VIII.1. Cannabis Business Regulation Discussion
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CITY OF HOPKINS
Memorandum
To: Honorable Mayor and Council Members
Mike Mornson, City Manager
From: Ryan Krzos, City Planner
Date: August 20, 2024
Subject: Cannabis Business Regulation Discussion
_____________________________________________________________________
PURPOSE
Staff will provide an overview of cannabis business regulations. The City Council is
asked to provide input and direction on policy objectives and regulatory elements that
will be used to draft the ordinance needed, specifically related to:
• Direction on how cannabis businesses will be incorporated into the City’s
Zoning Policies.
• Whether to impose buffers on cannabis and hemp Businesses.
• Whether to further limit hours of retail cannabis sales
• Any additional standards for cannabis events
• The number of retail registrations the City desires.
• The amount of the registration fees
• Whether to delegate retail registration and compliance to Hennepin County.
• Direction on whether to study municipal cannabis sales
INFORMATION
The Minnesota Legislature enacted new State Law at the end of the 2023 legislative
session, amended in 2024, that legalizes the possession, use, manufacturing, and sale
of certain cannabis products within the State. The Law also establishes the Office of
Cannabis Management (OCM) to oversee the implementation and regulation of the
adult-use cannabis market, the medical cannabis market, and the consumer hemp
industry. OCM has recently released a draft of its administrative rules. These draft rules
are subject to change over the next few months. Once the administrative rules are in
effect, anticipated mid-2025, licensing of cannabis businesses will commence.
Licensing of cannabis businesses will be conducted by the OCM. Under the State Law,
local governments may register cannabis businesses and enforce certain zoning
regulations within their jurisdiction, but they may not require additional licensing of
cannabis businesses. Using input from Council, staff will prepare an ordinance adopting
policies and procedures over the next few months prior to the expiration of the City’s
Moratorium ending on January 1, 2025.
Planning & Development
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Zoning
The State Law creates 13 cannabis and hemp license types through the OCM, which
represent land uses that the City needs to accommodate within the Development Code.
The City may not prohibit the establishment or operation of a licensed cannabis
business. A description of each license type is included as an attachment; however the
13 types of the businesses can be generalized by into the following activity categories:
• Retail Sales – Sales of cannabis and cannabis products directly to consumers.
• Cultivation – The planting, growing, harvesting, drying, curing, grading, or
trimming of cannabis plants, cannabis flower, hemp plants, or hemp plant parts.
• Wholesale – Purchases from a business growing or manufacturing cannabis or
cannabis products and sells to a cannabis business engaged in retail.
• Manufacturing – Turns raw, dried cannabis and cannabis parts into other types of
cannabis products, e.g. edibles or topicals.
• Testing - Obtains and tests immature cannabis plants and seedlings, cannabis,
cannabis products, and hemp products.
• Transportation – Transports products from one license type to another.
• Delivery – Transports products to the end consumer.
• Events – A business that organizes temporary events (lasting no longer than four
days).
Note: Certain license types enable multiple activity types, for example, Micro and
Mezzo businesses may include cultivation, manufacturing, and/or retail sales.
The City must decide which zones cannabis and hemp businesses will be allowed
to operate in. The Hopkins Development Code’s organization structure classifies land
uses into five major groupings (Residential, Commercial, Manufacturing & Industry,
Civic & Institutional, and Other) with each group further divided into more specific use
categories (e.g. Retail, Office, Consumer Services, Limited Manufacturing, etc.). Each
category, and several subcategories, are allowed in one of more of the City’s 20
mapped zones. In adding cannabis businesses within this structure, the City could do
one of the following:
• Individually assign eligible zones for each of the business or activity types. For
example, cannabis retail would be permitted in MX-D, MX-TOD, etc. This
alternative allows for a more granular approach, should there be areas of the city
where an activity or use is not desired. For example, if there was concern about a
retail cannabis business in a certain area of the city where retail is otherwise
allowed, cannabis retail sales could be prohibited.
• Amend the zoning provisions to allow each business type as a subcategory
within the existing categories having the most similarity. For example, cannabis
retail uses would be allowed where retail uses are allowed.
Staff recommends the later approach whereby each business type is identified as a
subcategory of one of the exiting use categories. Cannabis businesses will be required
to comply with all other aspects of the zoning ordinance including for signage, parking,
setbacks, building design standards, etc. The City may impose reasonable operational
requirements specific to cannabis uses, for example, around security, screening, odor,
and location. The State Law and OCM’s administrative rules will cover a number of
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these aspects. In preparing the necessary Ordinance, staff may recommend policies
addressing issues not addressed in State Law or the Administrative Rules.
Zoning Buffers
The State Law allows Hopkins to prohibit a cannabis business within 1,000 feet of a
school or 500 feet of a day care, residential treatment facility, or an attraction within a
public park that is regularly used by minors, including playgrounds and athletic fields.
The City may also impose a prohibition on a cannabis business within 500 feet of
another cannabis business. These are the maximum specified buffers, a lessor or no
buffer is also allowed. The City will need to decide whether to impose such buffer
requirements on cannabis businesses.
Retail Buffers
To date, most peer communities that staff corresponded with and researched have
discussed applying buffers primarily to retail businesses. Because cannabis is illegal
federally, many federally insured banks are reluctant to provide banking services to
cannabis businesses, which may lead to cannabis retail businesses having more cash
on hand then other businesses. Businesses with a lot of cash on may hand may be
targets for crime, which is one reason the City may want to consider buffers. Applying a
buffer to retail sales is consistent with similar buffering practices for the following similar
retail product types:
• Tobacco Sales and Vaping Establishments - prohibited within 500 feet of a public
park, public or private school, church, daycare or the Hopkins Center for the Arts
• Off-sale Liquor sales - prohibited within 350 feet of any elementary or secondary
school, daycare center or religious institution, existing exclusive off -sale liquor
store, pawnshop, currency exchange, or any business licensed by the city as an
adult oriented business
Three different buffer distance scenarios are presented below to demonstration how
distance requirements would restrict the potential locations of new cannabis retail
businesses. Maps depicting each scenario, as well as a no buffer scenario, are included
as an attachment. The middle column represents a buffer analogous to off -sale liquor
sales.
Maximum Buffer
permitted by Law
350 feet Buffer No Buffer
Eligible Number of parcels 136 (25%) 270 (50%) 539 (100%)
Number of parcels not eligible 403 (75%) 269 (50%) 0 (0%)
Other Licensed-Business Buffers
As noted, the City may impose buffers on businesses engaged in the other allowable
activities such as manufacturing, cultivation, and transportation. Staff believes that any
externalities associated with such business can be addressed by way of operational
requirements locally or by State Law.
Hemp Buffers
The City can also impose buffers for hemp businesses; although the City does not
currently impose them. State law does not impose the same limits on buffers for hemp
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businesses. The City may decide to adopt buffers for hemp businesses. It should
be noted that any new buffer would apply to new business, as existing business would
have legal non-conforming status.
Retail Sales Hours
The State Law establishes that retail sales are prohibited between2:00 a.m. and 8:00
a.m. Monday through Saturday and between 2:00 a.m. and 10:00 a.m. on Sunday. The
City may prohibit retail sales of cannabis between 9:00 p.m. and 2:00 a.m. the following
day and/or between 8:00 a.m. and 10:00 a.m. Monday through Saturday. In other
words, the most restrictive hours of sales could be 10:00 a.m. to 9:00 p.m. Monday
through Sunday. For comparison, Off-sale Liquor sales are allowed on Sundays,
between 11:00 a.m. and 6:00 p.m.; 8:00 a.m. to 10:00 p.m. on Monday through
Saturday; and not on Thanksgiving; Christmas Day; and Christmas Eve. The City
should decide the allowable hours of cannabis retail sales.
Events
A temporary cannabis event is a gathering organized by a licensed cannabis event
organizer that may last for no more than four days. The process for these event should
generally follow the normal process for handling similar events, but the City could
choose to require additional standards for temporary cannabis events, such as
prohibiting on-site consumption, limiting the hours or the events, etc.
Enforcement
The City must conduct compliance checks for cannabis and hemp businesses holding
retail registration at least once per calendar year. These compliance checks must verify
compliance with age verification procedures and compliance with the applicable City
ordinance on zoning and registration. OCM maintains inspection authorities for all
cannabis licenses to verify compliance with operation requirements, product limits, and
other applicable requirements of State Law. If the City determines that a cannabis
business or hemp business with a retail registration is not operating in compliance with
State Law or that the operation of the business poses an immediate threat to the health
or safety of the public, the City may suspend the retail registration.
Registration
A cannabis retailer or a cannabis business with a retail endorsement must obtain a local
retail registration. Applicants will be directed to first apply for licensure with the Office of
Cannabis Management (OCM), who will vet the applicant then forward applications to
the City to certify whether the proposed cannabis business complies with the zoning
ordinance, and, if applicable, building and fire codes. The City will have 30 days to
respond to a request for certification of compliance. The City may comment on the
proposed location or share public information about the applicant.
The City can limit the number of licensed cannabis retailers and/or businesses with a
retail operations endorsement to no fewer than one registration for every 12,500
residents. There is no upper limit or cap on the number of cannabis retail businesses
imposed by the State. Hopkins’ most recent estimated population was 18,608 per the
State Demographer’s Office. The City will need to decide if the number of licensed
retailers should be capped, but at a minimum two registrations must be available.
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As a point of comparison, similar licensed sales products are limited in Hopkins: Off-
sale Liquor is limited to nine, and Vaping Establishment is limited to one. There is no
limit of Tobacco licenses and there are currently 19 licenses issued. Additionally, there
is no limit on Hemp-derived consumer products registrations, and there are currently 21
businesses selling such products. The City will also need to determine how to select if
there are more applicants than registrations available. A few options for this process
include the use of a lottery, a first-come/first-serve model, and others.
The City will need to decide what registration fee, if any, it will charge . Staff
recommends imposing the maximum fee amount given the uncertainty of staff work
associated with the registration. Fees can be adjusted in the future once there is more
familiarity with the process. The table below shows the maximum amount for an initial
registration fee and renewal registration fee for retail businesses and includes the
amount the state charges for a license, for reference.
Business Initial Renewal
Cannabis Retailer City (Optional) - $500; State - $2,500 City (Optional) - $1,000; State - $5,000
Lower Potency Hemp
Retailer
City (Optional) - $125; State - $250 City (Optional) - $125; State - $250
Medical Cannabis
Combination Business
City (Optional) - $500; State - $20,000 City (Optional) - $1,000; State - $70,000
Cannabis
Mezzobusiness
City (Optional) - $500; State - $5,000 City (Optional) - $1,000; State - $10,000
Cannabis
Microbusiness
City (Optional) - $0; State - $0 City (Optional) - $1,000; State - $2,000
County Registration and Enforcement
Hennepin County has offered to take over registration and enforcement on behalf of
Hopkins. The City should decide whether to delegate registration and enforcement
to Hennepin County. The City is not recommending this at this time, staff feels
comfortable taking on management of registration and compliance checks, which would
afford better local control.
Municipal Sales
The new Law authorizes municipalities to operate a municipal cannabis retail store. A
municipal cannabis store would not be included in the minimum number of registrations
required. Staff generally understood there was little interest from the Council in a
municipal dispensary. However, staff would pursue a feasibility study by a third party if
this understanding was inaccurate. The feasibility study would consider factors such as
potential market, location, staffing, security, inventory, supply, etc. to determine the
profitability of a cannabis retail operation and serve as the basis for a business plan.
Additional research on insurance and banking would also be required given the
complexity of this type of endeavor, although it is being pursued by some cities and
Hopkins could learn from their research and experience.
Additional Information
A tax equal to 10% of gross receipts from retail sales of taxable cannabis products will
be imposed on any taxable cannabis product retailer that sells cannabis products to
customers. Revenues from the retail sales of cannabis products will be divided, with
80% going to the State’s general fund and 20% to the local government cannabis aid
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account. Cities will receive 50% of the amount certified to the local government
cannabis aid account. Half of the amount certified in the cannabis local government aid
fund will go to cities. Cities will receive a distribution proportional to the number of
cannabis businesses located in the city as compared to the number of cannabis
businesses in all cities. The State has not shared estimates of tax proceeds that cities
would receive per business based on projected sales.
FUTURE ACTION
Based on input and direction from the City Council, staff will prepare an Ordinance that
will regulate the time, place, manner, and registration of Cannabis businesses in
Hopkins. The Ordinance will be reviewed by the Planning and Zoning Commission for
their recommendation on the zoning aspects and would need City Council approval.
The timing is anticipated to occur prior to the expiration of the City’s moratorium on
Cannabis Businesses which was effective until January 1, 2025 or until removed by the
Council.
Direction Requested Options/Context Staff’s Recommendation
The number of retail
registrations the City desires.
Minimum: Two
Maximum: unlimited number.
Context:
Off-sale Liquor: 9
Vaping Establishment: 1
Tobacco: No limit (19 current)
Hemp-derived products: No limit (21 current)
At least Two.
Registration fee amount. Minimum: $0
Maximum: Set by state (generally $500 for initial,
$1,000 for renewal)
Maximum given uncertainty with work
associated with registration.
Direction on how Cannabis
businesses will be
incorporated into the City’s
Zoning Policies.
1) Assign zones individually for each business type.
2) Group business types with analogous existing uses.
Group business types of analogous
existing uses.
Whether to impose buffers on
Cannabis Retailers.
Minimum Buffer: No buffer
Maximum buffer:
• 1,000 feet of a school or
• 500 feet of a day care, residential treatment facility,
or an attraction within a public park that is regularly
used by minors, including playgrounds and athletic
fields.
• 500 ft from another cannabis business is also
allowed.
Context:
Tobacco Sales and Vaping Establishments buffer - 500
feet of a public park, public or private school, church,
daycare or the Hopkins Center for the Arts
Off-sale Liquor sales Buffer - 350 feet of any elementary
or secondary school, daycare center or religious
institution, existing exclusive off-sale liquor store,
pawnshop, currency exchange, or any business
licensed by the city as an adult oriented business
Staff recommends anywhere from 0 to 350
feet from Schools, Residential Treatment
Facilities, and Parks with attractions used
by minors; and anywhere from 0 to 500
feet from another Cannabis Retailer.
Staff recommends considering buffers to
address concentrations of retail
establishments, and potential externalities
from retail cannabis businesses.
Consideration should also be given to the
fact that Hopkins would see greater
revenues from taxation with higher relative
proportions of cannabis businesses in the
city.
Whether to impose buffers on
other Cannabis Businesses,
i.e. manufactures, cultivators,
wholesalers, etc.
Same as retail buffer options.
No buffer for these business types. Staff
believes that any externalities associated
with such business can be addressed by
way of operational requirements locally or
by State Law.
Whether to impose buffers on
Lower Potency Hemp
Retailers
State law does not impose the same limits on buffers for
hemp businesses. The City does not currently impose
buffers. This would apply to new business, as existing
business would have legal non-conforming status.
21 business currently are licensed with OCM.
Continue current no buffer policy.
Whether to further limit hours
of retail sales
Default Hours:
Mon-Sat: 8am to 2am
Sun: 10am to 2am
Most restrictive option:
Mon-Sun: 10am to 9pm
Context:
Off-sale liquor sales:
Mon-Sat: 8am to 10pm
Sun: 11am to 6pm
Correspond as closely to off-sale liquor
sales hours as allowable:
Mon-Sat: 8am to 10pm
Sun: 10am to 9pm
Whether to delegate
registration and compliance
to the County.
Hennepin County Health Department would register
businesses and conduct compliance checks.
Not at this time.
Whether to study municipal
sales.
The City may operate a municipal retail operation. This
would not count against the minimum required number
of retail registrations.
Additional study and information would be
needed. The City would not be precluded
from operating municipal sales in the
future.
Cannabis License Types
Microbusiness
Microbusinesses may cultivate cannabis and manufacture cannabis products and hemp
products, and package such products for sale to customers or another licensed
cannabis business. Microbusiness may also operate a single retail location. On-site
consumption of edible cannabis products and lower-potency hemp edibles are
permitted.
Mezzobusiness
Mezzobusinesses may cultivate cannabis and manufacture cannabis products and
hemp products, and package such products for sale to customers or another licensed
cannabis business. Mezzobusiness may also operate up to three retail locations.
Cultivator
Cultivators may cultivate cannabis and package such cannabis for sale to another
licensed cannabis business.
Manufacturer
Manufacturers may manufacture cannabis products and hemp products, and package
such products for sale to a licensed cannabis retailer.
Retailer
Retailers may sell immature cannabis plants and seedlings, cannabis, cannabis
products, hemp products, and other products authorized by law to customers and
patients.
Wholesaler
Wholesalers may purchase and/or sell immature cannabis plants and seedlings,
cannabis, cannabis products, and hemp products from another licensed cannabis
business. Wholesalers may also import hemp-derived consumer products and lower-
potency hemp edibles.
Transporter
Transporters may transport immature cannabis plants and seedlings, cannabis,
cannabis products, and hemp products to licensed cannabis businesses.
Testing Facility
Testing facilities may obtain and test immature cannabis plants and seedlings,
cannabis, cannabis products, and hemp products from licensed cannabis businesses.
Event Organizer
Event organizers may organize a temporary cannabis event lasting no more than four
days.
Delivery Service
Delivery services may purchase cannabis, cannabis products, and hemp products from
retailers or cannabis business with retail endorsements for transport and delivery to
customers.
Medical Cannabis Combination Business
Medical cannabis combination businesses may cultivate cannabis and manufacture
cannabis and hemp products, and package such products for sale to customers,
patients, or another licensed cannabis business. Medical cannabis combination
businesses may operate up to one retail location in each congressional district.
Lower-Potency Hemp Edible Manufacturer
Lower-potency hemp edible manufacturers may manufacture and package lower-
potency hemp edibles for consumer sale, and sell hemp concentrate and lower-potency
hemp edibles to other cannabis and hemp businesses.
Lower-Potency Hemp Edible Retailer
Lower-potency hemp edible retailers may sell lower-potency hemp edibles to
customers.
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