revenue

Marijuana: Falling Prices and Retailer Saturation?

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Recreational marijuana prices are falling and, in much of the state, retail options are plentiful. It appears to be a cannabis consumer’s dream, or at least what voters hoped for back in 2014 when Measure 91 was passed. Now, it has not been an entirely smooth ride to date, and concerns remain. Chief among them, as the new Secretary of State audit spells out, would be enforcement and ensuring products are tracked and accounted for. Additionally, potential saturation issues for growers, processors, and retailers indicate that some industry shakeout, or market consolidation is likely.

First, marijuana prices are continuing to decline. This is true here in Oregon, and in Colorado and Washington. Much of this is to be expected as businesses become more experienced in the newly legalized industry, which allows for efficiency gains. Furthermore, increased competition can lead to lower prices as well. Now, given Oregon levies the marijuana tax based on price, our office lists price as a risk to the outlook. Lower prices, everything else equal, would lead to lower revenues. However, lower prices should also lead to larger consumption. Demand curves do slope down. Further complicating the marijuana industry is the ongoing presence of the black market, which also competes on price, and can undercut the legal market at least in part due to the lack of regulations, product testing, etc.

While lower prices are a clear boon for consumers, they can lead to problems for some businesses. This is particularly true for those unable to adjust due to their business model, fixed costs, debt loads, and the like. For example, a firm may be profitable at a certain price point, however marijuana prices are falling by 10-20% per year. If that firm is unable to lower its operating expenses enough, accept lower profit margins, etc. then it can be in financial trouble. Grumblings within the industry suggest this is happening, at least in part due to market saturation. Now, is it truly a concern from an industry wide perspective, or from a consumer’s point of view? Unlikely. However, for any particular business it can be devastating.

This second chart tries to frame recreational marijuana market saturation here in Oregon relative to Colorado and Washington. In all three states, the number of recreational marijuana retailers is about the same, or just over 500. However, once you adjust the numbers based on population, it is clear that Oregon has significantly more stores. This does not necessarily mean Oregon is over-stored. It may be, but it may also be the case that the other states are under-stored. In fact, Colorado currently supports more marijuana stores overall due to their robust medical marijuana market. The error bars in the chart are an effort to show both the total number of marijuana storefronts (recreational + medical), in addition to just the recreational stores.

Now, there are an additional 140 or so retailer applications in the OLCC system. Should these stores open, it would push Oregon significantly past Colorado, even on a population adjusted basis. What all of this does mean is there is more competition for every Oregon recreational marijuana dollar, and this will likely increase. As such, average sales per retailer in Oregon are lower, leading to the industry shakeout or market consolidation concerns or expectations. Pete Danko had a good article in the Portland Business Journal recently about this.

As economist Beau Whitney notes, it’s easy to envision a long-run outcome for marijuana that is similar to the beer industry. One segment of the market is mass-produced and lower priced products. This will be the end result of the commodification of marijuana. Margins will be low, but due to scale, businesses remain viable. These are more likely to be outdoor grow operations as well, due to costs. Even in a world of legalized marijuana nationwide, it is plausible that Oregon, along with California, would remain a national leader in this market due to agricultural and growing conditions in the Emerald Triangle.

The second segment of the marijuana market would be similar to craft beer today. This segment would include smaller grow operations of specialty strains, higher value-added products like oils, creams and edibles. Such products will require and command higher prices. However, as our office has noted previously, it is here among the value-added manufacturing processes, in addition to building up the broader cluster of suppliers, and ancillary industries that Oregon will see the real economic impact of recreational marijuana. If all we have are growers and retailers, there will not be a large impact. Furthermore, the long-term potential of exporting Oregon products and business know-how to the rest of the country remains large.

Even if this market bifurcation materializes, it does not mean it will be an entirely smooth transformation. Conditions today are great for consumers, but potentially worrisome for some businesses. It will be interesting to watch how the market and industry continues to evolve. Our office’s forecast expects sales to continue to increase due to both new customers as usage increases and social acceptance of marijuana rises over time, and due to black market conversion. It’s the latter that is the most worrisome from a long-run perspective of industry viability. This is why enforcement and compliance are key issues being addressed by policymakers and industry professionals today.

Recreational Marijuana Sales (Graph of the Week)

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The big news this morning is that the federal government, led by Attorney General Jeff Sessions is set to rescind the so-called Cole memo, or memos as the case may be. For those who don’t know, the New York Times describes it as “an Obama-era policy of discouraging federal prosecutors from bringing charges of marijuana-related crimes in states that had legalized sales of the drug.” In practice this allowed Colorado and Washington first, followed by Oregon, Alaska, Nevada, and now California to establish recreational marijuana markets and not worry too heavily about federal prosecutors cracking down on these operations which were legal at the state level, but never legal at the federal level.

Last year, our office was tasked with forecasting recreational marijuana tax revenues for the state. You can read our summary here. Included in our work, and discussed with our advisory group was the possibility of changes in federal policy, or direction. This was especially salient given the changes in the executive branch. Our forecast summarizes it as a risk (PDF pg 38):

Finally, the one risk that looms large over the entire forecast is the federal government. While there has been no clear warning or action taken, there is a non-zero chance the federal government could step in and eliminate, or severely restrict recreational marijuana sales. In this event, taxes collected would be considerably less than forecasted.

Well, now there does appear to some action taken. Ultimately it will likely come down to enforcement, and the choices prosecutors make. We will be meeting with our advisory group again this month, and will discuss the implications of these changes, along with other issues and trends in the recreational marijuana market. More on this after our meeting and as we get closer to the Feb 16th forecast.

All of this brings us to this edition of the Graph of the Week, which shows monthly recreational marijuana sales for Colorado, Washington, Oregon and Nevada. These sales figures are estimates based on reported tax collections, and do not include medical marijuana sales. In total across the four states, they are seeing around $250 million in recreational marijuana sales per month. Additionally, all states continue to see growth in this newly legalized world. However the exact level of sales is also determined by the size of the population, usage rates, and tax policy, among other factors.

In fact, in my preferred chart in comparing sales trends, Oregon’s first year and a half of sales are nearly identical to Colorado’s first year and a half of sales, after you control for population size. Let’s call this the Bonus Graph of the Week. Also note that Nevada is seeing strong sales in their first few months. Nevada is currently selling about the same amount of recreational marijuana as Oregon is today, however with a much smaller population. Their initial adjusted sales data is the highest we’ve seen among the legalized states. Nevada and Las Vegas in particular are also a tourism hub, and thus are seeing larger sales than the resident population alone would suggest. I don’t have a huge reason to believe cannabis tourism is a big factor in Oregon’s sales, but I think it clearly is in Nevada.

As we write in our forecasts, there are a lot of risks to the recreational marijuana outlook. In particular, usage rates, prices, harvest levels, regulations and the like both have upside and downside implications for the forecast. However, none of those loom as large as changes in federal policy. Today’s actions may end up mattering substantially, or not so much, but we don’t know the answer yet. Our office will continue to work with our advisors, and to adjust the tax revenue outlook accordingly.

Oregon Recreational Marijuana Forecast

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SB 845, among other things, would give our office the recreational marijuana forecast responsibility. While not current law yet, we went ahead and produced such a forecast for the first time in our most recent quarterly forecast. What follows below the fold is an extended summary of our forecast work, including lots of pictures, I mean charts, for those interested.

Currently the outlook for recreational marijuana sales and tax collections remains highly uncertain. While Oregon has now collected just over a year’s worth of taxes, there have been substantial changes during this time that complicate any analysis. Early start sales through medical dispensaries were taxed at a 25 percent of rate, while sales at OLCC licensed retailers are now taxed at a 17 percent rate, with the local option of adding up to 3 additional percent. Furthermore, regulatory changes, more stringent product testing requirements, and Mother Nature all impacted and reduced available supply on the market during this time.

The first chart shows monthly tax collections as reported by the Department of Revenue, with the colors representing the different state tax rates. During the transition period there were recreational sales at both medical dispensaries (taxed at 25%) and at OLCC retailers (taxed at 17%).  The percentages listed are the effective tax rates after blending together sales under both regimes. These figures do not include any of the local option taxes, just the state portion.

As such, it is challenging to get a handle on the underlying trends in this newly legalized world. Thankfully, Oregon is not alone. Both Colorado and Washington are two years ahead of us. Both states have seen tremendous growth in sales and tax collections, which serves as a guide for where Oregon is likely headed in the near-term. Over time, as the market matures, future growth will follow trends in the economy and consumer spending. However the coming few years will see strong growth as the product becomes more widely available, more socially acceptable, and more black and gray market sales are realized in the legal market.

Certainly, one year’s worth of tax collections, and one set of quarterly tax returns filed by dispensaries is more valuable than no data. Our office’s forecasting responsibilities are made considerably easier than what faced those estimating the potential impact of Measure 91 (2014) which legalized recreational sales. That said, one year’s worth of data is not enough to build a full-fledged forecasting model, particularly when it is a brand new legal market. Over time, as we accumulate more data, a longer history of sales, and detailed breakdowns of consumer purchases and demographics, our office will build an econometric model. Until then, in consultation with our advisory group, and using Colorado and Washington as a guide, our office is relying on trends for the short-term outlook.

In terms of sales, Oregon’s first year closely tracks Colorado’s first year and outpaces Washington’s. The numbers in the graph below are estimated sales figures based on actual tax collections. Both Colorado and Washington are larger states than Oregon, so we adjust their figures based on the relative size of the adult population.

There are at least four main reasons for this pattern:

First, marijuana usage rates from surveys indicate a larger share of Oregonians have used marijuana in the past month than what is reported in Washington. As such, Oregon is more likely to see larger sales than Washington, after adjusting for population size. However, usage is not the only measure that matters, as Colorado’s usage rates are even higher than Oregon’s. Note that these national health surveys are based on responses prior to recreational legalization.

Second, prices and taxes matter. Oregon has a significantly lower tax rate than does Washington, which helps keep final consumer prices lower. Furthermore, the first set of quarterly tax returns, a very limited data set, indicates that Oregon prices were very competitive with Washington prices, even though Washington had two additional years to get accustomed to the newly legal market, license growers, processors and the like. A lower retail price, everything else equal, should bring more consumers and more black market conversions.

Third, the cross-border effect with legal sales beginning earlier in Washington likely had an impact on Oregon’s first year of sales. Counties in southwest Washington saw sales fall by nearly 40 percent once Oregon’s early sales began. Clearly there was plenty of cross-border activity. Effectively this meant Oregon had somewhat of a built-in customer base who were used to purchasing in the legal market. Thus Oregon’s initial sales were larger than in Washington, but this may have some to do with social acceptance and being used to the new system rather than fundamentally stronger sales.

Fourth, both Colorado and Washington initially had relatively few retail outlets in major population centers. In Colorado, Denver had retailers but Boulder did not initially. In Washington, Seattle had only a few retailers at first, but have added quite a few in recent years. As such, some of each state’s strong growth in the first two years was simply due to market access and product availability, particularly in places where lots of people live. It is unlikely this is a similar issue in Oregon, with our major population centers having dispensaries at first, and retailers now. Not that Oregon is overstored, or that there cannot be more room for growth – Colorado, for example, has considerably more retailers even after adjusting for their larger population – however lack of consumer access does not appear to be a major issue in Oregon today for much of the population.

In terms of the outlook, Oregon is poised for strong growth in the coming years. However, given the above and the advice from our advisory group, our office is not forecasting revenues to be quite as strong as those seen in Colorado over their second and third years.

This outlook remains highly uncertain with substantial upside and downside risks.

On the downside, supply constraints that keep products and inventory low will result in fewer sales, and tax collections. Such constraints could be regulatory changes that impact grower, processors or retailers, or regulatory bottlenecks where companies in the industry are unable to get their licenses, renewals or tests completed or approved in a timely manner. Another downside risk for tax collections are prices, given Oregon levies the tax based on the sales price. To date in Colorado and Washington, prices have fallen around 20 percent per year. Marijuana is a commodity and eventually will be commoditized. How far and how quickly prices decline is a considerable risk to the outlook for tax collections. Offsetting this risk somewhat is the fact that lower prices should result in larger sales, helping to buoy tax collections overall, which is what has happened in both Colorado and Washington so far. Finally, the one risk that looms large over the entire forecast is the federal government. While there has been no clear warning or action taken, there is a non-zero chance the federal government could step in and eliminate, or severely restrict recreational marijuana sales. In this event, taxes collected would be considerably less than forecasted.

On the upside, consumers overall could get more comfortable with legalized recreational marijuana sales, and the industry gains broader social acceptance, resulting in larger sales. Furthermore, a faster rate of black market conversion would also result in more legal sales. Similarly, conversions from the medical marijuana market to the recreational market would result in more sales and taxes collections. The impact of the seed-to-sale tracking system may also increase activity within the legal market and restrict the flow of product into the black market.

While the sales and tax collection outlook is uncertain, it is also fairly straightforward. The same cannot be said for distributing the taxes, or at least not yet. Currently there have been no distributions from the collected recreational marijuana taxes and there are likely to be none in the current biennium. Start-up costs to OLCC and other state programs need to be repaid first, with only the net revenues after accounting for these costs available for transfer to recipient programs like schools, state police, city and county law enforcement and the like. The exact reimbursement figures will be finalized in the coming months, with the first tax distributions made early in the 2017-19 biennium.

The process and timing for future tax distributions is as follows. First, retailers pay taxes on a monthly basis. These are the figures reported periodically in the media and other outlets. However these taxes are not immediately available for distribution. They only become available for recipient programs once the Department of Revenue has received and processed a retailer’s quarterly tax return. This ensures transfers are made based on the correct, not estimated, taxes paid by retailers. As such there is a time lag of between one and two quarters from when taxes are initially paid to the Department of Revenue and when they are available to transfer to programs. This discrepancy is likely to shorten some in the future as retailers file their taxes in a timelier manner, however the time lag will not be eliminated entirely. The chart below tries to show the lag between the tax collections paid on a monthly basis and when they become available for distribution.

Given no distributions will be made in the current 2015-17 biennium, the accumulated revenues are carried forward into 2017-19 and will be distributed then. Again, note that the Tax Revenues reported in our office’s forecast tables represent the amount available for distribution. Currently there is approximately $78 million in tax collections at the Department of Revenue, with the total 2015-17 figured forecasted to be nearly $90 million. However, as our table shows, under normal circumstances where we do not have to worry about start-up costs being repaid first, only about $67 million of the $90 million would be available for distribution in the 2015-17 biennium. This time lag between monthly collections and quarterly tax returns is a big deal in the budget world and can be a bit confusing. At least for me it was at first when trying to wrap my head around when monies will be distributed.

The above is what our office worked on and published in our latest quarterly forecast. However, some of the costs and revenue distributions will change (or have already changed) based on legislation. For example, the same SB 845 that gives our office the forecasting responsibilities also changes to the revenue distributions. Also, SB 1057 impacts the administrative cost estimates. Additional bills remain alive in the legislative process. Our office, with the help of other agencies and legislative staff, will update the forecast as bills become law. Check back in August when we release our next forecast for all the details.

Border Effect, Weed Edition

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The border effect, or the border tax effect, is a very real. Our office has previously written about it regarding sin/vice taxes, retail sales in the Gorge, and a broader look at Oregon-Washington taxes, including an academic paper I, along with my co-author Portland State Prof. Wooster, wrote on retail sales in Washington.

So it comes as no surprise that the different timing of legalized marijuana sales in Washington first and now Oregon also shows a clear border effect. Our friends and counterparts in Washington — the Washington State Economic and Revenue Forecast Council — is currently finalizing their latest forecast and included the following graph in their meeting materials. It highlights the drop in cannabis sales in Clark County (Vancouver) relative to the overall statewide trends. The steep drop in Clark County occurred in October 2015, right as recreational sales in Oregon went into effect. As the fine print on the slide says, prior to Oregon sales, Clark County accounted for 12% of Washington sales, but in January Clark County was just 7% of statewide sales.

WAWeed0116

The graph brought to mind some very rough, preliminary work I did back in September regarding the border effect on Washington cannabis sales.  With the help of our counterparts, I threw county level sales data into a classic border tax effect model. The overall results were intuitive and make sense [1]. Washington border counties near Portland had a much higher level of sales than their demographic and economic fundamentals along would suggest. If you do the math, this quick and dirty estimate indicates that sales per adult in these border counties were 40-50% higher than otherwise expected.

WaMJresults

In reality, it turns out those were pretty decent estimates. In the months since Oregon recreational sales began, tax collections in the Washington border counties in and around Portland have fallen 35% (data here). These declines are seen in counties from the mouth of the Columbia River (Pacific County across from Astoria) through the Portland MSA and into into the Columbia River Gorge (Klickitat and Skamania Counties across from Cascade Locks, Hood River and The Dalles). At the same time, sales in the Seattle MSA are up 25%, with the rest of Washington increasing 12%. The border counties near Portland are the clear outlier and clearly impacted by the arrival of recreational marijuana sales in Oregon.

WaMJSalesChange

Overall these results are no surprise. The border effect is real and ongoing across the country. Oregon and Washington in particular provide such a natural experiment regarding tax policy and the fact that Oregon’s major population center is on the state border.

So far the border effect has been about where legal recreational sales have occurred. Now that both states allow for legalized sales, the research focus will shift to the actual impact of different tax rates on consumer behavior. Clearly, sales in Southwest Washington are lower post-Oregon sales, but depending upon product availability and consumer prices, how the balance of sales shakes out is still unknown. Oregon tax collections only began in January, so it will still be some time before we have enough data to draw solid conclusions.

[1] There are some issues with this simplified model. For one, it uses full FY2015 data. Given that sales were/are ramping up over time in a newly legalized world, it is not ideal to use a full year of data, or at least not until the phase in period is over. Also, it does not include any spatial impacts (spatial error correction or spatial autocorrelation) which is important when looking at county level sales, particularly given there are some “dry” counties where there are no retailers in Washington. Even so, the results of this basic model are both intuitive and provided pretty solid ballpark estimates.

2015 Outlook: Measure 91

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One of the more interesting and yet unknowable questions in the year ahead is what the impact of Measure 91 will be for Oregon. The basics of the vote itself and the direct implications for Oregonians have been well covered. However, the broader and bigger impact on the state’s economy and public resources are not known. The revenue estimates are fairly modest in size — relative to the size of the state budget — and the track record of such estimates in Colorado and Washington are somewhat mixed. That does not mean the impact won’t be felt, as it will. Bringing a largely illegal activity into the legal marketplace will have many benefits including the tax revenue but also additional jobs that will now have legal protections as employees can be covered under the unemployment insurance system for example, plus new (legal) businesses, operations, the regional impact in places like Southern Oregon and the like. Of course, as with all vices, not every aspect is positive and there are some downside risks associated with legalization, even if the research consensus is that marijuana is a safer alternative than other options.

However, from an economist’s perspective the two most interesting aspects are consumer preferences and potentially problematic market distortions. As for consumer tastes, what is the substitution effect of legal marijuana and how will it impact, say, alcohol and tobacco sales. Are these products purely substitutes? To what degree are they complements? University of Oregon professor Ben Hansen gave a very good and informative presentation at the Oregon Economic Forum a couple months back. Among other items, he discussed how not only are other types of products substitutes for marijuana, but how the various markets for marijuana itself can be substitutes, these include both the medical and recreational markets but also personal cultivation.

Along these lines, one interesting but also potentially troubling development is the differential between Colorado’s medical and recreational marijuana markets, due to different tax structures. In essence, due to higher taxes on recreational marijuana, it is less expensive to buy medical marijuana in Colorado. As such the state has not seen a big switch into the recreational market from medical patients and even seen medical sales increase. However, Colorado has seen a switch from the black market into the legal market (be it medical or recreational). That’s the big win from both an economic and societal point of view, bringing the illegal market into the legal one.

However these market distortions between medical and recreational can be problematic not only in terms of rules, costs and regulations but also in terms of achieving the desired outcomes or goals. Consumers will likely figure out the best option for themselves (below is a hypothetical example using Oregon’s medical application fees and Colorado’s price differentials) however that may not be the best outcome for the state overall. That’s why the work the OLCC is currently undergoing is so important — to figure out what those outcomes should be and how to set up the rules and marketplace to best achieve them.

M91Breakeven

Lastly, one additional tidbit that was somewhat surprising — to me at least — was the overall lack of clear connection between the voting results of Measure 91 and the local medical marijuana population already in the state. Besides the obvious that cultural or societal preferences and ideology has swung significantly in favor of marijuana legalization, regardless of the local medical population, there are a few additional possibilities for these results. One, particularly for a place like Josephine County with a very large OMMP patient population and yet only voted 50-50, could be that the largest medical marijuana market participants did not want to rock the boat, so to speak. They may be relatively content with the existing market and not wanting to shift the landscape for something unknown. Another possibility may be that these two populations aren’t the same. The voting population may be significantly different than the medical marijuana population. Another may be that while OMMP patients are equivalent to about 2 percent of the adult population in Oregon, that may not be a large enough share to influence overall voting patterns. Regardless, these results are interesting to see and the Oregonian has a nice interactive map of voting results across the state, even down to the precinct level in some places.

M91CountyVote

Stay tuned for a few more posts on the 2015 outlook in the coming weeks, plus a new economic recovery scoreboard that tracks progress across a whole host of measures.


Our office has received a number of comments, questions and requests about the impact of Measure 91 in Oregon, so I thought I would write down a few thoughts and concerns from our perspective heading into the new year. To be clear, so far our office has not been involved in the process at all. As with all initial revenue estimates, those are done by the Legislative Revenue Office (plus there were outside estimates as well) and since the Measure 91 revenues do not go to the General Fund (which is largely our focus) we have not been involved at this point.

November 18 – Morning Headlines

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Food for Lane County is suffering a food reserve shortage.

Headlines

  • Bicycle v.s. Vehicle Crash at E.11th and High
    The Eugene Police Department is investigating a serious traffic crash involving a vehicle and a bicycle at the intersection of E 11th and High Streets.  11th Street is closed from Mill Street west to Pearl Street.  Motorist are urged to avoid the area …
  • Police Arrest 17 Occupy Eugene Protesters
    Occupy Eugene was out in full force Thursday to join in the International Day of Action. Everything was quiet by 5 p.m. on 11th and Willamette, but that was not the case earlier that afternoon. Chase Bank was the sight of one prot…
  • Attackers were strangers, beating victim tells jury in attempted murder case
    A 42-year-old Glenwood man told a jury this morning that he had never before seen two homeless men who seriously injured him in an Aug. 11 altercation the prosecutor called a “beat down” that might have killed Mark Christopher Taylor, had witnesses…
  • FFLC Shelves Barely Stocked
    Food For Lane County says its shelves are not staying stocked this year. The warehouse usually has enough food to last eight to 10 weeks. Right now, it only has four weeks’ worth. The USDA cut a third of the funding going to food banks thi…
  • Angry mom confronts Occupy campers about runaway daughter
    “Harboring children and dealing drugs! That’s what you’re doing!” the woman screamed, accusing the Occupy campers of harboring her runaway daughter.
  • Tree Limb Falls on Electric Line in South Eugene
    More than 400 EWEB customers were without power Wednesday night after a tree limb fell across an electric line. It happened near Willamette Street and West 38th Avenue around 6:30 p.m. Strong winds caused a tree limb to fall o…
  • Oregon economists predict another drop in state revenues
    State revenues are down approximately $107 million from previous estimates, officials announced today. Combined with an almost $200 million revenue drop predicted in August, today’s forecast means Oregon’s sputtering economic recovery has…
  • Police get prior approval to arrest trespassers
    A Eugene Police Department program helps property owners who want to keep people off their property who don’t belong there. It’s called the Trespass Program.
  • County commissioners pass DeFazio’s logging revival
    The Lane County Board of Commissioners voted 3-2 last Wednesday in support of Congressman Peter DeFazio’s proposal to support more logging on federal forests in Lane County.DeFazio recently teamed up with Congressmen Greg Walden and Kurt Schrader to…
  • Egan Warming Centers Open Today
    With temperatures expected to dip, the Egan Warming Centers will open Friday.
    The centers that will open are downtown Eugene, Valley Covenant Church, Grace Community Fellowship, the Fern Ridge Center, Hosea Youth Services. In S…
  • Boys & Girls Club Opens Part-Time
    Money problems forced the Boys & Girls Clubs of Emerald Valley to close its doors back in October. But now with a little help, one of the branches is open a couple days a week. The Westmoreland Branch of the Boys and Girls Clubs of Emer…
  • Bright leads Oregon St. past CS Northridge 83-63
    Patricia Bright scored 23 points and Oregon State opened the second half with a 14-2 run to pull away from Cal State Northridge 83-63 Thursday night.
  • Late second-half surge leads Oregon men to first win of the season
    For more than 30 minutes on Thursday night, the Oregon men’s basketball team struggled in most every facet of the game. Turnovers kept the Ducks out of rhythm offensively, poor perimeter defense paved the way for a great shooting night for Big Sky op…
  • UO Student-Athlete Center Floor Damaged by Water
    Some of the flooring inside the Jaqua Center at the University of Oregon has warped because of water damage. School officials say the majority of the floor will have to be replaced because of it. They say insurance will cover the …
  • Heisman Tour Stops in Eugene
    There’s a lot of talk about LaMichael James getting nominated for the Heisman for a second year. But even if he doesn’t get it, you still can, in a way. Crews spent Thursday setting up the tent for the Sports Illustrated Heism…
  • Duck star Cliff Harris sorts out traffic citations in court
    A star Duck football player suspended from the team since police pulled him over and cited him for traffic violations appeared in court Thursday to settle the charges against him.

Tim Chuey Weather:

Wet weather with falling snow levels. Looks like cold and wet will be the watch words through Thanksgiving.

High: 42
Low: 31
Rain: Showers

Advisories:

A WINTER WEATHER ADVISORY IS IN EFFECT UNTIL 4 PM TODAY FOR THE COAST RANGE OF NORTHWEST OREGON AND THE CENTRAL COAST RANGE ABOVE 1,000 FT. , FOR THE NORTH OREGON CASCADES FOOTHILLS ABOVE 1,000 FT, THE CASCADE FOOTHILLS OF LANE COUNTY ABOVE 1,000 FT, AND THE NORTHERN CASCADES INCLUDING THE CASCADES OF LANE COUNTY. A HIGH SURF ADVISORY IS IN EFFECT THROUGH 4 PM TODAY FOR THE NORTH AND CENTRAL OREGON COAST.

The upper air flow is swinging from the northwest over the Pacific Northwest to bring us more moisture. A frontal system has moved through increasing the chances for rain and mountain snow. A series of frontal systems will march through into the weekend to keep us wet and we will seriously cool down.

Forecast for the Southern and lower Mid Willamette Valley including Eugene-Springfield and Albany-Corvallis: Mostly cloudy with showers today (0.25 in. of rain possible), rain and snow showers likely (60%) tonight (snow level 1,000 ft., 1 in. of snow possible, 0.10 in. of rain possible), cloudy with a good (50%) chance of rain and snow showers Saturday (under 0.10 in. of rain possible), mostly cloudy with a slight (20%) chance of showers Saturday evening, mostly cloudy Saturday night, then a mix of clouds and sun Sunday and mostly cloudy Sunday night highs near 42 lows 31-35. Mostly cloudy with a (40%) chance of rain Monday, a good (50%) chance of rain Monday night, then rain likely (60%) Tuesday through Thursday (Thanksgiving Day) highs near 48 lows near 39. (seasonal averages high 51 low 37)

Because weather forecasting is a combination of science, intuition, and timing there can be no absolute guarantees that individual forecasts will be 100% accurate. Nature is in a constant state of flux and sudden unexpected weather events can happen.

Keep Current on the Weather: timchueyweather4u.com

Dexter Reservoir’s tourism economy flows steadily in spite of lake closures

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Most boats on Dexter Reservoir remain docked on a Saturday afternoon.

Under its fourth summer of blue-green algae restrictions, one would expect the businesses surrounding the popular lake to be suffering a loss of tourism dollars. If boaters, skiers, swimmers, divers and fisherman can’t use the reservoir for recreation, you would expect nearby eateries and retailers to suffer a reduction in the ripple of revenue.

But the very threat that keeps the flip-flop wearers at bay, is drawing workers in hiking boots and construction hats who are replacing lost tourism dollars with federal and state infrastructure and stimulus pay.

The city of Lowell was recently awarded the $120,000 grant to study the Cyanobacteria, or blue-green algae in this reservoir, which is the source of its drinking water. The grant is being given by the Oregon Health Authority Drinking Water Source Prevention Program and will pay for two years of study. City officials in Lowell will work alongside Oregon State University lab students to determine through weekly DNA samples if the algae is actually a toxic variety and how to treat and eradicate future blooms.

Dexter Reservoir is one of several Oregon bodies of water that have undergone algae restrictions in the past four years. This summer, Dorena, Detroit, Diamond, Lost Creek, Cullaby and Cougar lakes lost their livelihoods due to the potentially toxic bloom.

The bacteria referred to as blue-green algae floats on top of the water and has a soft, fuzzy appearance.

Cyanobacteria, is a bacteria like its name states and not actually an algae at all. But this bacteria was initially thought to be algae by scientists because it mimicks algae by its use of photosynthesis. Found in virtually all fresh water lakes and streams, these bacteria are not harmful in small, natural quantities; it’s when they start to take over that they can become dangerous.

An abundance of Cyanobacteria casts a pea-soup color in the water columns they inhabit, and turn into a yellow-green scum on the top outer edges of calmer waters. This scum blocks the light to real algae and aquatic plants living below the water’s surface, killing off these vital oxygen-producing plants, thus suffocating the marina life.

“By shading out their competitors, blue-greens can completely dominate a body of water,”  according to Dr. Carole A. Lembi, plant pathologist at Purdue University.

The runoff of fertilizers, pesticides and other nitrogen- and phosporous-producing organic substances from surrounding land stimulates the exponential growth of the bacteria, creating a “bloom,” or heavy infestation.

Keith and Jaquie Rosencrantz, managers of Dexter Shores RV Park, say that even though they take a flood of cancellation calls when the lake closes, long term visitors like construction workers – and soon, biologists – will pick up the slack.

Work on Dexter Dam and the I-5 bridge keep construction dollars flowing into local businesses.

Keith says, “what’s helping us is the work going on on the dams here, and (the bridge work) down on the interstate. If we were depending on the lake to bring us (tourism) business, we wouldn’t have any,” Keith says. “When they started getting the stimulus money for the dam work and things like that, that’s what kind of saved us.”

Jaquie estimates more than half of Dexter Shores’ occupied RV pads are being rented by construction workers who have temporarily relocated to the area. She says the rest of their seasonal visitors are snowbirds, wilderness seekers, sports enthusiasts and RV caravan clubs. According to Jaquie, boat racers, regatta goers, the Oregon Association of Rowers (OARS) and the University of Oregon rowing team all continue to use the lake since they don’t have physical contact with the potentially unsafe water. During the boating events, the RV park reaches capacity.

Disc golfers also use Dexter State Recreation Site for their activities, which brings morecampers and cookouts to the area.

Keith said he expects the grant Lowell recently received will continue to help keep their business afloat.

Kim Beer has owned Bridge Town Market in Lowell with his wife for the past year and a half. The only clearly visible retailer from Dexter Reservoir, the market is the biggest retailer and variety store for miles. Beer says stores like his don’t suffer much of a loss when the lake closes because of the area’s numerous and diverse activities.

Beer, whose store employs 4 full time and 12 part time clerks, says, “When the lake closes we see a change in business, but we still had a great summer. A lot of people still come because of the creeks and the rivers around here. People still come and camp. Really what hurt our summer more this year is it came late. Once the sun came out, people were just anxious to get out and go camping and (do) some of the outdoor activities they do around here. So when the sun came out, we were really busy. There’s so many more things to do around here than just the lake.”

Owners and staff of Dexter’s Buckhorn Tavern, Lowell Gas and Grocery and Mack’s Cafe in Lowell say they haven’t experienced sluggish sales either.

Noah Freeman, 5, and his dad Adam caught several trout on Oct. 1, unaware of the lake's hazard warnings.

However, Kuldip Pawar, owner of Dexter Market, says her business, which is tucked away several streets from the reservoir, experiences about a ten percent drop in revenue each time the lake closes. But Pawar, who has owned the market for the past four and a half years, says business hasn’t been bad enough to lay off any of her two part-time or two-full time employees.

Last weekend, just like the two months preceeding it, Dexter Reservoir was virtually void of those seeking water recreation. But five year-old Noah Freeman had already reeled in four fish, alongside his dad, Adam, who hadn’t heard of the advisory. When EDN informed Adam, he looked slightly perplexed, then cast his reel back into the still waters, saying he would be sure to “take off the skin and clean out any of the fatty parts” before cooking the fish for his family.

Jesus Martin Reyes, an immigrant who only speaks Spanish, said he, too, was unaware of the advisory. He’s been fishing the lake for the past 10 years and brings in about five fish every day he casts his line.

Warning signs flanking the lake will be taken down when the Army Corps of Engineers determines the bacteria has returned to normal levels.

– Beckie Jones, EDN