage of that opportunity," Hodel told NET News.

"This is a community that was on its last leg," Hodel said. "Any opportunity to drive traffic two miles off the highway and for a business to capitalize on that is a positive thing for an economic culture."

"You would have seen someone with like a hot dog stand or something like that just be hugely successful," Hodel adds. "I find that it is sad that has never happened."

Troy Kinoshita and others on the town board were "under the impression that might happen too," the board member said. "There's not many new businesses wanting to come in right now."

A new restaurant may be on the way soon, based inside the bed and breakfast. Other attempts open up for food service have not been successful.

Lupe Casis is among those who don't consider slow growth as a problem.

"Maybe we don't want all these businesses coming in here to attract even more people," Casis said. "Spend your money and go away. It's true. We want to keep it small."

When a reporter pointed out that statement would be a terrible idea for a chamber of commerce slogan, she laughed hard and summed up her perfect Sedgwick visitor.

"Drop your money and then get on that interstate, and you can go away."

New jobs and improvements made to the run-down Main Street have changed the town for the better over the past five years.

"These guys have done an awful lot for our little town, and we are very glad that they're here," Owens said.

"We came in here with a commitment to the community to rehabilitate some dilapidated buildings, put them to full use, try to employ as many people as we could," Hodel said.

The company says it employs between 12 and 16 people in the grow house. "We're pretty proud of the fact of the type of jobs that we've had to offer the community," he said.

The owners of the dispensary also became landlords in town, buying and fixing up residential properties. SAR purchased a share in the bar up the street.

Long-time residents have mixed feelings about the influence SAR now has in the community.

Casis has heard people in town say the dispensary has "gotten too much power."

Some, according to Casis, believe the attitude of the dispensary managers brought on bad feelings.

"Because they're so brilliant, that people are starting to mistrust (them) because they just are spinning circles around everybody and it's like, "wait, what are we doing? We're a small town. We need to understand what's going on."

Others see the conflict as "all about personality," according to Thurman. "Everyone was friends at one point."

The town board responded by calling an election asking residents if Sedgwick should allow competitors to set up shop. A ballot initiative asks if the town should allow "up to three additional licensed retail marijuana stores to operate."

Yard signs declaring opposing views suddenly appeared in front of nearly every home in town.

"The town's pretty well split," Kinoshita said. "That's why we say take it to a vote."

"There are businesses at stake with this decision, and there are people's livelihoods at stake," he added. "I don't necessarily know if that's a decision for four or five people sitting on the board to make."

(Sedgwick Mayor Wayne Price did not respond to multiple messages from NET News requesting comment.)

"We are very excited about the possibility that there might be more than one, so there can be some competition," Owens said. "There's something sort of un-American about a monopoly," she said, explaining her reason for supporting a new dispensary license. "It's like the town store. 'You owe your soul to the company store' sort of thing."

Owens also acknowledges she has a preferred local applicant for one of the new licenses.

"One of our young men wants to open a dispensary," she said. "He has quite a reputation as a professional grower of cannabis for medical use."

There are also complaints, disputed by SAR, that the store's prices made the product too expensive for local users.

Casis regrets "the fight has turned hostile" but feels many in town "want an even keel" and "to have a voice and not just some voices coming to the top because they're very powerful."

SAR's management believes they are the entity overpowered by long-time residents controlling the town board.

Hodel fears two dispensaries only increase the town's reliance on a single source of income for its budget.

"Unfortunately, this could be the arrow that kills the golden goose," he said.

Hodel expects competition would substantially reduce his store's revenue without adding to the town's tax base.

"Any kind of market share could be diluted through multiple locations," he said.

The prospect of adding additional stories would turn Sedgwick into "weed city," in the Thurman's words, without any gain for the community. "Nobody's going to be able to survive until the other guy dies," he said. "Only the richest guy will survive."

It comes at a time when the national marijuana market is changing dramatically. More states have legalized cannabis, making it less of a novelty for tourists to pick up and sample Colorado weed.

Hodel claims monthly traffic dropped at 25-30 percent in recent months.

Others in town are aware of the risk.

"We're not going to get as much," Casis said. "It's going to make a difference for all of us in the amount of money we're going to get."

"You only have so many pot customers," Thurman said. "You would need more pot customers, and I don't see it."

Meanwhile, the election seems to be all Sedgwick can talk about lately.

"There are only 150 people here and TV sucks," Owens told NET News. "This has been our main source of entertainment for the last week or so, so we're really enjoying it."

Other towns in northeast Colorado have not changed their stance that legalized marijuana involves more risks than benefits to their communities. Nearby Julesburg, the county seat, recently rejected, for the third time, allowing retail outlets.

Overall the market for legal retail and medical marijuana remains strong. Sales in Colorado exceeded $1 billion in the first nine months of 2019. That surpassed the previous year's record three months before the end of the year.