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10.5 SR 11-18-2024The Elk River Vision A welcoming community with revolutionary and spirited resourcefulness, exceptional service, and community engagement that encourages and inspires prosperity Request for Action To City Council Item Number 10.5 Meeting Date November 18, 2024 Prepared By Tina Allard, City Clerk Item Description Cannabis and Hemp Registration Ordinance Reviewed by Zack Carlton Cal Portner Action Requested Review the draft ordinance and provide feedback. Background/Discussion The State Office of Cannabis Management (OCM) will begin issuing various types of cannabis and hemp licenses in early 2025. While the city's role is limited in regulation, we can create reasonable regulations regarding time, manner, and place for business operations. The city is required to issue a retail registration for state licensed hemp and cannabis retailers after verifying the following: ▪ The business has a valid license or license pre-approval issued by OCM. ▪ The business has paid a registration fee or renewal fee to the city. ▪ The business is found to be in compliance with Chapter 342 and local ordinances, including zoning. ▪ The business is current on all property taxes and assessments for the proposed retail location. Registration Fees Imposing fees is optional. It should be noted staff will be responsible for the registration and zoning certification process to determine compliance with ordinances. There may also be some fire and building code compliance items. We will be required to perform annual compliance checks at least once per year. Compliance checks typically involve law enforcement personnel in partnership with the county health and human services division. It is recommended to capture the maximum amount of fees allowed by state law. The city is prohibited from charging an additional application fee. Here are the maximum fees the city could charge for initial registration and renewal fees. Collection of fees by the state are shown as well. Business City Initial Fee (max allowed) State Initial Fee City Renewal Fee (max allowed) State Renewal Fee Low Potency Hemp Retailer $125 $250 $125 $250 Cannabis Retailer $500 $2,500 $1,000 $5,000 Page 194 of 204 Medical Cannabis Combination Business $500 $20,000 $1,000 $70,000 Cannabis Mezzobusiness $500 $5,000 $1,000 $10,000 Cannabis Microbusiness $0 $0 $500 $1,000 Limit on Number of Retailers We can limit the number of cannabis retailers as long as there is at least one location per 12,500 residents. With the city's current population, we are required to have a minimum of three. At a previous meeting, the Council stated they'd like a cap of two. A municipally owned store can't be included in the minimum number of registrations required. We currently do not limit licenses for low-potency hemp retailers. There is no statutory authority to limit the number of low-potency hemp retailers under the new law. Notes: ▪ Cities will receive a portion of the taxes imposed by the state as part of local government cannabis aid. This aid will be distributed based on the number of retailers in the city. ▪ If a limit is set, we'd want to determine a selection process if there are more applicants than registrations available. Options include the use of a lottery, first-come-first-serve, a rolling basis, or others. Additional Restrictions on Hours of Operation State law says businesses may operate from 8:00 a.m. to 2:00 a.m., Monday through Saturday, and 8:00 a.m. to 2:00 a.m. on Sunday. The city could follow state law or be more restrictive and could limit the hours of operation between 10:00 a.m. to 9:00 p.m., six days a week. Our liquor stores are allowed to operate on Sundays, 11:00 a.m. to 6:00 p.m. and 8:00 a.m. to 10:00 p.m., Monday–Saturday. Hours could be limited to follow the hours set for liquor store operations, except for Sunday hours. There is no statutory authority to restrict Sunday hours. Additional Standards for Temporary Cannabis Events A temporary cannabis event is a gathering by a licensed cannabis event organizer that may last up to four days. Our liquor ordinances do require temporary permits for special events, which is set by state law. The city could establish standards for these events, such as restricting or prohibiting any on-site consumption, limiting locations or hours of the event, or other public health, safety, or welfare concerns. If a temporary permit is not considered, some of the events may fall under our special event permitting process, but only if the event has 50+ people attending for more than an hour, and it is open to the public. And there are additional standards in state law that all of these events would be required to meet. Municipal Cannabis Operations The city can apply for a cannabis retail license to operate a municipal store. If the Council wants the option to have a store, it is recommended to have some language in the city ordinance. Buffer Requirements State law allows cities to prohibit cannabis businesses within 1,000 feet of a school, 500 feet of a daycare, a residential facility, or an attraction within a public park. We currently only regulate within 500 feet of a school or park for tobacco product shops. Other tobacco retailers are not restricted. There are no buffer requirements for liquor. Page 195 of 204 Financial Impact Fees may be required for registration. Retail sales of cannabis products are subject to the state and local sales and use tax and a 10% gross receipts tax. Cannabis gross receipts tax proceeds are allocated as follows: ▪ 20% to the local government cannabis aid account ▪ 80% to the state general fund. Mission/Policy/Goal Meet changing needs - agile. Attachments 1. Draft Ordinance Page 196 of 204 233576v1233576v1 Make sure to do proposed ordinance notification process Ordinance 24-___ An Ordinance Amending Chapter XX Section XX, TITLE, of The City of Elk River, Minnesota Relating to Cannabis Retail Business Registration The City Council of the City of Elk River hereby ordains: Section 1. Administration 1.1 Findings and Purpose The city makes the following legislative findings: The purpose of this ordinance is to implement the provisions of Minnesota Statutes, chapter 342, which authorizes the city to protect the public health, safety, welfare of residents by regulating cannabis businesses and lower-potency hemp businesses. 1.2 Authority & Jurisdiction The city has the authority to adopt this ordinance pursuant to: a) Minn. Stat. 342.13(c), regarding the authority of a local unit of government to adopt reasonable restrictions of the time, place, and manner of the operation of a cannabis business provided that such restrictions do not prohibit the establishment or operation of cannabis businesses. b) Minn. Stat. 342.22, regarding the local registration and enforcement requirements of state-licensed cannabis retail businesses and lower-potency hemp edible retail businesses. 1.3 Severability If any section, clause, provision, or portion of this ordinance is adjudged unconstitutional or invalid by a court of competent jurisdiction, the remainder of this ordinance shall not be affected thereby. 1.4 Enforcement The city administrator or designee is responsible for the administration and enforcement of this ordinance. Any violation of the provisions of this ordinance or failure to comply with any of its requirements constitutes a misdemeanor and is punishable as defined by law. Violations of this ordinance can occur regardless of whether a registration is required for a regulated activity listed in this ordinance. 1.5 Definitions 1.Unless otherwise noted in this section, words and phrases contained in Minn. Stat. 342.01 and the rules promulgated pursuant to any of these acts, shall have the same meanings in this ordinance. Commented [TA1]: Should we have some type of repeal or sunset date for the current THC ordinance? Commented [PC2R1]: Do we need to? How will they be handled differently than cannabis? We may have more work to do to ensure tobacco shops with hemp-based THC aren’t instead carrying cannabis? Commented [LK3R1]: OCM is messaging that licensing will not be occurring right away in 2025. OCM has said that cities can continue their current licensing systems for hemp until the State’s is up and running. So I would not repeal and replace the hemp licensing language just yet. Page 197 of 204 233576v1233576v1 2.Cannabis Cultivation: A cannabis business licensed to grow cannabis plants within the approved amount of space from seed or immature plant to mature plant, harvest cannabis flower from mature plant, package and label immature plants and seedlings and cannabis flower for sale to other cannabis businesses, transport cannabis flower to a cannabis manufacturer located on the same premises, and perform other actions approved by the office. 3.Cannabis Retail Businesses: A retail location of a mezzobusinesses, microbusinesses, medical combination businesses, or lower-potency hemp edible retailers. 3.4.Lowwer-potency Hemp Edible Retail Business: A lower-potency hemp edible retailer location. 4.5.Cannabis Retailer: Any person, partnership, firm, corporation, or association, foreign or domestic, selling cannabis product to a consumer and not for the purpose of resale in any form. 5.6.Lower-potency Hemp Edible: As defined under Minn. Stat. 342.01 subd. 50. 6.7.Office of Cannabis Management: Minnesota Office of Cannabis Management, referred to as “OCM” in this ordinance. 7.8.Place of Public Accommodation: A business, accommodation, refreshment, entertainment, recreation, or transportation facility of any kind, whether licensed or not, whose goods, services, facilities, privileges, advantages, or accommodations are extended, offered, sold, or otherwise made available to the public. 8.9.Preliminary License Approval: OCM pre-approval for a cannabis business license for applicants who qualify under Minn. Stat. 342.17. 9.10.Retail Registration: An approved registration issued by the city to a state- licensed cannabis retail business. 10.11.School: A public school as defined under Minn. Stat. 120A.05 or a nonpublic school that must meet the reporting requirements under Minn. Stat. 120A.24. 11.12.State License: An approved license issued by the State of Minnesota’s Office of Cannabis Management to a cannabis retail business. Section 2. Registration of Cannabis Businesses 2.1 Registration Required. No individual or entity may operate a state-licensed cannabis retail business without first registering with the city. 2.2 Zoning Verification Pursuant to Minn. Stat. 342, within 30 days of receiving a copy of a state license application from OCM, the city shall certify on a form provided by OCM whether a proposed cannabis retail business complies with local zoning ordinances and, if applicable, whether the proposed business complies with the state fire code and building code. 2.3 Fees. A registration fee shall be charged to applicants depending on the type of retail business license applied for and is outlined in the city fee schedule. All fees are non- Commented [LK4]: A suggestion, because hemp and cannabis retailers are treated differently in the statute and no population cap or buffer areas are explicitly allowed for hemp retailers I like to divide the definitions: -Lower-potency Hemp Edible Retail Business: A lower-potency hemp edible retailer location. -Lower-potency Hemp Edible Retailer: Any person, partnership, firm, corporation, or association, foreign or domestic, selling lower- potency hemp edible product to a consumer and not for the purpose of resale in any form. Page 198 of 204 233576v1233576v1 refundable. 2.4 Application Procedure. (A)An applicant for a retail registration shall fill out an application form, as provided by the city. Said form shall include, but is not limited to: i.Full name of the property owner and applicant; ii.Address, email address, and telephone number of the applicant; iii.The address and parcel ID for the property which the retail registration is sought; iv.Certification that the applicant complies with the requirements of local ordinances established pursuant to Minn. Stat. 342.13. v.If property taxes, assessments, and utilities are current at the premises. (B)The applicant shall include with the form: i.the registration fee; ii.a copy of a valid state license or written notice of OCM license preapproval; (C)Completed applications will be submitted to the city administrator or designee for approval or denial. 2.4.2 Application Approval (A)An application shall not be approved if the cannabis retail business would exceed the maximum number of registered cannabis retail businesses permitted under Section 2.7. (B)An application shall not be approved or renewed if the applicant is unable to meet the requirements of this ordinance. (C)An application that meets the requirements of (A) and (B) above and the following requirements shall be approved. i.The applicant must have a valid license issued by the OCM that allows retails sales; ii.The location for the cannabis retail business must comply with applicable zoning ordinances; and iii.All property taxes, assessments, and utilities for the location of the retail establishment must be current. (D)Applications will be reviewed in the order they are received. 2.4.3 Annual Compliance Checks. The city shall complete at minimum one compliance check per calendar year of every cannabis business to assess if the business meets age verification requirements, as required under [Minn. Stat. 342.22 Subd. 4(b) and Minn. Stat. 342.24] and this ordinance. Age verification compliance checks shall involve persons at least 17 years of age but under the age of 21 who, with the prior written consent of a parent or guardian if the person is under the age of 18, attempt to purchase adult-use cannabis flower, adult- Commented [TA5]: We may get more than our limit during the initial implementation. Would we want to set another process? Commented [PC6]: Do we do a check to ensure hemp-based licensees are only selling hemp-based products? Commented [LK7R6]: Product compliance can be a part of the compliance check, but the statute after 2024 only requires age verification compliance checks. Commented [TA8R6]: We have not typically done product compliance check and have left that to the state. Page 199 of 204 233576v1233576v1 use cannabis products, lower-potency hemp edibles, or hemp-derived consumer products under the direct supervision of a law enforcement officer. Any failures under this section must be reported to the Office of Cannabis Management. 2.4.4 Location Change A state-licensed cannabis retail business is required to submit a new application for registration under Section 2 if it seeks to move to a new location still within the city. 2.5 Renewal of Registration Every registered cannabis retail business must apply for renewal annually, at the time its state license is renewed. Renewals are processed according to the procedure in Section 2. 2.6 Suspension of Registration 2.6.1 When Suspension is Warranted. The city administrator or designee may suspend a cannabis retail business registration if it violates ordinance or poses an immediate threat to the health or safety of the public. The city shall immediately notify the cannabis retail business in writing the grounds for the suspension. 2.6.2 Notification to OCM. The city administrator or designee shall immediately notify the OCM in writing the grounds for the suspension. OCM will provide the city and cannabis business retailer a response to the complaint within seven calendar days and perform any necessary inspections within 30 calendar days. 2.6.3 Length of Suspension. The suspension of a cannabis retail business registration may be for up to 30 calendar days, unless OCM suspends the license for a longer period. The business may not make sales to customers if their registration is suspended. The city may reinstate a registration if it determines that the violations have been resolved. The city shall reinstate a registration if OCM determines that the violation(s) have been resolved. 2.6.4 Penalties. Civil Penalty. Subject to Minn. Stat. 342.22, subd. 5(e) the city may impose a civil penalty, as specified in the city’s Fee Schedule, for registration violations, not to exceed $2,000. Page 200 of 204 233576v1233576v1 Criminal Penalty. Any violation of the provisions of this ordinance or failure to comply with any of its requirements constitutes a misdemeanor and is punishable as defined by law. The City is not precluded from other enforcement action, such as injunctive relief. 2.7 Limiting of Registrations The city shall limit the number of cannabis retail businesses to no fewer than one registration for every 12,500 residents within the City of Elk River, excluding municipal cannabis retail store(s). There is no limit on the number of low potency hemp retailers allowed in the city. Section 3. Requirements for Cannabis Businesses 3.1 Minimum Buffer Requirements The city shall prohibit the operation of a cannabis business within 500 feet of a school. The city shall prohibit the operation of a cannabis business within 500 feet of an attraction within a public park that is regularly used by minors, including a playground or athletic field. The distance limitations shall be measured from property line to property line at the nearest point or from property line to the nearest point of an attraction within a public park. Pursuant to Minn. Stat. 462.357 subd. 1e, nothing in Section 3.1 shall prohibit an active cannabis business or a cannabis business seeking registration from continuing operation at the same site if a (school /attraction within a public park that is regularly used by minors) moves within the minimum buffer zone. 3.2 Hours of Operation Cannabis businesses are limited to retail sale of cannabis, cannabis flower, cannabis products, lower-potency hemp edibles, or hemp-derived consumer products between the hours of Monday -Wednesday 9 a.m. - 10 p.m. Thursday-Saturday 8 a.m. – 10 p.m., and Sundays ?? Section 4. Temporary Cannabis Events 4.1 License or Permit Required for Temporary Cannabis Events 4.1.1 License Required. A Special Event Permit shall be required to be issued and approved by the city prior to holding a Temporary Cannabis Event. 4.1.2 Registration & Application Procedure A registration fee, as established in the city’s fee schedule, shall be charged to applicants for Temporary Cannabis Events. Commented [TA9]: If the Council decides to set a limit, a process should be considered to determine who gets a license: For example, first come first serve, lottery, etc. Commented [PC10R9]: I think the state determines who gets the licenses? Commented [PC11]: I don’t know if I agree here. We have hemp-based THC downtown near a park. We will only have two retailers and they need to be in commercial areas, so we really don’t have an issue but downtown… We also have a lot of mental health services downtown, like Open Doors for Youth and Thumbs Up. Commented [LK12R11]: Hemp businesses are not cannabis businesses. The city is automatically authorized to have these buffers for cannabis businesses, but not explicitly hemp businesses. Hemp businesses could be included in a buffer zone, but the City would need to be prepared to defend that choice as a “reasonable time, place, manner” restriction. Commented [PC13]: I don’t like this either, as a legit, legal business should be grandfathered in. Commented [LK14R13]: I believe Cal’s comment and the language highlighted are saying the same thing. Commented [PC15]: I think we want close the window a little, like where our liquor store hours are at? Commented [LK16R15]: City is limited on what hours it can restrict: MS 342.27 subd. 7 (b) A city or county may adopt an ordinance to prohibit sales for any period between 9:00 p.m. and 2:00 a.m. the following day or between 8:00 a.m. and 10:00 a.m. on the days of Monday through Saturday. Commented [TA17]: Not sure about this temporary section yet. Can we follow our special event ordinance for events rather than create a new temp cannabis license event? Although we do have temp. liquor permits. Need to review further. Commented [PC18R17]: yes Commented [LK19R17]: The City can decide to use its other special event regulations, but I would look at MS 342.40 regarding fees, security, and on-site consumption because these events will be different than other special events. Commented [TA20R17]: https://www.revisor.mn.gov/statutes/cite/342.40#:~: text=Samples%20of%20adult%2Duse%20cannabis,can nabis%20products%20sold%20to%20customers. Page 201 of 204 233576v1233576v1 Application Submittal & Review. The city shall require an application for Temporary Cannabis Events. An applicant for a retail registration shall fill out an application form, as provided by the city. Said form shall include, but is not limited to: (A)Full name of the property owner and applicant; (B)Address, email address, and telephone number of the applicant; (Insert additional standards here) The applicant shall include with the form: the application fee as required in (Section 4.1.2); a copy of the OCM cannabis event license application, submitted pursuant to 342.39 subd. 2. The application shall be submitted to the city administrator, or designee for review. If the designee determines that a submitted application is incomplete, they shall return the application to the applicant with the notice of deficiencies. Once an application is considered complete, the designee shall inform the applicant as such, process the application fees, and forward the application to the (insert staff/department, or elected body that will approve or deny the request) for approval or denial. (C)The application fee shall be non-refundable once processed. (D)The application for a license for a Temporary Cannabis Event shall meet the following standards: •Insert standards here (G)A request for a Temporary Cannabis Event that meets the requirements of this Section shall be approved. (H)A request for a Temporary Cannabis Event that does not meet the requirements of this Section shall be denied. The (insert city/town/county) shall notify the applicant of the standards not met and basis for denial. (Optional) Temporary cannabis events shall only be held at (insert local place). (Optional) Temporary cannabis events shall only be held between the hours of (insert start time) and (insert stop time). 5.1 Sales within Municipal Liquor Store. The sale of Low-Potency Edibles is permitted in a Municipal Liquor Store. Section 6. Local Government as a Cannabis Retailer The city may establish, own, and operate one municipal cannabis retail business subject to the restrictions in this chapter. The municipal cannabis retail store shall not be included in any limitation of the number of registered cannabis retail businesses under Section 2.6. The city shall be subject to all same license requirements and procedures applicable to Page 202 of 204 233576v1233576v1 all other applicants. SECTION XX. That this ordinance shall take effect upon adoption. Passed and adopted by the City Council of the City of Elk River this XX day of XX, 2024. ______________________________ John J. Dietz, Mayor ATTEST: _______________________________ Tina Allard, City Clerk Page 203 of 204