COVID-19 And Marijuana: Can Cannabis Municipal Bonds Help Government Budgets?Posted by On


Cannabis Based Municipal Bonds (CMBs) could offer governments and financial institutions a viable and creative way to aid in the recovery of lost revenues due to the COVID-19 pandemic, says a newly released report from cannabis and hemp advisory firm MPG Consulting.

As the cannabis industry continues to grow at a rapid pace and regulations mature, it is time for state and local governments, as well as traditional financial institutions, to start taking a serious look at the validity of CMBs as a source of financing for local initiatives and infrastructure, MPG analysts argue. In fact, they point to similar initiatives in place in the form of special tax bonds, typically backed by taxes, on certain activities or assets classes like tobacco, alcohol and gaming — the so called “sin taxes.”

How This Could Work

To demonstrate how this could work, MPG conducted a theoretical analysis, using Denver as an example.

Figure

Figure – MPG Consulting

Above, a breakdown of Denver’s cannabis revenue sources by type for 2018. Below, how tax revenue and allocation has evolved over time.

Chart

Chart – MPG Consulting

In its study, the firm showed how Colorado could translate its cannabis revenue into a short-term bond capacity of $166 million, and long-term bond capacity of $591…

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