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VI.1. Continued Cannabis Business Discussion; Krzos 1 CITY OF HOPKINS Memorandum To: Honorable Mayor and Council Members Mike Mornson, City Manager From: Ryan Krzos, City Planner PeggySue Imihy, Special Projects and Initiatives Manager Date: September 18, 2024 Subject: Continued Cannabis Business Discussion _____________________________________________________________________ PURPOSE The City Council is asked to provide additional input and direction on cannabis retail registrations, retail separation requirements, and a municipal cannabis sales study. INFORMATION The Minnesota Legislature enacted new State Law legalizing the possession, use, manufacturing, and sale of certain cannabis products within the State. Licensing of cannabis businesses will be conducted by the Office of Cannabis Management (OCM). Under the State Law, local governments may register retail cannabis businesses and enforce certain zoning regulations within their jurisdiction. The law also authorizes local governments to establish retail sales operations. At the August 20, 2024 City Council meeting, staff presented a summary of legislation and sought feedback on policy matters that will be addressed in an Ordinance regulating cannabis businesses in Hopkins. Staff is looking for additional discussion to solidify the number of retail registrations the City will issue and the buffer standards for retail business. Additionally, based on feedback from the Council, staff solicited an initial feasibility study proposal for a municipal sales enterprise. Staff is looking for authorization to move forward with the study. Using input from Council, staff will continue to draft an ordinance adopting policies and procedures prior to the expiration of the City’s Moratorium ending on January 1, 2025. Registration During the August 20th meeting, the Council discussed a range of limitations on the number of retail registrations. The range in the number of registrations discussed was between two (the minimum required) and nine (matching the off-sale liquor sales license) with midpoint amounts also mentioned. Since there was a lack of consensus, staff is looking to solidify this number. Should the City ultimately pursue municipal sales, the City’s establishment would not count against the required minimum number of available registrations. Planning & Development 2 Additionally, if municipalities within Hennepin County have collectively issued active retail registrations totaling one per 12,500 residents of the entire county (104 retail locations based on Hennepin County’s population of 1.29 million) then Hopkins would not be obligated to register any cannabis retail businesses. The Council is asked to weigh in on whether Hopkins should prohibit any registrations if this threshold is met. From a service provision perspective, staff consulted with public safety staff for their input. Public safety staff noted that, as is typical with any business having age of sale limitations, an additional amount of service calls would be anticipated with new businesses. As such, staff is recommending that the City start on the lower end (two or three), with the understanding that additional registrations may be allowed should the demand and local need arise. Zoning Buffers At the August 20th meeting the City Council discussed buffers for retail cannabis business. While Council members generally expressed support for imposing buffers, there was no consensus on the distances. In order to help work towards a consensus on buffers, staff created a mapping tool to help evaluate both the individual and collective impacts of differing distances: https://arcg.is/18yOOS. The mapping tool allows for customization of buffers for each of the relevant sensitive land uses. The Council is encouraged to explore various scenarios in advance of the discussion. A number of scenarios are shown below for discussion purposes: 500 feet Buffer 350 feet Buffer 500 ft buffer from Parks and Schools, No Buffer for Day Care 350 ft buffer from Parks and Schools, No Buffer for Day Care Eligible Number of parcels 154 (29%) 267 (49.5%) 177 (33%) 362 (67%) Number of parcels not eligible 385 (71.5%) 272 (49.5%) 362 (67%) 177 (33%) 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. For reference, buffers from tobacco and liquor sales are as follows: • 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 Additional consideration in crafting buffers may include general availability of real estate and landlord willingness. RISE dispensaries, which includes seven-plus dispensaries in 3 Minnesota reported at a League of Minnesota Cities presentation that they experience that 50% of landlords cease negotiation once learning the proposed use is cannabis retail. Furthermore, cannabis’ classification as a federally controlled substance poses challenges for landlords to navigate with third parties such as mortgage lenders and insurance providers, resulting in further reduction in feasible locations. As such, staff is recommending a buffer distance of 350 feet from parks and schools. Municipal Sales At the August 20th meeting, the consensus of the Council was to support initiating a municipal dispensary study. Through experiences with other metro communities (Wayzata, Anoka, Vadnais Heights, Lauderdale) that have similarly explored municipal sales, staff was introduced to a consultant that conducts a variety of services that support cannabis businesses: Point Seven Group. Their proposal is attached. The proposal includes a recommendation for multiple phases of work. The first phase is a $8,500 flat fee for the initial assessment of potential revenues. This could be funded by the Council Budget. The initial study phase considers factors such as revenues, expenses, staffing, location, facilities, and the potential market to help assess the profitability of a cannabis retail operation. A second phase, not included in the initial fee structure, would provide insight to position the City in its application to the State for licensure. FUTURE ACTION Based on input and direction from the City Council, staff will continue to 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 will be coordinated 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. Additionally, should the Council move forward with a municipal enterprise study, staff will present the results of said study at a future meeting. Provided to The City of Hopkins Presented by Point Seven Group on 09/10/2024 Consulting Services Overview PeggySue and Ryan, Thank you for your interest in working with Point Seven Group. We developed the following proposal outlining the scope of services we believe you will need to be prepared for Minnesota’s upcoming cannabis licensing process and downstream operations. This service overview reflects our conversations thus far, understanding of the MN cannabis Preliminary Application licensing process and extensive experience working with licensed retailers throughout the United States. We encourage you to review this carefully, considering the competencies your team has in-house, versus those that will need to be outsourced to third-party firms like Point7. When we speak next, we’ll use your questions, ideas and notes to develop a final proposal and quote customized for your team’s unique needs. Notably, while we recognize the workload necessary to prepare and submit a compliant and competitive application in MN, we want to emphasize the greater importance of being prepared for operations. We hope that this is emphasized sufficiently throughout. We fully expect this to be a two-way conversation and look forward to our next call so we may develop an engagement that works for all. On behalf of our team, thank you for your consideration. Ashley Picillo Katelyn Coskey Founder & CEO VP of Client Success POINT SEVEN GROUP © 2024 | 1 ABOUT POINT7 Point Seven Group (Point7) is a global, tenured management consulting firm dedicated to the commercial cannabis industry known for agility, speed, licensing success, and exceptional service. Our success is measured by that of our Clients – whether winning competitive licenses, creating global brands, or expanding operations into new markets. We’ve developed a holistic offering that addresses our Clients’ business needs and positions them for success at all stages, including pre-application business planning, licensing and application submissions, foundational operations, ongoing compliance, expansion, and exit. We create a custom roadmap for each client, delivered with high-touch service to ensure our clients hit every milestone, in every market, every time. When our Clients succeed, we succeed. THERE IS NO SUBSTITUTE FOR EXPERIENCE In a new industry, it’s difficult to find partners who can back up glossy marketing materials with consistent real-world success and a roster of happy, long-term clients. We prefer to let the numbers do the talking. LICENSES WON Number of commercial cannabis licenses obtained for clients in highly competitive markets. Number of clients supported globally since 2016. Number of regulated cannabis markets where we have supported clients worldwide. Point7’s combined experience working in regulated cannabis markets. CLIENTS SERVED REGULATED MARKETS YEARS EXPERIENCE POINT SEVEN GROUP © 2024 | 2 POINT7 FULL SERVICE CONSULTING PROCESS Building a cannabis business requires a thoughtful, strategic (and compliant) plan. Our proven, agile approach was designed to take the guesswork out of cannabis while speeding-up our Client’s industry learning process. Point7 supports full service Clients from the business planning and strategy stage, co-developing a roadmap alongside our Clients through application submission. Aside from our proven track record, winning some of the most competitive cannabis business licenses in the U.S., our Clients are set-up for long term success because of the thorough, education-driven approach we take to consulting, helping to ensure a strong go-to-market plan once the license has been issued. EXPLORATION Listening is the cornerstone of Point7’s Exploration Phase. We believe the most critical step to creating a successful, sustaining relationship with our clients is to understand their ambitions, pain points, and vision so we may work collaboratively to explore—and understand— each of the business pathways that exist. STRATEGY Cannabis is competitive and the industry is evolving quickly. The Strategy Phase is a highly collaborative process designed to convert outcomes from the Exploration Phase into an actionable plan — taking us from ideation through execution. This is where we dive deep into the market; compare your concept to competitors; stress test our nancials; and consider the most tactical way to enter the cannabis market. EXECUTION Flawless execution is our goal– 100% of the time. We recognize your team may be staring down a steep learning curve in cannabis. We’re here to ensure our co-developed roadmap can be executed effectively, eciently, on- time, and in compliance with all local and state rules and regulations. We understand where the most common blind spots are and we are well-versed in taking our clients’ unique visions— and bringing them to life. POINT SEVEN GROUP © 2024 | 3 PREPARING FOR OPERATIONS IN THE MINNESOTA CANNABIS INDUSTRY PHASE I. OVERVIEW During Phase I. we will: 1.Develop a 5-Year Pro Forma / Financial Model designed to aid in internal decision making, reflecting the intended business model and local market data. The Pro Forma will include: 1) Revenue Assumptions; 2) Startup Expense Assumptions; 3) Operational Expense Assumptions; 4) Personnel Assumptions; and 5) Projected Monthly Income Statement, Balance Sheet and Statement of Cash Flows. Point7 will also conduct market research, including, but not necessarily limited to census information, demographic analysis, traffic and access research, product pricing, and market share. a.Point7 will participate in up to three (3) one-hour strategy calls with Client prior to developing the model and up to two (2) one-hour financial model review calls with Client to explain the work product and incorporate Client feedback. 2.Provide Client with predeveloped documents and tools to guide Client through their learning process, including: a.© 2024 Point7’s Retail Facility Room & Area Description which describes each room/area necessary to operate a dispensary, as well as the square footage most commonly utilized for each area. These materials will ensure that you have a visual representation of what a dispensary looks like and how to best operate them compliantly, profitably and efficiently. b.© 2024 Point7’s Retail Site Consideration Guide, outlining the various considerations to be thinking about as you evaluate possible locations for your business. c.© 2024 Point7 Roles & Responsibilities Overview so you may begin to consider the skills necessary for each role within the dispensary as well as the wages/salaries associated with each role. d.© 2024 Point7’s Dispensary Design Inspiration Book consolidating various interior and exterior design examples, as well a dozen unique dispensary floor plans. Phase I. — $8,500.00 Flat Fee Phase I will be completed within approximately 60 days and will require Client engagement throughout the process. You will be connected with a dedicated relationship manager who will support you throughout the process. PHASE I. OVERVIEW POINT SEVEN LLC © - 6 POINT SEVEN LLC © - 5POINT SEVEN LLC © - 5POINT SEVEN GROUP © 2024 | 5 PHASE II. OVERVIEW During Phase II, our primary objectives are: 1) Guide you through the hundreds of operating decisions you will need to make prior to submitting your application; and 2) Provide you with a First Draft Narrative for each required Preliminary Application narrative. Each narrative that you will submit requires your team to think through hundreds of decisions — ranging from equipment selection, personnel choices, budgeting decisions and layout. Point7 would recommend prioritizing the following discussions and services during Phase II. 1.Educate Client about license-specific operating requirements, guiding Client through operational decisions related to staffing; technology; equipment; vendors/suppliers; pricing; marketing programs; community outreach/education; and site layout. a.Please Note: As a Point7 Client you will also receive Point7’s Resource Toolkit including valuable templates and guides such as organizational charts, job descriptions, pay-scale documents and operational flow chart diagrams. 2.Provide Client with consultative support as it pertains to best operational practices, facility workflow and customer experience. 3.Provide insights and updates as regulations and regulatory guidance are released. 4.Evaluate vendors and suppliers and making introductions to potential third-party providers. 5.Develop required Preliminary Application narratives. Phase II. — $5,000.00/month (up to 20 hours/per month) The work described herein will be performed over a three month period. Some months may require more support while others may feel slower. Client and Point7 will work together to determine which deliverables are needed each month, prioritizing deliverables based on known State information, Client needs and Point7’s expertise. In addition to the deliverables described above, Client may select any services from the Point7 List of Approved Services, included on the following page. PHASE II. OVERVIEW POINT SEVEN LLC © - 6 7POINT SEVEN GROUP © 2024 | 6 LIST OF APPROVED SERVICES ●Development & Completion of Application Narratives ○Completion of all required narratives such as: Disclosure of Ownership & Control; Preliminary Security Plan; Preliminary Business Plan; Preliminary Description of Training and Education for Employees; Preliminary SOP for Quality Assurance; Preliminary SOP for Inventory Control, Storage, and Diversion Prevention; Preliminary SOP for Accounting and Tax Compliance, and Preliminary Retail Operation Plan ○Project Management of Submission Process ●People Operations ○Management and/or Employee Training Program Design/Development ○Development of Job Descriptions, Roles & Responsibilities ●Market, Location, Real Estate & General Research ○Pricing and Market Share Research ○Community Engagement Strategy ○Real Estate Evaluation & Related Research ■Site Review and Evaluation in accordance with local and/or state cannabis regulations, if applicable ●Sustainability ○Evaluation of Sustainable Equipment, Designs and Operational Practices ○Implementation of Renewable Energy Sources ○Water Conservation and Waste Management Strategies ○Carbon Footprint Assessment and Reduction Plans ●Standard Operating Procedure (SOP) Development ○Customization of separately purchased Point7 SOPs ○Technical Writing for New/Original SOPs ●Licensing Preparedness, Operational Planning & General Strategy ○Review and Development of Operational Best Practices ○Vendor and Third-Party Partner Evaluation and Review ○Technology & Equipment Evaluation and Review ○Copy Editing of Client-provided materials such as biographies and resumes POINT SEVEN LLC © - 9 8POINT SEVEN GROUP © 2024 | 7 NEXT STEPS & TIMELINE PeggySue and Ryan, We appreciate you taking the time to review this Service Offering. I recognize there is a lot of information to consider here and look forward to discussing these options with you and Ashley by phone. As a reminder, we use the Service Offering as a tool, helping us to hone in on your needs. As you review, please make note of the services you do and do not need so we may revise this offering accordingly and present you with a final quote. We sincerely look forward to collaborating with you. Katelyn Coskey Director of Business Development 856-381-1734 katelyn.coskey@pointsevengroup.com www.pointsevengroup.com POINT SEVEN GROUP © 2024 | 8 Let’s work together. Send us an email or give us a call to start collaborating and we can continue to shape the industry for the greater good. POINTSEVENGROUP.COM (844)POINT7G (844-764-6874)