Senate Finance [Apr 28, 2026]

Senators, Benavides. Here.

Zell. Present.

Solica. Here.

Snyder. Here.

Madam Chair. Here. Thank you very much. and I'm going to pass the gavel to Vice Chair Marchman.

Well, thank you, Madam Chair, and thank you, Committee. We're here to discuss Senate Bill 161. And by way of background, this was actually a bill titled pulled by former Senator Daphna, Michaels, and Janais, and my co-prime here, Senator Mullica, and I decided to pick this up rather late in the session and see what we could find out and what we could learn and what we might be able to do. So given that, there are really two intents, two purposes for Senate Bill 161. One is to address the lack of vigorous testing that we have been occurring here in Colorado over the last decade or so. And the idea was that we need to get more of a public health focus onto the purpose of testing, as well as making more vigorous testing. Currently, Colorado has a self-reporting system, and there's a lot of statistics that show that that has been ripe for abuse and has been abused. and so we were ending up with a lot more products that were contaminated that should not have been released for sale ending up on shelves. So the idea was to move to the testing over to CDPHE because that's their business, is public health, whereas MED I think is part of DOR and so their focus has generally been on taxation and policing that area and making sure that we're getting all the tax revenues that we should and could be getting out of the industry. But that has also led to what I believe to be a serious lapse in our public health focus. So the idea was to move over to CDPHC, who has that focus at the foremost of what they do. And maybe I could prevail upon my co-prime sponsor. You want to talk about the second part of the bill? No, I'm just going to tell them that one. You're stuck with number two, or is Senator Malika going to do it? You can if you want, but I'm just going to tell them what I want. Okay. So the other part of the bill was looking at the way that we tax this sales tax on cannabis products. So currently we use what known as average market rate and a weight a pound weight of cannabis and we tax it accordingly Average market rate has proved to be less than a reliable indicator on the true value of the products that are grown and packaged and sold and manufactured So what we were trying to do was look at a different way of approaching taxation. So our bill was seeking that tax based upon potency rather than average market weight and actual weight of the product. I think we've I have personally have the sense and I think a lot of folks share that with me that when we passed amendment 64 back in 2012 everybody had kind of this vision in their head of flour, smokeables, maybe some edibles what have you generally in 5 milligram increments but that has not really what has evolved in Colorado over the last 10-12 years. So what we found is that there are more and more of these super high potency products that are not segregated or taxed or treated in any different way from other cannabis products and I think we have not really understood or allowed ourselves to really address whether these high potency products, and by that I'm talking about shatter and dab, and the others. And, you know, I think we're getting more and more evidence, and we heard this as our stakeholder meetings with groups like Blue Rising and One Chance to Grow Up, that it's having some very detrimental effects, especially on the adolescent brain. So I know there's been talk over the last few years about some type of potency cap. Several states already have a potency cap. Vermont comes to mind. I believe they cap potency at 40% for all products. But a lot of these manufactured products, especially, are up in the 90s, approaching close to 100% of potency. I don't believe when the voters voted in 2012 for it to be the first state to legalize cannabis that they envisioned that these really potent products would be available and while they're still regulated by MED, we've also seen a giant proliferation of hemp-derived intoxicating products and those are really a concern for me. They've developed these chemical changes. They change one molecule, delta-9 comes to mind. These products have not been properly tested or vetted and they are pretty much being sold with very little, if any, regulation right now in Colorado. So you can go to a convenience store or a gas station, pick up some of these Delta 9 hemp-derived products, and there's really no oversight. They're not within the regulated cannabis market that we work so hard to establish. So that was the two intents of the bill. I know that potency caps are something that more and more groups are really starting to embrace and take a look at, but I think that would be a bridge too far at this point. And so we thought by taxing it based upon potency one it will help shore up our declining marijuana revenues and two it would be a way to much like we do with tobacco products nicotine even alcohol which if you remember Amendment 64, it said regulate cannabis just like alcohol. Well, guess what? We assess more taxes in Colorado on 80-proof vodka than we do on 5% or 6% beer. So that makes sense to me, that that would regulate it just like alcohol. So the idea was that the higher the potency of the product, then the higher amount of tax you would be paying, with the idea of maybe dissuading some people from continuing to go up the ladder to the highest potency products. But in the end, while we intend to postpone indefinitely this bill, I'm really proud that we were able to bring together our stakeholder groups and and begin a much needed conversation around those two issues one whether we should change the way we tax cannabis and two we have to make sure that we are doing proper and vigorous testing of these products so that contaminated products don't get out on the market and I think we need to get away from the self reporting system that we've been using for a while. while. So that was the intent of the bill. We didn't get to the finish line. Obviously, this would have been a ballot measure that the voters would have decided upon. I think it's going to take longer than, you know, a third of a session to really stakehold this properly. I've already gotten commitments from a lot of the stakeholders that will continue to look at this over the interim with the idea of maybe bringing something back next year. Thank you.

Thank you, Madam Chair. Thank you to Senator Snyder for being on this bill. I'll be brief. I think Senator Snyder went into great detail there. I'll just say that I was on this bill because I do think that we are in a public health situation right now with concentrates. I think that the highs that we are seeing are not of what typical marijuana is. and I think it's really concerning to see our younger folks utilizing and using these concentrates that it can be really harmful. And so I was on this bill because I want to do all that we can to try to keep those products out of our youth sands. I think that through taxation you can do that. I think we've seen success with tobacco, a similar strategy, and I think that this body and we should be having this discussion in this building of what concentrates look like in our state, what it looks like for our youths using those products, and really, you know, what are those products doing? And what impact on public health are they having? Because these are not what we traditionally think of when we think about marijuana. And so I do think taxation can play a role in trying to keep those products out of our youth's hands, and that's why I was on this bill. Fortunately, we're going to PI it today, but I think that that conversation is a valid conversation going forward and hope that we continue having it.

Thank you, Madam Chair. And just a final closing comment. So what we're asking of the members of this committee, we ask the members of the committee to recognize that the problems this bill identified are real and documented and that postponing a bill is not the same as dismissing the concerns that brought it to our attention we ask the committee to continue oversight of meds enforcement priorities and testing program implementation we ask the administration to engage seriously with the with us over the interim process we commit we commit to returning next session with a proposal that is stronger and well-stakeholded and has a lot of buy-in from everybody in this cannabis market. Colorado voters were promised a regulated market. They were promised honesty about what the products they buy, their safety from contaminated goods and a tax structure that reflects the real value of what is sold. The promise belongs to every member of this committee and every member of the legislature regardless of party. We look forward to working together. And with that, if I may make a motion, I move to postpone indefinitely Senate Bill 161.

Ms. Rudevush, will you please pull the committee?

Yes.

Yes.

Aye.

Aye.

Yes.

Aye.

Aye.

Excuse.

I.

Senator Gonzalez. Thank you, Mr. Chair. Thank you to members of the committee. I'd like to invite your consideration of Senate Bill 26164 today. This bill has been a process that has unfolded over the course of several months of work and iterative conversations with businesses, public health advocates, bar owners, restaurants, regulators, and more. This bill was initially set as my pre-file bill. And now here we are, April 28th, day 105 of our 120-day legislative session. I'm so grateful for all of the work that all those testifying today have put into this policy and everyone who we have met with over the course of the past several months since last summer. I'd also be remiss if I didn't just start off by extending my gratitude to Bill drafter, Mr. McMichael. Colorado was the first state to legalize cannabis for recreational use in 2012. alongside Washington. And so we built out the regulatory structure for these products, which has brought in over $3.1 billion in cumulative tax revenues since, January 2014. Following the passage of the 2018 Farm Bill at the federal level in 2023, Colorado also set forth regulations on intoxicating hemp. Since then, this committee, this finance committee, has grappled with many different ideas about how and what the right level of regulation and enforcement should be for these products, how to balance public safety and the plain language of Amendment 64 and our state constitution. Colorado already permits compliant hemp beverages with up to 1.75 milligrams of THC per serving to be sold in Colorado stores, including Argonaut Liquor, Clayton Hotel, Total Wine, and more. Currently, Minnesota and Tennessee allow the sale of THC beverages alongside alcohol sales for on-premises consumption. Both red and blue states currently allow for the sale of THC beverages, and these are bastions of conservatism and bastions of liberalism. Kentucky, New York, New Jersey, Minnesota, Ohio, Rhode Island, and Tennessee. It's in that context that I bring forward Senate Bill 26.164. This policy would allow up to 10 milligrams of hemp-derived THC beverages to be sold where alcohol is legally available with an additional license. This bill seeks to reestablish Colorado as a leader in this industry by creating a clear and responsible regulatory framework for the sale of these beverages at restaurants, bars, music venues, and more. Based on Minnesota's hemp sales from June through November 2025 and monthly cannabis consumers in Colorado, this bill could generate over $26 million in new revenue for the state of Colorado on an annual basis. Give us the funding to address both budget shortfalls and to ensure safe enforcement. And it's in that context that I bring forward this bill for your consideration. You will hear testimony from cannabis companies, restaurants, hemp companies, alcohol distributors. I encourage you all to ask them questions and try to understand how this bill has the potential to generate revenue for the state of Colorado by allowing us to set up a regulatory framework for the safe sale and enforcement of these beverages. With that, Mr. Chair, I know that there is a list of proposed witnesses, and with the Chair's permission, I'd welcome opponents to speak first in those two panels and then proponents, but I stand ready for any questions that members of the committee may have.

No.

Good afternoon, Madam Chair and members of the Senate Finance Committee. My name is Dr. Dana Massingill. I am an assistant professor of pediatrics and medical toxicologist at Children's Hospital of Colorado. I am here today testifying on behalf of Children's Hospital Colorado in opposition of Senate Bill 164. There are several reasons we're urging you to vote no today. THC products, even those containing less than 10 milligrams, can and do cause adverse health effects in children and adolescents. Over the past several years, we've seen a sharp increase in pediatric exposures, with national data showing a more than 1,300% increase in calls to poison centers for children under age 6 ingesting cannabis edibles. Importantly, those exposures are not only becoming more common, but more severe, with a growing proportion of cases requiring hospital admission and even ICU-level care. The clinical effects we are seeing are concerning, things such as central nervous system depression, ranging from excessive sleepiness to coma, vomiting, dangerous heart rate changes, and breathing problems that can lead to low oxygen levels. We recognize that these trends are closely associated with increasing availability of cannabis products. If this bill were to pass, resulting in regulatory changes and expanded access across our communities, existing evidence strongly suggests we will see further increases in pediatric exposures, healthcare utilization, and ultimately greater risk of harm. We also recognize that relatively small amounts of THC can be dangerous. Children who ingest more than 1.7 milligrams per kilogram are at higher risk for severe symptoms and prolonged care. For a toddler weighing 10 to 15 kilograms, that threshold can be reached with less than two standard 10 milligram servings. The American College of Medical Toxicology position statement on preventing cannabis exposures in children recommends limiting THC dose and packaging size, regulating these products consistently as cannabis, and requiring child-resistant packaging. This bill raises significant concerns because it does not adequately prioritize the health and safety of children and fall short of implementing safeguards to prevent exploratory ingestions. I thank you for your time and respectfully urge you to vote no on Senate Bill 164. I'm happy to take any questions.

Thank you to the committee for the opportunity to address you today. My name is Dawn Reinfeld, and I am the Executive Director of Blue Rising. We are here today in opposition of SB 164. Blue Rising focuses on issues that derail young lives. We believe that intoxicating hemp beverages will exacerbate Colorado's youth and mental health addiction crisis. Young people in Colorado are already subjected to misinformation about marijuana in general. They are told that it's medicine that helps with anxiety and depression when the data shows the opposite to be true. To add into this toxic mix another intoxicating substance that is allowed to operate outside of the regulated marijuana market will compound this issue This bill would allow toxicating THC beverages to be sold even in grocery stores and convenience stores The ease and availability of these drugs will mask to young people the dangerous nature of intoxicating beverages on their mental health and addiction issues, and very importantly, on their growing ability to drive safely. We are especially concerned with these drugs being sold in grocery stores, as most grocery chains have a no-chase policy. We hear from parents and teens that it is easy to walk into a grocery store and stroll out with alcohol, so why would these intoxicating THC substances be any different? Additionally, we have concerns that these intoxicating THC drinks will be sold wherever alcohol is sold. Why would hemp-derived THC beverages be treated differently than marijuana-derived THC products? Colorado law prohibits alcohol being sold with marijuana products. That has proven to be a wise state regulation. Allowing these increased THC beverages to be sold anywhere alcohol is sold would increase the opportunity for kids to get them, family restaurants, concert venues, art walks, even the zoo where beer and wine is sold. We appreciate the sponsor's request to PI the bill, and we kindly ask the bill to be postponed indefinitely. Thank you.

Good afternoon. My name is Rachel O'Brien. I'm a co-founder of One Chance to Grow Up. We are a nonpartisan, nonprofit organization dedicated to safeguarding children from today's marijuana. Since 2013, our goal has been to ensure that public health and youth safety are the foundation of THC policy in Colorado. Senate Bill 164 will blow Colorado's regulated marijuana system wide open. THC is psychoactive, regardless of the source. In 2023, this legislature put limits on THC and hemp products to ensure intoxicating products are only sold in regulated marijuana stores. But this bill reverses those THC potency restrictions. Senate Bill 164 will also explode the availability of intoxicating THC beverages throughout the state. It increases retail outlets where these drinks can be purchased from approximately 700 locations today to over 13,000 liquor-licensed establishments. This includes restaurants, grocery stores, convenience stores, places where children and teens dine and shop. The most recent Healthy Kids Colorado survey showed that alcohol is the number one easiest substance for teens to access. So save 51% of them. Why is this? Because it's already being sold in these locations. This bill will undoubtedly increase youth access to THC to a similar level. Marijuana and sales and consumption around children will continue to normalize the use and lower the perception of harm in the eyes of youth. We have concerns with its normalization as science is demonstrating that there are harmful impacts to the developing brain of THC use. This bill will also adversely impact the safety of all Colorado roadway users Evidence has shown that the present levels of cannabis commercialization in the state has already negatively impacted road safety according to a recently released report from the Colorado Department of Public Safety. Between 2013 and 2022, fatalities where a vehicle operator had only THC present increased 148 percent, and fatalities where a vehicle operator had more than the legal limit increased 94%. And for the health and safety of all Coloradans, we ask that you oppose this bill. Thank you very much for your time.

Thank you, Senator. Good afternoon, members of the committee. My name is Bria Kinsella. I am the CEO of the Colorado Providers Association. We are a trade association that represents behavioral health providers in every county of the state, and we oppose Senate Bill 164. From a finance committee perspective, the core issue is cost exposure. When access to an intoxicating substance increase, use increases. This bill expands access by placing THC beverages into normalized retail settings like liquor stores and grocery stores in a format that feels familiar and low risk. As use increases, a portion of individuals will experience negative effects, including overuse, co-use with other substances, and increased behavioral health needs. About 3 in 10 people who use cannabis develop cannabis use disorder. That is the connection point. Increased access leads to increased service demand. Colorado's behavioral health system is not currently built to absorb that increase. We are still stabilizing a system with uneven access, workforce shortages, and heavy reliance on public funding streams, as you all know. So while this bill expands a market on the front end, the cost shows up on the back end in Medicaid utilization, emergency departments, crisis systems, and treatment services. There are no corresponding investments in treatment, recovery, prevention, or workforce capacity to offset that demand. So from a cost-benefit standpoint, this bill expands access while shifting costs to the public system. For these reasons, we respectfully oppose Senate Bill 164. Happy to answer any questions, and thank you for your time.

Good afternoon, members of the committee. My name is Adam Foster. I'm the chief legal officer of Silver Stem Fine Cannabis, and I'm testifying on behalf of the Responsible Cannabis Coalition today in opposition of the bill. We oppose the bill because fundamentally it's a ploy by out-of-state hemp companies to sell intoxicating THC products in Colorado while completely sidestepping Colorado's regulations and taxes for intoxicating THC. The bill would move hundreds of millions of dollars of economic activity and thousands of jobs from Colorado to the low-wage, low-regulation jurisdictions where the hemp beverages would actually be made. Instead, we ask that you stick with the common-sense idea that all intoxicating THC products should be regulated the same under Colorado law, and that's what Colorado law currently does. Under both state and federal law, the amount of THC in a cannabis plant determines whether the plants classified as marijuana or hemp. In November of 2025, Congress closed the so-called intoxicating hemp loophole by amending the federal definition of hemp to prohibit intoxicating levels of THC in hemp products. New Jersey and Ohio have closed their state loopholes, as have Virginia and Missouri. So the trend is to not allow these unregulated intoxicating hemp products. Under current Colorado law, intoxicating cannabis products can only be sold through the tightly regulated licensed supply chain administered by the Colorado Marijuana Enforcement Division, or MED. All of Colorado's hemp regulations, all of them, total 55 pages. There are 700 pages of marijuana regulations currently. And that is why the THC bill is fundamentally a giveaway to out-of-state hemp companies. It would allow 10 milligram intoxicating THC beverages to be brought in from Kentucky or Alabama or Louisiana or whatever low regulation, low wage jurisdiction and sold wherever Colorado allows liquor sales. And that's because intoxicating hemp companies have no interest in paying MED license fees, paying marijuana taxes or otherwise playing by Colorado's rules that have governed intoxicating cannabis products since 2010. 26,000 Coloradans currently hold MED occupational badges. These are people that work in the so-called plant-touching jobs, not all the thousands of other ancillary jobs that support them. Licensed marijuana generates $231 million in taxes annually. That's right now. So the policy ask is simple. If you want to protect 26,000 jobs and $231 million of tax revenue, that the state already has, then we respectfully ask that you continue to make all intoxicating THC products subject to the same uniform set of licensing requirements, regulations, and taxes. Thank you.

Good afternoon, ladies and gentlemen of the committee. My name is David Michael, and I am the owner of Agati Limited. I am testifying on behalf of both Agati and the Responsible Cannabis Coalition, of which I am a member. The hemp beverage bill is an end run around Colorado's regulation, testing regime, and taxes. The plant that produces marijuana industrial hemp is genetically the same plant. The distinction is in the amount of THC the plant produces. Industrial hemp is below 0 by weight and marijuana is above that But THC is THC period It is the same molecule and has the same intoxicating effect regardless of whether it has the legal distinction of being a hemp plant or a marijuana plant. Industrial hemp is meant to produce non-intoxicating CBD products because the amount of THC in industrial hemp and the products that come from it should not have a psychoactive effect that gets people high. If you get high from a cannabis product. We have a regulatory regime in Colorado with over 700 pages of rules. Hemp, as Mr. Foster said, has only 55 pages of regulations. We also have robust testing and taxes that are higher than any other product produced and sold in Colorado, which fills the state coffers. The state and the marijuana industry have seen revenue go from $2.2 billion in 2021 to $1.2 billion in 2025, and the corresponding taxes the state receives have plummeted. Why? The industrial hemp industry is not only producing products for one's health, they're producing and selling here in Colorado products that get people high. They're selling it through the internet, and many of the early business owners in marijuana that I knew when I started out in marijuana have left our industry to go into hemp and CBD, allegedly, but really it's more THC because they do not want to be subject to the intense regulations and taxes that govern the marijuana industry. We passed the Intoxicating Cannabinoid Hemp and Marijuana Act in 2023 to limit the amount of THC in a non-marijuana product because the federal Farm Bill loophole, which should be closed by this coming November, allowed low THC plants to be harvested. Then the THC from acres of plants to be aggregated through extraction, infused into products that have as much THC as the products Colorado regulates, tests, and taxes of marijuana and sold through the marijuana industry. Plus, through a chemical process, CBD can be converted to THC. This is not the safest of processes. And that is what out-of-state producers will do to sell the intoxicating hemp beverages allowed under this bill without regulatory testing and taxation standards here in Colorado. This bill allows products that get you high to be sold everywhere liquor is sold. One 10-milligram drink is enough to get most people very high. The competition contemplated by this bill with the marijuana industry is simply unfair. It will not have the same public health protection. It will take revenue and the taxes that come with it away from the marijuana industry and the state and local governments that depend on it. This will take away jobs as the hemp beverages will steal market share from Colorado manufacturers and businesses because the bulk of the products will be produced by out-of-state businesses in Kentucky, Tennessee, and Texas, and important to Colorado. My company has gone from 186 to 82 employees over the last three years, and this is as a result, in part, of hemp products being sold already in Colorado that aren't compliant over the Internet. These products will not be produced consistent with Colorado laws or subject to Colorado's marijuana taxes. Either deregulate the marijuana industry, give us a level playing field with these hemp beverages that are the subject of this bill or do not vote for it. Thank you.

Thank you, Mr. Chair. My name is Elizabeth Haskell. I represent the Colorado Municipal League, and we represent 271 municipalities. And CML is currently in an amend position on this bill. We appreciate the work that gone into it and we did work with proponents while they were drafting this bill and our main focus on it was how locals were going to manage this new product And as you've heard, there are many public health concerns related to the bill. And many of our members share those public health concerns, as well as public safety concerns, as well as concerns that this would not be regulated the same as marijuana. So we have those concerns. But we did work to help create what we thought might be a workable regulatory framework for this program. So our goal was clear. We wanted to ensure that the regulatory framework for THC beverages provide adequate oversight if these products are sold and within municipal boundaries. In general, if these products are to be sold in Colorado, CML would like local governments to have the ability to opt into allowing the sale of these beverages within their jurisdictions rather than opting out of allowing to sell them. We also want to be sure that the locals and the state regulatory agencies can work together to determine what's the best route for regulating these beverages and permitting these beverages for sale. they are an intoxicating beverage and be new to our community. So we'd want to make sure we had the proper oversight and regulatory structure for them. And I'm happy to answer any questions.

Thank you, Mr. Chair. Appreciate everybody coming this afternoon. I know it's the Finance Committee, but I'm going to ask some questions outside of the finance for just like the construction. Maybe for Mr. Michael. I'm trying to understand. And elaborate for me the difference between hemp grown in Colorado that is or isn't concentrated to a higher level versus out-of-state interests that are growing the same hemp plant but then doing something and importing it in Colorado? Why isn't it? Or is it happening in Colorado as well? No, this isn't important. I'll just go ahead. Mr. Michael, I'll just announce your name. We got millions listening, so they need to know who's talking. This is a very important distinction.

And it can also be converted from CBD into Delta-8 THC or other THC. Our bill in 2023 outlawed that in Colorado. but the products that get imported into here, we don't know what they have. And even though it's outlawed here in Colorado, the DOA covers what comes out of the ground. CDPHE deals with the limited panel of testing, but there is no agency right now in Colorado regulating what is happening with the finished products of hemp. Whatever's showing up on a convenience store, what's being sold through the Internet, what's in Target or grocery stores. If it says CBD, we don't have testing of that finished product, particularly if it comes from out of state. And we don't know whether it's naturally occurring THC or whether it's gone through some of these synthesization processes, right? And those have been shown to produce not a consistent but a very variable set of synthesized cannabinoids that can be dangerous and can be toxic at certain levels. and they're not the same type of THC, but they definitely do get you high. And so when you have these products, right now they're not even age-gated. And I understand under this bill that will be allowed, but that's kind of the difference of what's going on. So right now, if you allow this bill, there'll be some Colorado companies producing beverages, but the majority of hemp right now is grown in Tennessee and in Kentucky and in California. Now, Texas and Colorado, other places are also producing hemp, but those other states don't have the same regulations as Colorado, nor is there any agency right now in Colorado that is looking at and testing those finished products, like they do in the marijuana space. So we're not going to know exactly what the potency is. We're not going to know what the chemical compounds in there. We're not going to know when they go through these chemical syntheses, whether they're producing a safe product or a product that can be considered very dangerous, because synthesized THC has produced some very strange reactions. And you can see it in papers. Like there was some that being sold in New Haven where a bunch of people started attacking each other right outside of Yale's campus. That was about four years ago. So these synthesized cannabinoids are not like the THC that we're producing. And so we don't have any regulatory oversight of what's being done in other states. And then we're just allowing these products in. And then they're going to compete with the regulated marijuana market. So, look, if we want to deregulate everything, that's fine. But saying that the THC that comes from a hemp plant and saying the THC that comes from a marijuana plant are different THCs is a complete fallacy. So either we're going to regulate THC as one molecule and look at this all as one plant and you want to deregulate marijuana, go ahead. But right now, we're complying with 700 pages of regulation, which is a maze. We're testing our products before they hit the shelf. We're paying 15% state tax, not only when we're transferring it from our cultivations to our retail, but then at the sale. tax, you know, we're seeing 15% from the state plus local, which is oftentimes 5%, plus normal sales tax. So we're seeing taxation anywhere from, I think, South of Grand Lake is on 15%, so 20 to something like 30%. So we're being asked to compete with these products that aren't going to be taxed the same, aren't going to be tested the same, aren't going to be produced in Colorado. There's no regulatory regime because the regulatory regime only governs what's coming. Got it. Thank you. Thank you. I think I'm done. Yeah.

Senator Snyder.

Ms. Haskell.

Thank you. Thank you.

I will hand the gavel back over to Vice Chair Marshman.

Sure. Thank you for having us today. My name is Chris Lafferty and I'm here on behalf of EVG Extracts in support of the bill. My background is before I was into the hemp manufacturing space and farming, I was a public school teacher in the state of Colorado for just shy of 20 years. So I cared deeply about kids. I'm also a CSU grad and a CU mom. So kids are important to me. just to kind of follow up on some of the things that you just heard. I'm also a manufacturer of hemp products in the state of Colorado. Entrepreneur, and we have a farm as well. So representing our farm down near McLeave, Colorado, and our manufacturing facility in Arvada and Wheat Ridge, depending on what map you look at. We do all private label manufacturing. We have everything that leaves our doors is third tested It is tested for potency it is tested for microbials And nothing leaves without that Or CGMP SQF certifications and all that We are not just some garage manufacturing facility. We employ between 40 and 50 people, depending on the time of year. And those are real Colorado jobs and real Colorado families. We also work closely with a lot of Colorado businesses. We get our sugar from Colorado. and all those kind of things as well. So currently, thank you to the Safe Harbor Manufacturing of Colorado, we are able to manufacture a lot of products that can't actually be sold here. And CDPHE and the Department of Ag has done a fabulous job regulating the industry so that we can manufacture these products. And unfortunately, contrary to what you just heard, many of the products that we do manufacture are leaving the state, and the tax revenue is going to these other states where they are sold. They're not coming to Colorado, especially with this beverage bill. As an entrepreneur, I care about all of our employees. I care about our people's jobs. And I also really feel like the next step with the great foundation that we have as leaders in the nation on being able to manufacture and grow hemp, that it would be really great if our adult consumers could choose to use our products that we're making, including support for the things that address the concerns for the kids age-gating these products, selling them in clearly labeled containers, and third-party tested everything so that we can make sure that our consumers have the choice to have the safe products. that's what I got for you.

Thank you, Madam Chair, members of the committee. My name is Steve Finley. I'm the Executive Director of the Colorado Beer Distributors Association. Beer distributors across the state carry every major brand of alcohol or beer, imported beer, Colorado craft and imported craft beer. We service every liquor license in the state of Colorado. And what I bring to the table is not any expertise at all in THC, hemp, or cannabis, but expertise and experience in regulation, and specifically the regulation of alcohol beverages. I like to thank the proponents in the Senate for working with us as they were going through drafting on this bill. Our concerns have been that if these products are going to be in liquor licensed establishments, it should follow the same rules and regulations as alcohol. Therefore, we support where the bill is now with the language going through the three-tier system of alcohol distribution. What that provides is transparency, chain of custody of the products, built-in excise tax collection apparatus already. We collect and limit sales tax on alcohol to the state currently, and we would provide market access for suppliers of all sizes. So that's what we bring to the table. I think there's still a little bit of work to be done on some of the smaller issues, but generally we like where the direction is headed that this is going through the three-tiered system. We encourage that it stays regulated by the Colorado Liquor Enforcement Division. That is where we'd like to see the regulation of the sale of the product come from. And with that, I'll give you back one minute, 27 seconds of your day.

drafters of Amendment 64, which I think you all know made Colorado the first place in the history of the world to legalize cannabis. I also ran the statewide tax measure that put the first tax in place on cannabis that following year. I'm here as a member of the coalition that's brought this forward and as with Amendment 64 we spent a tremendous amount of time writing that law honestly but what we've done around this bill and this proposal in front of y'all is we spent a year stakeholding this with the guidance of Senator Gonzalez. We met with folks in alcohol. We met with police. We met with prohibitionists. We met with cannabis business owners. We met with restauranteurs and bar owners and folks that said you know we're going to go out of business if we don't get more other products here that people want to buy, right? And when we let folks know that actually these products, these low-dose THC products, are available in other states, they're making money, we have not heard about a parade of horribles or enhanced traffic incidences related to folks having access to these, people said, you know, we'd like to have these. We actually held three stakeholder events and almost a thousand individuals showed up to say in support of this. So I think it's a sensible proposal. You know, as I said, you know, other states are doing this. We can look at 3,000 bars and restaurants in Minnesota that serve these low-dose THC drinks. I'm talking 5, 10 milligram drinks. We look at conservative states, as the senator pointed out. We also have Illinois, right, that sells these same drinks at the United Center. That's where the Chicago Bulls play. So if it's good enough for Bulls fans but not good enough for Nuggets fans, that seems a little strange to me. So how do we know this is going to work? Colorado is already selling 1.75 milligram drinks, THC, hemp derived, on the shelves of Total Wine and dozens of other places across the state, right? Those products are available. They're tested by CDPHE. There's thoughtful testing and manufacturing protocols in place for that. We've not heard about any adverse incidents related to those. One problem, though, is those products are currently taxed, I could go buy one today, at 2.9%. 2.9%. And so our coalition came together and said, we want to be taxed. We want to give back to the state. How about 20%? How about 25%? And that's what we wrote into this bill, right? That would produce anywhere from $25 to $50 million in new tax revenue. Colorado has an extraordinary budget deficit right now. It seems like ideas such as this that have worked in other states would be worth considering here as well. I guess the final thing I'll say is, you know, Colorado was a leader on cannabis policy. We were. And we stepped out front. The voters said we want to do this. We're now being lapped by other states that are allowing adults to access these products that are safer than alcohol at venues, you know, bars, restaurants, et cetera. I think it's just a matter of time until this is embraced further. So I appreciate your time on this, and I hope to continue to have a good discussion. Thank you.

Thank you, Madam Chair. My name is Greer Bailey. I'm the Executive Director of Colorado Convenience Stores. First off, I want to thank Mr. Vicente, as well as the sponsor, for considering our 3 milligram cap in stores that kids can come. We were completely uncomfortable with the 10 milligram threshold in those stores, and I really want to say thank you. I think it's more responsible. I'm here today to, like, consider a world where this bill doesn't pass. I think the Senate and this committee should take the historical examples of what happened with Kratom what happened with vaping what happened with synthetic cannabinoids The lack of regulation does not mean these products don't exist. The entire marijuana industry was predicated on a violation of federal law. And look, they're going to get there. On a call this morning, my one question to the Vice President of the National Association of Convenience Stores, will the THC bill and this cliff that exists in November be amended? There are four different legislative proposals. Four different legislative proposals to either extend or mitigate that cliff. What happens if any of those passes in Colorado? Do we not want these products not being sold next to school supplies? This bill does that. Do we not want some threshold where kids can walk into a store and get something that's the equivalent of a six-pack of beer in one can? Age-gating works. Responsible education works. Responsible investment by retailers to sell age-gated product works. You vote no on this. None of that exists in Colorado. In my view, that is completely irresponsible. For somebody that gets hauled up in front of committee after committee, town council after town council, for selling illegal products, for selling products that are not regulated by federal law, this is more responsible. 100%. I think that the federal government will pass the bill co-primed by Kentucky Republican, Oregon Democrat, and what they will say is that the bill that says that states that have responsible and strict regulation around these products are exempt from federal regulation, that's the bill that will pass. There's no one in this room that can convince me that the Tennessee, Kentucky Republicans are not going to get something through. There's nobody in this room that can convince me of that. So this is better. From the person who was here in 2014 on synthetic cannabinoids, from the person who's been 10 years in the vaping fight, from the person who's been here, this is better. It's not perfect. You're going to have to work on it for years after this. I just can't understand why an industry that would be self-regulating themselves, investing in age-gating, wouldn't pass. Thanks.

Can you hear me now? All right. Perfect. Thank you, Madam Chair, and to the committee and the fellow colleagues up here. And, of course, Senator Gonzalez, thank you for all of your work on this bill. My name is Eric Knutson. I'm the founder of Keefe Brands and Denver Packaging Company, a licensed manufacturing cannabis and medical cannabis operator here in the city of Denver. We've been operating under the Colorado regulated market rules and guidelines for the last 16 years since the first bills were passed in 2011, 2010 and 11. We are, as far as I know, one of maybe two cannabis beverage manufacturers that operate here in the state of Colorado. selling into dispensaries both on the medical and adult use side of the market. I believe our ready-to-drink beverages represent almost 90% of the total 12-ounce beverages sold in the state of Colorado right now through dispensaries, both medical and retail. One of the reasons for that is the economic inability to produce beverages at scale for a single state like Colorado. Looking at this, and again, to what my colleague here just spoke about, if something were to pass, the regulated market itself is not ready to take that on, per se. And one of the big issues we've found over the years is obviously selling multiple products, but especially beverage. Dispensaries are not set up to really house, you know, true volume of low dose beverage. We average, I think, 80% of our sales right now in 100 milligram format drinks in dispensaries in the state of Colorado, limiting consumers to really one choice, and that's an extremely high dose product. Not to say that that's a bad thing or a good thing, that's just the reality of the retail market in the state of Colorado right now. What we believe this bill will do is open up access to lower dose beverage options for people that may not want to consume that much per sitting. Operating, Keef operates currently in 14 regulated markets across the United States, and we sell into 18 hemp markets. In those hemp markets, four of them right now have crossover legislation where we have regulated and hemp markets operating side by side, including Illinois and Michigan, where Keefe operates in both states. We have not seen any decrease to the actual regulated sales in either of those states since the implementation of the legislation allowing hemp beverages to be sold in liquor stores. Obviously age-gated in the same place that liquor is sold. So there's obviously more to unpack there. We'll find out more as it progresses. But, you know, this, I believe, is an exciting opportunity for the state of Colorado for tax revenue. And at the end of the day, could actually help drive the cannabis market in the state of Colorado to a higher plateau as well by introducing new consumers to a real option as opposed to higher dose products. Thank you for your time today.

Minority Leader Simpson. Thank you, Madam Chair. Oh, sorry.

Mr. Vicente. Yeah, thank you. So quite a bit of stakeholding went into that. And I should say, you know, there's two kind of primary producers of these products. One's actually in Durango in your district. But, you know, we basically surveyed dispensary owners, we surveyed the public, and we looked at what other states are doing and where low-dose sort of beverages are sold. And what we found is, by and large, consumers don't want, you know, 3-2 beer. They want full-strength beer, if you will. And that's what's currently on the shelf is sort of low, low dose in Colorado being 1.75. So 5 milligram to 10 milligram is simply what people buy when they have those options around the country.

Ms. Lafferty, he's a farmer.

And sorry, what was your follow-up to that? Minority liter, Simpson. I think you got to ask how many acres.

Minority Leader Simpson. Thank you. Just one last follow-up. What's the highest potency product you, I guess, you're selling?

Very good. Senator.

Mr. Bailey. Yeah, for my association and my 2,500 stores in Colorado, if the milligram cap was removed, we would be in opposition of the bill. we have no interest in selling anything above 3 milligrams. It's just not responsible, and that's our biggest fear about this bill not moving forward. So if the federal regulation acts, then there's no regulation around at the state level.

Thank you, Madam Chair. Just a question for the gentleman from Keefe. Do you sell these products in other states? Yes.

Senator Mullica, you can dialogue.

Yeah, and I asked about THC. Yeah, THC. THC. So I was on the website. Can you tell me the pineapple extreme drink that you sell then that's 500? Yeah, that's a medical product here in the state of Colorado. So that's only sold in medical dispensaries here. Okay, but you do sell a product that has 500 milligrams. Yeah, that's only through medical retail dispensaries here in the state of Colorado. So not even adult use. That's just a medical product. So you have to have an actual Colorado medical red card to buy that product. but I just want to be be clear Like you manufacture a drink that has 500 milligrams THC in the drink Yeah absolutely It has a dosing cap child removable dosing cap on the top of it It once again specifically for the regulated market here in Colorado and the medical side Thank you.

Minority Leader Simpson. Thank you, Madam Chair. Mr. Bailey, then like...

I really don't know. Can you sell a 1.75 milligram product in your store today? Yes. Yeah. So why three milligrams? Was there something like... You agreed you needed a cap, but why three? Yeah. A lot of legislative history, a lot of kratom, a lot of synthetic cannabinoids, a lot of whatever. And we're not allowed to sell liquor in convenience stores and grocery stores. I mean, a limited amount of legacy grocery stores, but we don't want to sell something that's the equivalent of a fifth of Jack Daniel's. So what we want to do is we want to sell something that's generally equivalent, responsibly, age-gated, in the same exact way that we responsibly sell nicotine products, beer and wine, and we already sell the 1.75, but we thought it was responsible to limit it to a 3 milligram, and after talking to Mr. Vincente and his advocates, that seems to be a product that the manufacturers are willing to make. So we don't want to lose those types of sales, but we also have no interest in selling a 10 milligram product. Thanks.

Thank you. I'm sorry to extend those questions, but just for my clarification, when you were talking milligrams, then we're talking 0.3% of the Delta 9 THC. Is that what, I mean, are we clear? Am I clear? Is that what we're talking about? Is it Delta 9 or Delta 8? Yeah, we're talking about Delta 9. So Delta 8 would be a synthetic produced cannabinoid that is not approved in this bill. And then 0.3% equals 3 milligrams or 4 milligrams? No, that's a little off there. It does get confusing. 0.3% was the federal guideline that was originally set in the 2014 pilot hemp bill. passed in 2014. So that's the threshold of allowable THC in dry weight material or by weight in hemp produced under the current federal guidelines.

Last question. How does that correlate with the conversion to milligrams then in the cans? Yeah, so it's pretty tough. So the way that it's been going, and this is the real, the way the loophole worked and what led to this basically explosion of 1,000, let's be real, 1,000 milligram gummies being sold online to kids through Instagram right now, and that's really the loophole that was closed in November, hopefully, which obviously we're not advocating for here. If you take 0.3% of a weight of a beverage, say, for example, so a 12-ounce beverage, that equates to a lot of THC allowable under what the Farm Bill previously said We believe the federal government at this point at the November 13th deadline that approaching has closed that loophole That being said I currently also sit as executive chairman and founder of Attach, which is the American Trade Association of Cannabis and Hemp. We've legalized multiple states and worked very closely on both the hemp and regulated market side, especially helping with this loophole. And then also sit on the board of CABA, which is the Coalition of Adult Beverage Alternatives. Something's happening federal. We're hoping November 13th, obviously, that online sales that have heavily impacted the state of Colorado's regulated market go away. But I would be highly surprised if a federal bill did not get passed, saving the beverage side of this industry. At this point, there's almost 20-plus states that either have passed or will be passing legislation, including the state of Alabama, that has already passed regulatory legislation on cannabis beverages up to 10 milligrams in liquor stores and convenience stores. Thank you.

Thank you. Just stick to the conversion. 0.3% delta 9 is how many milligrams in a can? I mean, how many milligrams equals that? I mean, because I'm reading online the limits. We're talking 3 milligrams. Well, how much 0.3% delta is that? Does it matter? I mean, 0.3% is 3 milligrams. No, that's different math, basically. So it's hard to correlate that. 0.3% really has to do with just the weight by volume. So 3 milligrams, if you're a 12-ounce can. It's less than 0.3 dry milligrams. I mean, 12 ounces of liquid. All right, thank you. Yeah.

Great. Thank you. Thanks for having me. So I'm Ben Kennedy. And the accent aside, I am an American citizen. Proud one. I have a couple of American citizen kids. We'll get to that. I think today you'd be forgiven for thinking that the hemp industry is full of grifters making products out of state in a bathtub designed for kids that I've learned today may well end up attacking each other. So I just want to put some clarity on this from an operational standpoint. point. I didn't come from cannabis 20 years in corporate America. My wife, co-founder, worked for the U.S. State Department under George W. Bush. We had two kids at Bromwell, we're responsible parents, we live on 7th and York, we are vested in Colorado and the safety of Colorado and the growth of Colorado. We started Fable, a low-dose hemp-derived canned cocktail, four years ago, based on a social tension that we saw. This could be hillstone. Six friends go out for dinner. Two friends go to the parking lot. Come back in. The restaurant smells. People are annoyed. It could be a garden party. People walking down to the bottom of the garden. Plume of smoke. Come back. It could be, and this is a true story, I saw a CFO with a blue tongue and she said, I've just had a cannabis gummy. So back four or five years ago, We determined that not everybody wants to smoke. So what did we do? What did we put forward as the solution to that? The most universally recognized kids' food on the planet, a candy, a gummy. Five years ago, nationwide. So when we talk about appealing to kids, let's just think about where we've come from and the products that have been in the market for four or five years to date. In the case of Fable, we made a drink for adults. Now, what does that mean? We've replicated the youth's experience of alcohol, the bite of alcohol, the burn of alcohol. Why? Because we want kids to taste this and put it right back down. God forbid they do taste it. There isn't a kid in Denver that would enjoy Fable. That was intentional. so we've made a drink that was designed to give people a way to augment alcohol versus disrupt marijuana and we've done that in a very responsible way as for what's in fable we are self-enforced 21 plus we won't sell anywhere that isn't 21 plus or target consumer is a bromwell parent they care about what they put in their body there is nothing synthetic in fable there is not even a coloring dye or gum in fable fable is the only thc product to have been invited to showcase at the aspen food and wine classic i tell you that not to peacock because it shows a standard and we adhere to these standards so in closing what we want and we've tried the dispensary model mr kennedy

People are not drinking less. They're drinking differently, and we're being left behind.

Yeah, and I'll give back some of the time that Mr. Kennedy offered since he is a member of our organization. Madam Chairman, members of the committee, thank you so much for the time. My name is Christopher Lackner. I'm the founder and president of the Hemp Beverage Alliance. We are the trade association for the hemp beverage industry. We have over 371 member organizations in the U.S. and Canada, and we even have one in Europe up in Northern Ireland. A couple of quick facts. First and foremost, the trade association for the industry is based in Salida, Colorado. We have two employees there. We have two and a half full-time employees in the state of Colorado with the half person in Lakewood, Colorado. Hemp beverages are currently regulated in 28 states. We mentioned Minnesota we mentioned Georgia we also other states like Louisiana and Kentucky and Tennessee etc These products are in states that have a regulatory market and states that don have a regulatory market The key indicator here, as it's been alluded to, and I'm just going to hammer home, is that these do not compete with the cannabis dispensaries. They compete with alcohol. They are enjoyed like alcohol. They are marketed and sold to 21-plus adults like alcohol, and the price point and the experience is like alcohol. Consumer trends are changing and folks are rethinking, they're recalibrating their relationship with alcohol and they're looking for something different, something with a little bit of lift to it, and they still wanted an adult beverage. And that's where hemp beverages come in. Got a minute and a half here. So a couple of things I just wanted to amplify here. This industry is booming. It's estimated by Total Wine and More that once federal regulations come, and it will be soon, that this could be upwards of a $30 billion industry. We have companies such as Target in the state of Minnesota that are selling these products. Sprouts, a well-known grocery chain that is owned by Meyer Corporation that sells these products. The United Center was mentioned, a large entertainment facility. Minor League Baseball in Oregon has these available at their ballparks. All in all, this is in places where products have been regulated, where the category has been regulated, there have been no catastrophic public health incidents that some folks may be concerned about. When they are treated like alcohol, regulated like alcohol, distributed through the alcohol three-tier system with all of its checks and balances and its 92-year history of regulation, these products are responsibly enjoyed responsibly taxed and create jobs I want to just say that we have 15 members of our trade association in Colorado they are all currently doing all they can within the confines and doing all their exporting instead and I'm just want to leave it at that and say that we are a resource for this committee and we'd be happy to drive back up to 85 at

Now we're going to go right here. Yeah, I also live in Salida, Colorado, so it is pretty amazing.

Back to the regularly scheduled program.

Thank you, Ms. Ross. Now we'll go right here.

And thank you. And finally, we'll wrap up with Ms. Maff.

can answer the 0.3 question no problem thank you um miss tedeschi do you need him to re-up the question okay we're just gonna let you answer um so this is admittedly something that's really

Senator Colker.

Senator Kolker? And I'll leave it at this, because I'm still trying to stress. We don't know how much you're talking about when you're saying the dry weight, right? How much of the dry weight is at milligrams? What is that? The bill says 10 milligrams, and that's the hard part. I'm trying to get my head around is how much of that dry weight then goes into one can of beverage that we limit at 10 milligrams, and how do we determine that? It sounds very complicated to me. So I think that's when you spend a lot of time explaining, you're losing, right? You're trying to explain how this works. That why this is taking some time I totally understand and appreciate that What is really shocking and many of you might not know is if you go into a regulated cannabis dispensary and look at what the dry weight Delta 9 THC limit is in a gummy or a beverage product

Seeing no other questions, we will go ahead and release this panel. Thank you so much for being here with us today. And with that, we have concluded all of the witnesses that we're going to hear from today on Senate Bill 164. So we'll wait for our sponsor to get situated.

And thank you Senator Gonzalez for your work on this the coalition you led and I really appreciate all that you done on this That a proper motion Oh we need a committee member Yeah that right

Thank you.

And that's finally a proper motion. Now, Ms. Rudabush, will you please pull the committee?

Yes. Grazell.

At the sponsor's request, yes. Polica.

Aye. Snyder.

Madam Chair.

That bill has been postponed indefinitely. Thank you very much. I'm going to pass your, you've got a bill. Oh, right here. Okay, great. You're next. Very good. No. I'm done. Very good.

I'm fine. I don't know. I think so. There's a note on that. It was terrible. What was it? Thank you. I guess I don't either. What are you doing? What are you doing? Troublemaker? Is that a hemp? Kyle, is that a hemp-derived THC? 1.75 milligrams? Yeah. I don't know why they don't measure it in percent like alcohol. Like it would make a hell of a lot more sense to know that this can is 3.2% alcohol. Very good.

Senator Kipp. Thank you Madam Chair and committee for hearing our bill today. We have HB 261346, Transfer of Unsold Insurance Premium Tax Credits.

Apparently they had some of their own products At any rate so what we are doing today is during the special session back in August we passed HB 25B 1006 Unfortunately, it had a small defect in it, and that defect could cause Colorado to be $30 million out of balance, and we just did the budget, so I would really recommend a yes-ho today. Really what we need to do today is make sure that the third party who is helping us to sell those insurance credits for the health insurance are able to purchase the rest of the credits before the end of June. And so that's the part that wasn't in the original bill. But if they can't purchase those credits before the end of June and make Colorado whole, then we will be $30 million out of balance. In addition to that, they can then continue to sell those credits onto insurance companies and other types of corporations. But this really needs to happen. It's incredibly important, and we would ask for your yes vote.

Thank you, Madam Chair, and thank you, Committee. and thank you to my esteemed colleague for inviting me to be on this bill with her. And I'll start by doing a brief history. Back in the special session of 25, two bills were passed. One I was proud to be the prime sponsor of, House Bill 1004, and that was basically selling these tax credits to raise $100 million to support our general fund. At the same time, HB 25B 1006 started with a different funding mechanism, but ultimately came around to tax credits also as a way to support the health insurance affordability enterprise. It was conditioned on the expiration of the Federal Affordable Care Act subsidies, which did, in fact, expire. But I think what we hadn't thought of was that $200 million of tax credits in this space is quite a bit. And so we didn't get the full subscription that we were looking for. And I think we've also learned through this process, we've had success before. The climber program was funded with similar tax credit program. But what we find is that these companies aren't willing to buy a three-year stream of tax credits. They much prefer to buy them on an annual basis because they don't know what their tax liability is going to be, how much of a credit they're going to be able to use in a given year. So the subscription rate was not what we were expecting. So what this bill does is recognizes that. And as my co-prime sponsor said, these credits have to be sold by June of 26. So what we're doing is we're bringing in these third-party facilitators who will purchase the unused credits, unpurchased credits for lack of a better term, and hold on to those and work with the insurance company. So a year later, a year after that, if a company finds itself with a higher tax liability than they expected or a need for a tax credit to offset that tax liability, they will have those credits. At the same time, the state will get the full amount of money that we expected to get when we first issued the tax credit program. So that's really it in a nutshell, that we were just trying to get these credits out the door and sold by the deadline of June 25th. And this is a good mechanism because it allows for the credits to ultimately go to the right people, but based upon on a need basis. So as they realize their tax liability, they'll have an opportunity to buy these credits after June 26 from these third party. Thank you.

Thank you, Madam Chair. Thank you, sponsors. So for clarity, the $100 million tranche for supporting the health care affordability enterprise, those were sold and consumed, bought out, and you said there's potentially a $30 million impact to the general fund, so I assume the second tranche of $100 million that we didn't get participation in all $100 million of it, that there's $30 million still sitting there unsold, and the bill is an attempt to offer it to somebody, a third party, other than to the insurance company? And at what cost to the state then does that come at?

I think I probably skipped too many steps when I was explaining it, so thank you for backing us up a little bit. So I believe that the other $100 million has been sold. This is $125 million, and part of that, I believe, about $41 million has been sold already. But we found that a lot of companies don't want to go too far in advance of what they know their tax liability will be. The sales of these tax credits have always been done by this third party, right? There was an RFI that went out. They bid on it. They are getting it, and you will hear from them today. So that is what is already happening. The only thing that the bill did not include back in August is it didn't allow a provision to say that that company could then go ahead and buy the rest of those tax credits that remained unsold, make Colorado whole, and then go on in the future to finish reselling those credits as time goes on. Does that make sense?

Thank you, Madam Chair. Thank you both for bringing this. Thank you to the Treasurer's Office for a lot of work. I would say it's not $200 million. I think they could sell up to $250 million, if I remember correctly, from the bills that we ran in special session. But my question is, as I see what your bill is trying to do to allow for a non-insurance company to purchase these tax credits, the process that we go through is we need the money today, and we typically sell these at a discount to be able to get the money today, so there's a benefit to the insurance companies. I just want to try to be clear and make sure that when we are allowing for this third party, we're not essentially taking another discount based on kind of what we originally talked about or envisioned when we were selling these tax credits. We're not kind of adding a layer. It's just necessarily letting them purchase them, and then they can sell them at a second time. I just want to be clear that we're not kind of getting discounted further than what we had already planned. Does that make sense?

Yeah, and that's what we're already doing. So this company has already been chosen as that sort of third-party seller. So they've already been selling them. So, yeah, I'm sure they get a cut. They can tell you what that is. But the overall cut is not greater than what we said we would offer the discount at. Does that make sense?

I just wanted to follow up on that You absolutely right Senator Mullica I think both of them estimated million in sales in order to achieve the million that we wanted for the various purposes And I think we all realize time value of money. So you buy a tax credit for the current year, it's going to be pretty close to over 90%, maybe as high as 95%. If you're buying a tax credit for two years out, it's going to be a lower rate because there's more uncertainty there. And then similarly for the third year, it would be a lower rate at that time also. So that really won't change here. It'll be between the third-party purchaser and the ultimate redeemer of the tax credit to negotiate a sale. But I think the sale to the third parties will be along what we estimated. And this is really just a way to bring that money forward now. it'll be a face-to-face negotiation between the third party and the ultimate utilizer of the tax credit.

Thank you so much, Madam Chair. Just a quick follow-up, because I guess I'm just curious of, and maybe I don't know if you can answer this, and so if you can't, we can ask the company. I guess I'm just trying to figure out what the business model is then, you know, if they're able to, what we're changing. Obviously, I know we're expanding who can purchase them and whatnot not so that they could be sold to the insurance companies later. I'm just trying to figure out what the business model is. And I just want to be just crystal clear that by doing this, we're not getting any worse deal than we had initially kind of signed up for.

I'm not sure if we have anybody from Treasury. I see Leah. They can probably give us a more specific answer on that. I don't believe it will affect our ultimate revenue generation. And I'm just going to read from House Bill 25B-1004. It says the minimum proposed tax credit purchase amount must be the greater of either the amount an independent third party determines to be consistent with market conditions or 80% of the requested dollar amount. So I think it's an 80-cent floor in the original bill. And I think the question is, is that going to get any, you know, is that going anywhere? And I don't think it is because that's in a different bill. So very good.

Yeah, that's correct.

It's not going to go lower than that amount. Than that 80%.

Yes, and thank you. And that was a negotiated change. I believe that was an amendment to 1004. We had it originally set at 70. That was a little low, and it interfered with some of the affordable housing tax credits. We didn't want them to be too much more attractive so that people would purchase these credits at the expense of the affordable housing tax credit. So we settled on 80 as a floor for that. But like I said, it's related to the time of the credits going to be utilized. So it will be higher in the first year and then proportionally down to that floor of 80 for future years.

Hi, Madam Chair, members of the committee. My name is Leah Marvin Riley. I'm the Policy Director for Department of Treasury. I'm here in support of House Bill 1346. As you just heard, this is a technical update to two bills that you passed. Several of you sponsored 1004 and 1006 in the special session last year. Treasury was directed to raise $200 million total, $250 million in the sale to raise $200 million of revenue, $100 million each for the budget and for the health insurance affordability enterprise. We're raising that money by selling tax credits to insurance companies and corporations up front, while buyers claim those credits against their tax liability over three years. At this point, we've sold about two-thirds to three-quarters of the $200 million authorized. We did that in partnership with Advantage Capital. They're here today. You'll hear from them later. Because of how the current statute is written, we are at risk of not being able to raise the full amount that you're counting on. And because of this risk, we identified a technical change that you can make that will ensure the capital you're counting on arrives. Most insurance companies will only commit to buying credits once they know their annual tax liability and they won't purchase a three-year stream up front. This bill will allow a bridge purchaser to buy any remaining unsold credits at the average rate of what's been sold so far by the June 26 deadline, not to go below the floor of 80 cents that's in the statute now, and then they'll transfer them annually to qualified insurance companies as those buyers are ready. Treasury will maintain oversight throughout, and credits cannot be further transferred after that single handoff. The bill does not create new tax credits, change when they're claimed, or affect the state's fiscal position. It's simply giving us an option to finish the work that you asked us to do. And just to note, there will be an amendment today that adds to the statute a clarification that a tax certificate will be issued to any purchaser of these credits, including the bridge purchaser and the subsequent transferees. That ensures that the statute aligns with Treasury and the Division of Insurance procedures and expectations. So we ask for your support and happy to answer questions.

Good afternoon. Tony Toops, Advantage Capital. We are the third-party company that has responded to the competitive RFI that the Treasurer's Office put out and have been handling the auction of the tax credits. We expect to apply to be the bridge purchaser. We're not specified in the legislation. We have had a fantastic experience with the Treasurer's Office. We do this in numerous states around the country. They've been very transparent, very responsive, and professional. I'm happy to respond to anything.

Thank you, Madam Chair. I guess I want to clarify because I guess if this is the case, I'm a little concerned. So based on what Senator Snyder is saying, the closer you are to your tax year, the higher you're paying. So maybe you're at $0.95, but if you buy something five years out, you start going down to the percent you're paying. Are we so is this entity buying the tax credits at the floor of 80 cents Because I know that we were obviously that the floor but the hope is that we not at 80 cents And so back to that original question I asked the sponsors, I'm trying to understand the business model here and just making sure that the state is, like, that we're already taking a cut to try to get this money forward. I want to make sure that we're not taking more than we need to. Mr. Toops, or sorry, Ms. Marvin Riley.

Senator Mullica. Thank you, Madam Chair. So I guess, sir, I would love to kind of know the business model here, that if we're only averaging 82 and we had hoped that we were in the 90s, or at 90 at least, I guess I'd be curious of what, how does that math work out for your entity? to purchase this $30 million or whatever we need to sell.

Senator Mullica. So I just want to be clear. So you buy them at the average price that's being sold right now. Is the commission, is there going to be a difference? Is the plan to buy them at this average price and then market or sell them at a higher price?

Senator Mullica. I'm just trying to understand this. And I guess if, and I'm not an expert in this area, but I'm just trying to understand this. If you have this expectation that you could get higher than this average of 82 cents, why aren't we getting higher than this average?

Mr. Eek also has an answer.

We can.

that, Mr. Eek. So I guess my question is, if these tax credits end up getting sold in the 90 cent range or plus, you know, up to 100%, the state that's all your company and you get that whole spread or does the state get any of that spread? Can you explain that to us a little bit? Maybe Leah can, yeah. Ms. Marvin Riley.

Okay.

Thank you, Madam Chair. I'm trying to follow what Senator Mullica was saying, because I really understand, I think, what he's getting at. We were selling these, and still are, tax credits, hoping to sell $100 million worth. that are valued at closer to $125 million. So when the insurance company bought the tax credit, they would buy, let's say, $100,000, and then their tax was, say, $101,000. That tax credit would go towards that, so they would only owe that much. but I think where Senator Mullica was going if the intent was to do it close to 80 cents the price that was used in the budget calculations if they're sold we don't care what they're sold for because we sell them at the price we sell, excuse me, at. So how much are, because if there was an RFI, how much are we selling them to the third party? If it's not 80 cents, if it's 90 cents that we're selling them at, that calculation on the state expenditure, state tax expenditure might change.

Sir, for your company to make any money on this, you're buying these tax credits at $0.80 to $0.83. How much are you selling them to insurance companies? Mr. Tu?

So, and I think when, I think Senator Mullica mentioned commission, if you put up the money up front, you'll have these tax credits. and if you're going to sell it to insurance companies, you're not going to – where does your profit come in? Are you receiving some commission for the purchase of this above that? Are you selling those tax credits for what you pay for them to insurance company?

So how do you get paid? Because I don't see any way –

Yeah, we're still struggling with this. Um, Ms. Marvin Riley, can you clarify this at all?

Yes, Senator Minervis. It's a great question, but again, this all falls into that time value of money. So what the state is willing to give up at this point in time is, you know, down to approximately 80 cents on the dollar for those tax credits with advantage capital what they're going to be able to do again kind of in this current year is they would be able to sell somewhere between you know 92 to 95 cents ish um to the to the insurance companies that are saying hey we need to buy we need you know five million dollars of the of these tax colorado tax credits next year when this comes up they would be able to do the same thing but what's where they're losing money too is they're put they're fronting this 30 you know million 40 million dollars whatever that's final number is to the state of colorado today in 365 days that you know that 30 million dollars becomes 45 50 million dollars for them so even though they are selling these in those future years at a higher profit, they're losing money, you know, or you're losing a percentage down. And especially once you get out to that third year, because you have to think about it as, let's just say this year, you know, those credits are worth 95 cents. Next year, they're worth 85 cents. The third year, they're worth 70 to 75 cents. So you can see how that staggers down. Yeah, they're getting a higher price in the in the moment where they're selling it to the insurance companies but they've fronted the money and so they're they're paying interest they're they're paying the cost of capital cot things that are internal for their own company so there are costs for them that they're going to try and offset with the best deal that they can but regardless these we're getting the benefit right now by getting the money that has been allocated or you know requested from the original legislation Does that make sense?

Mr. Tubes? Oh, Mr. Eek, sorry.

So, again, using the simple round numbers, if we're just saying that you have an insurance company X that they want to buy $1 million worth of these tax credits from Advantage Capital, Advantage Capital is going to sit there and say, we'll sell you these tax credits at $0.95 on the dollar. The insurance companies will like that because, one, that's still five cents cheaper than them paying the actual taxes to the state of Colorado. That's still the encouragement for those businesses or those insurance companies to utilize these tax credits and for Advantage Capital. In the early years, again, Advantage Capital is going to make a little bit more money because they're able to sell their cash outlays at the same time as they're getting this new cash coming in. Advantage Capital is still restricted that they can only use 33% of these that they buy within each year. So the soonest that they can finish and get made whole again is after the three years. If they have any that are on their books extending past that, that's just going to cost Advantage Capital more and more. So that's going to force Advantage Capital in future years to sit there and say, hey, maybe these aren't worth 95 cents on the dollar. Maybe these are worth 90 cents on the dollar. But regardless, you're still going to have insurance companies interested on purchasing those tax credits from Advantage Capital at that point in time because it's still a cash savings for them to buy them from Advantage Capital and then make their payment to the state of Colorado on their tax liability.

It's up to them to sell it, and whatever price they can get, they'll sell it.

I can.

Again, Senator Benavides, thank you very much for that question. You are correct. When an advantage capital enters into the contract for whatever amount of the tax certificates or the tax amount that they're going to pay back to the state, that is 100% on their books, and they are 100% on the hook to get rid of them as they can. The state of Colorado would not owe them any additional funds or any additional payments for unsold tax certificates. Even if it gets out to the 2033, when these do expire, if they still had them on their books, that would be a liability that they have to incur on their own. That's part of the risk they're willing to make in order to buy these up. Senator Benavides.

Mr. Eek.

All right.

One last question. If we're paying them $2.5 million, roughly 1% of sales, to do this, and then they sell them, and I have 1006 from the special session in front of me, and there was a $3.1 million appropriation to Department of Treasury, does that $2.5 million come out of that? And so we don't need... Additional appropriations now.

Madam Chair and Senator Benavidez, yes. So in 1004 and 1006, we wrote it so the cost of issuance would be able to pay for the cost of whoever the vendor we selected through the publicly procured process was. and $3 million was our estimate based on tax credits we had sold in 2020 for the climber program on how much it generally cost to hire a vendor to do this. So there's no appropriation required. There wasn't in special session either. It's just, yeah, that $3 million is the general maximum amount of money that we were allowed to spend out of the cost of issuance per special session bill.

No, I'm fine, Madam Chair.

Thank you, Madam Chair. Please correct me if I'm wrong. The question is, is this a correct statement? So within the sale of the tax credit, which is a whole other idea of insanity that I can debate later, But when we named the floor, like I will not sell this cheaper than 80 cents on the dollar, that pretty much sets the price. If we would have said 90 cents on the dollar, that would have pretty much set the price. And so we shouldn't be surprised that it sold at 82 cents on the dollar when the buyers know already our bottom line of 80 cents on the dollar. What drives the price here is scarcity. There are plenty of tax credits left, plenty, because we haven't been able to sell all of them, which means there's a surplus of tax credits. When those are gone and they're down to zero, the price floor goes away of $0.80. Now it's up to our contractor to determine or set the price of the tax credit. So no longer is the buyer looking at a competitive 80 cents on the dollar piece. They're looking at whatever they can negotiate with the contractor. Am I understanding that correctly?

Awesome. Mr. Eek, your favorite phone a friend today.

to account for thank you mr eek senator bright okay thank you for the explanation that illustrates

Is that an old hand or a new hand? No, that's a new hand. Great. We'll take your new hand.

Miss Marvin Riley, and then we're going to go to Minority Leader Simpson.

Minority Leader Simpson.

I looking at Senate I sorry House Bill 25 concerning modifications to the Colorado Health Insurance Affordability Enterprise So we filled the general fund one is what I just heard 104 or 1004 was filled The one pager says ensure the state can sell tax credits authorized under House Bill 25-1006.

Did one of them get filled? So, yeah, go ahead, Ms. Marvin Riley.

And that would impact the budget.

I do not know the answer to that. We had 1,004, and so it was numerical.

That's what I thought. It was my bill. Yeah, go ahead.

Well, that was clever.

Thank you, Madam Chair. Mr. Troop, I actually had dinner with one of your colleagues from St. Louis. Nice. Yeah, not too long ago. And I got a chance to talk with her about what we're talking about here. But I just want to clarify that your company takes a risk in buying these unused credits. And so that risk is priced into the price that you're going to try and sell them to other companies.

Right. Correct. Yes, sir.

Thank you.

So actually, both of those bills, 1,006, 1,004, had an upper limit of $125 million. Because you have to sell sometimes all the way to $125 million to raise to $100 million. It looks like if we've been averaging in the low 80s, it's more like $120 million in tax credits will be sold to raise that $100 million. Is that a good statement?

Thank you, Madam Chair. Senator Snyder, yes, that is correct.

Yes, Senator Snyder, you can keep going.

Thank you for that question, Senator Snyder. They were both wonderful bills. Providing health insurance for people and balancing the budget are both extremely important. We're happy to help.

Very good.

Mr. Toops. Thank you for the question, Senator. I don't believe we get the commission on selling it to ourselves.

Mr. Tubbs? Happy to respond. Senator, we would much prefer to sell them today and be done with it and make that commission as opposed to having to go out and we're going to – we're not in the bill, so we have to be chosen yet again. It's a second selection process to be the bridge purchaser. If we're, in fact, chosen, we're going to have to go out and borrow that money at a cost of capital to make the state whole on whatever the delta is between what's been realized and what the budget projection is for the 80% to make the budget this year. So we would have much less risk if we could just sell them. So we're taking risk, and we're willing to do that because we think there's, you know, we've had a great partnership with the state. We're very confident in that relationship, and we know there will be a market for those premium tax credits in the out years. The question is, what will the yield be? We don't know that. That's an unknown. So, I mean, that's what the market is saying is that there's so much that they can take. However, there's also a portion of the credits that there's just no market for at this point. So we would hope and we would do better to sell today as opposed to borrow the money and wait.

Ms. Marvin Riley. Madam Chair, just to clarify, Senator Mullica, this is enabling us to use a bridge purchaser. It's not naming any company in the bill. It just says, if we need to do this, we will go out and find a bridge purchaser. And I'm realizing after we had this whole conversation, it probably would have been good. We could have gone into an executive session and looked at the contract and probably had a lot of these questions answered. So this is a great conversation.

Thank you, Madam Chair. I move L002 to 1346.

The amendment for us, please. My apologies.

Yeah, sure. Thank you very much. I think we heard in the beginning of our opening that companies are hesitant to buy too far out in the future. You don't know what the economy is going to do. You don't know what your industry is going to do. And so if you go and buy a large tranche of tax credits that can be taken in years two or three, they may not fit your needs at that time. So what we've learned through this process is companies buy the tax credits after they know what their tax liability is going to be. So that's why I think it's part of the reason, besides having too many tax credits available at one time, part of the reason why the uptake hasn't been as vigorous as we projected originally. But if you're a company and you didn't buy any tax credits for two years from now, and in two years from now you have a banner year and you have a high tax liability, you're going to be talking to one of these bridge partners because you would much rather pay $0.92 on the dollar than the full 100% of the tax liability. So for them, it's worth it to pay more down the road at a higher price than to buy early at a lower price and run the risk of not being able to utilize that tax credit. So I think it's just simple, good business sense. And with that, I would ask for an aye vote on House Bill 1346.

Thank you, committee, for hearing our bill today. I mean, I think what we've heard a lot about today is supply and demand. We were told this, frankly, back in August. If we glut the market with an additional 125, we're probably not going to get as good rate. We don't know exactly. We'll see what happens. This is where we find ourselves. You might not have voted for 1004 or 1006, but I would ask you to vote for this bill today because, frankly, we cannot afford to lose the $30 million that we need to have in the bank by the end of June, unless we all want to go back to the floor and spend another 13 days or whatever we have left on figuring out how to close that gap So I would ask for a yes vote Very good

Thank you. I move HB 26-1346 as amended to the Committee of the Whole with a favorable recommendation.

Ms. Rudevush, will you please poll the committee?

Bright. No. Rizal. No.

Mullica. Yes.

Snyder. Aye.

Madam Chair. Aye. That bill passes six to three, so you're on your way to the committee of the whole. Thank you, committee. And we've got, yeah, you can do it from right there. Is Senator Roberts coming? Oh, I just texted him. I'm going to tell him he's not. Don't worry. This, oh, good. Let's go ahead and start it. We've got House Bill 1338. We are not the Committee of Reference. Minority Leader Simpson.

support Thank you Do we have questions for our bill sponsor Senator Kolker Any of this money coming from online sports gambling

I can say with some confidence, but not absolute, that it's not generated by the sports. Those end up into the state water plan grant program and not the projects bill.

I apologize. I am making assumptions, aren't I? Ms. Sandoval, please introduce yourself and you have three minutes. Good afternoon. Good afternoon, Madam Chair and members of the committee. My name is Anthony Sandoval. I'm with the Special District Association of Colorado. We are in strong support of HB 261338. This bill helps our special districts complete important water projects such as pipelines, storage, and infrastructure of clean water that flow to our Colorado communities. It improves how our district work and ensure that local tax dollars are used efficiently. So we appreciate your consideration and ask for your full support again of HB 261338. Thank you.

Thank you, Madam Chair, and thank you, Senator Simpson, for being our sponsor. You always do a great job. I'm the Executive Director of the CWCB, and really I'm just here for questions, but just echo all of Senator Simpson's comments about the importance of this bill and the projects that receive appropriations through this bill are critical to our water supply issues around the state of Colorado. So just appreciate the committee's attention. And I see that we do have somebody in the audience who wishes to testify.

Thank you Madam Chair and members of the committee My name is Diana Orff I here on behalf of the Colorado Water Congress As Senator Simpson said this is not a routine bill but it is extremely important We have always supported it because the projects are so critical to water around the state for infrastructure and for projects for maintaining clean water and making it available to our citizens. So we appreciate your support.

Director Riss does. Director Riss, sorry. Thank you. No, thank you, Madam Chair. I'm happy to answer that. The answer to that is really that we needed an extension to be able to use that funding. The person who is the staff project manager in charge of that funding moved on to a different

amendment phase. Do you have any amendments? Minority Leader Simpson? No, Madam Chair. No

is closed. That brings us to wrap up. Minority Leader Simpson. Good bill. Good bill vote, yes.

Yes.

Grazell. Aye.

Mullica. Excused.

Snyder. Aye.

Madam Chair.

That passes unanimously, and you are sadly on the way to the committee on appropriations. Good luck.