ELY- The Ely City Council got its first look at proposed new cannabis business ordinances at its Tuesday study session, including zoning restrictions on where these businesses would be allowed and how many licenses the city will permit.
Despite the new ordinances the city passed last year to regulate the sale of hemp-derived edibles with tetrahydrocannabinol, or THC, Minnesota passed new state laws during the 2023 legislative session regulating the sale of cannabis itself. Those new state laws have Ely and every other community and county in the Gopher State jumping through hoops.
New cannabis laws
The new state laws create 16 cannabis and hemp product licenses. To open a cannabis or hemp product business, a business owner must now apply for a license through the newly established Office of Cannabis Management, or OCM. After the business owner applies, the OCM will consult with the municipality where the business will be located for zoning approval and feedback. Once a license is issued, municipalities can issue registrations to certain cannabis businesses to operate in their communities.
Cities must conduct compliance checks to ensure that businesses are following the law for selling cannabis and hemp-derived THC products and can revoke registrations to operate if necessary. For their troubles, cities can collect registration fees from businesses and will also receive a portion of the state’s 10-percent tax on cannabis-based sales.
A municipality can regulate cannabis businesses, including reasonable restrictions on the time, place, and manner of those establishments, but they can’t prohibit the operation of cannabis businesses in general. Minnesota Stat. §342 allows cities to limit the number of cannabis retail business, with the caveat that there cannot be less than one establishment for every 12,500 residents.
The new cannabis laws have created confusion throughout the state, in part because the OCM has not yet fully codified the regulations governing cannabis businesses. This has left cities and counties scrambling to enact their own ordinances on cannabis without knowing if they will need to redo them once the OCM gets its act together and issues a complete set of rules.
“We have two steps we need to do,” Ely Clerk-Treasurer Harold Langowski told the city council. First is to decide on zoning and then to determine what we’ll regulate … which we may need to change once the state decides on how they are going to put everything together.”
Moratorium and ordinance
Ely passed a new moratorium earlier this year on issuing registrations for cannabis and cannabinoid businesses to give the city time to write new ordinances to accommodate the upcoming state regulations. That moratorium expires at the end of the year.
Ely City Attorney Kelly Klun outlined the proposed cannabis ordinances for the city council, explaining its two parts: zoning and business regulation. The business regulation portions begin in the usual manner with definitions followed by a section governing lower-potency hemp-derived products, which incorporates most of what the city council passed in 2023 for selling edibles. The one notable change is that the fines for hemp product retailers who violate state or local laws were raised several hundred dollars compared to what the city council passed last year (from $500 to $750 for a second violation, and from $1,000 to $1,500 for a third violation).
The proposed ordinance also contains a new section on cannabis businesses. “I did spend a significant amount of time figuring out what other cities are doing and using their best practices and format so we’ll be congruent with the state regulations,” Klun told the council.
Cannabis businesses
The proposed ordinances will allow for cannabis retail, manufacturing, and cultivation. The business ordinances end with a section allowing “temporary cannabis events,” which parallels the city’s ordinances that allow events to sell alcohol. These events will be prohibited on public property and can only be held from 10 a.m. to 9 p.m.
The cannabis regulations received the most discussion. Council member Adam Bisbee opened the debate by questioning an initial restriction on cannabis retail in Ely to one license.
“Because of our population, if we only have one business, it creates a lack of competitiveness,” Bisbee stated. “I’d like to see (at least) two to create a competitive environment.”
The council also debated the difference between the cannabis fines compared to alcohol or hemp product fines, with some, like Bisbee, arguing that the fines should be the same for all three types of recreational drugs. One thing the council did appear to agree on was increasing the fines for prohibited public use inside the exclusion zone around public schools.
“I am very much in favor of a higher fine than $150 for public consumption near a public school,” Mayor Heidi Omerza said emphatically.
Regarding the zoning end of the ordinances, cannabis businesses other than retail would be restricted to industrial zoning and excluded from operating near public schools, day care centers, treatment centers, and public parks.
Nothing in the proposed ordinances is set in stone yet. The first reading of the cannabis ordinances will be at the city council meeting on Nov. 19.