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Cannabis sales are lagging behind. One valley community is already adapting.

Measure AQ, also known as the cannabis sales tax in Farmersville, is now in its second year of raising revenue for the city. And of late, city management has realized they may have to lower their expectations of how much green they can bring in.

A staff report submitted to the Farmerville City Council on Monday, Oct. 10, shows that the city’s 2021-2022 budget — which ended June 30, 2022 — expected $1,450,000 in revenue. But by the end of the fiscal year, the city received 91% of their forecast, totaling $1,312,323.

While not an immediate cause for concern, the $137,677 shortfall changed the city’s expectations for Measure Q returns. As a result, the city expects $1.2 million in tax revenue from cannabis by the end of the 2022-2023 fiscal year.

The report was presented by the city’s director of finance and administration, Steve Huntley, who said the observed decline is due to the saturation of the national cannabis market, where the demand for cannabis products is simply not keeping up with the supply.

“There are more businesses entering the industry and more supply than demand,” Huntley said. “So demand may increase, but not as fast as supply.”

That could potentially conflict with the council’s approval of a third dispensary in Farmersville, which, if completed and operational, could impact the market, according to Huntley. The decline in cannabis tax revenue can also be attributed to state-mandated home delivery of cannabis, regardless of whether a city allows dispensaries in their city, as well as the ever-expanding black market operations that illegally sell marijuana.

Also according to Huntley, once the market saturation phase is complete, the next phase is likely to be consolidation, where two or more companies merge and become one. This could eventually result in larger, more successful cannabis companies buying up smaller ones to keep up with the market. According to Huntley, this process is like cutting a pie into smaller and smaller pieces.

“What this means specifically for Farmersville is that there will be dispensaries that will just start making less money,” Huntley said. “The more slices in the pie, the smaller it gets, but if you can buy other people’s slices, yours will be bigger.”

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