07-12-21 Work Session Agenda and MaterialsCITY COUNCIL
KCITY OF WORK SESSION AGENDA
ALISPELL July 12, 2021, at 7:00 p.m.
City Hall Council Chambers, 201 First Avenue East
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Register to join the video conference at:
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A. CALL TO ORDER
B. DISCUSSION ITEMS
Montana Marijuana Regulation and Taxation Act
C. PUBLIC COMMENT
Persons wishing to address the council are asked to do so at this time. Public comment
can be provided in person, verbally during the online meeting, or via email to
publiccomment(cr�,kalispell. com
D. CITY MANAGER, COUNCIL, AND MAYOR REPORTS
E. ADJOURNMENT
UPCOMING SCHEDULE / FOR YOUR INFORMATION
Next Regular Meeting — July 19, 2021, at 7:00 p.m. — Council Chambers
Next Work Session — July 26, 2021, at 7:00 p.m. — Council Chambers
Watch City Council sessions live on Charter Cable Channel 190 or online at the Meetings on
Demand tab at www.kalispell.com.
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CITY OF City of Kalispell
KTALISPELL post Office Box 1997 -Kalispell, Montana 59903-1997
elephone (406) 758-7700 Fax - (406) 758-7758
MEMORANDUM
To: Honorable Mayor Johnson and City Council
From: Doug Russell, City Manager
Re: Montana Marijuana Regulation and Taxation Act
Meeting Date: July 12, 2021
BACKGROUND: At a previous work session, the Council reviewed the "Montana Marijuana
Regulation and Taxation Act" (HB 701) which was signed into law. Attached to this memo is a
breakdown of the Act and how it impacts local governments.
The discussion at the previous meeting also reviewed components for the City of Kalispell to
address related to zoning within municipal limits as the City of Kalispell currently does not have
provisions for this type of commercial activity within our zoning code. As described at the
meeting and in the attachment, there are various approaches the Council can consider for the
zoning of this industry within the municipal limits. It was agreed to resume this discussion at a
future date in order to provide further direction so we can begin preparing the appropriate
ordinance changes required to comply with the Act.
RECOMMENDATION: It is recommended that the City Council review the materials
provided, engage in further discussion, and provide guidance to staff for appropriate changes
within the zoning code.
City of Kalispell
Charles A. Harball Office of City Attorney
City Attomey 201 First Avenue East
P.O. Box 1997
Kalispell, MT 59903-1997
To:
From:
Subject:
Meeting Date:
I. Background
MEMORANDUM
Doug Russell, City Manager
Johnna Preble, Assistant City Attorney
PJ Sorensen, Senior Planner
Marijuana Dispensaries/Retail Stores
June 28, 2021 (Work Session)
Tel 406.758.7709
Fax 406.758.7758
charbalIkkalispell. com
On May 18, 2021, Governor Greg Gianforte signed House Bill 701 ("HB 701")
legalizing adult use of marijuana in the State of Montana. HB 701, now entitled the "Montana
Marijuana Regulation and Taxation Act" ("Act''), has since been codified under Title 16,
Chapter 12 of the Montana Code Annotated ("MCA").
The Act provides that, effective October 1, 2021, the Department of Revenue
("Department") shall issue licenses for "adult -use dispensaries established by adult -use providers
or adult -use marijuana -infused products providers."' Under the Act, "[a] person who obtains an
... adult -use dispensary license or an employee of a licensed adult -use provider or marijuana -
infused products provider is authorized to cultivate, manufacture, possess, sell, and transport
marijuana as allowed by [the Act]."
The Act gives local governments the authority to regulate adult -use providers and adult -
use marijuana -infused product providers that operate within the local government's jurisdictional
area.
The Department must start accepting applications for licenses on or before January 1,
2022. Importantly, the Act explicitly encourages local governments to begin the process to
approve any or all marijuana business categories beginning on July 1, 2021. The City of
1 An "adult -use provider" is "a person licensed by the [D]eparlment to cultivate and process marijuana for consumers
as allowed by [the Act]." An "adult -use marijuana -infused products provider" is "a person licensed by the
[D]epartment to manufacture and provide marijuana -infused products for consumers as allowed by [the Act]."
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Kalispell will likely see providers intending to open marijuana dispensaries licensed by the
Department as early as January 31, 2022.E
II. Zoning Questions Regarding Marijuana Dispensaries
Currently, Section 27.03.010(8) of the Zoning Ordinance states that "No use of land shall
be permitted or conditionally permitted within the City of Kalispell that is in violation of federal,
state, or local law." That section currently prevents marijuana dispensaries, cultivation, and
processing within the city. With the recent changes in state law, that should be revisited. There
are a couple different approaches we could take:
(1) While dispensaries are not listed as a specific use, Section 27.02.030 allows the
Zoning Administrator to classify a use with the closest listed use. A dispensary in
many senses is a retail business, just like a liquor store or pharmacy, for example.
Both of those uses are permitted in all of the business and health care zones. We
could allow it as a permitted use without restrictions under the current ordinance by
considering it as a retail use. There certainly would be concerns about how they
would fit into the community, but it is an option.
(2) Similarly, cultivation is not a listed use within the ordinance, but could be considered
to fall under "greenhouse, nursery centers and landscaping materials" by its definition
or an "agricultural or horticultural" use. Processing might be considered to be
accessory to those uses, or could fall under a manufacturing/industrial category. As
with dispensaries, simply using existing categories may not adequately address how
to best fit the use within the community.
(3) Casinos were discussed at the Council level several years ago. In that context, the
Council limited the zones where casinos could operate and placed certain criteria on
them, such as distances from churches, schools, parks, city residential zones, federal
highways and other casinos. They created an "accessory casino' classification for
casinos that did not meet the buffer requirements. Design criteria were added to
provide a separation from the primary use (eg a bar or restaurant) and generally shield
it from view both externally and internally.
We could create categories for marijuana dispensaries, cultivation, and processing,
and attach criteria that would mitigate some of the impacts. Those criteria could
include a conditional use permit or an administrative conditional use permit, buffers
from certain types of uses, or other design standards. Whether or not a conditional
use permit is helpful in this situation would be something to discuss, as would be
2 HB 701 provides that for the first 18 months only medical marijuana providers approved by the State by November
3, 2020, will be licensed by the Department. New providers may apply for licenses beginning July 1, 2023.
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what other criteria would be appropriate. We also could simply limit them to certain
zones (eg industrial) with or without criteria.
SUMMARY OF POTENTIAL ZONING APPROACHES
For discussion by the Council, there are a couple general directions that could be taken in
how the City should approach these uses as we look to integrate the new state legislation into the
zoning ordinance:
(1) We could create separate use categories for dispensaries, cultivation, and processing,
and place each as a permitted use within an appropriate zoning district. The allowed
districts may include all or most commercial/industrial zones (B-1, B-2, B-3, B-4, 13-
5, H-1, I-1, and I-2), or could be restricted to a more limited scope. Casinos (as
opposed to accessory casinos connected with a bar or restaurant, for example), are
limited to only the B-5 with a conditional use permit. Similarly, sexually oriented
businesses are only allowed in the I-1 and I-2 industrial zones with a conditional use
permit. Marijuana related businesses could be similarly restricted to certain zones.
(2) Along with creating use categories and placing them within certain zoning districts,
the Council also could consider certain standard criteria for each use. Criteria could
include buffers from other marijuana establishments and residential zones, as well as
schools and churches (although there is already a buffer from those uses under the
state statute).3 The Council also should consider whether a conditional use or
administrative conditional use permit should be necessary.
III. Legal Issues Regarding Marijuana Dispensaries
A. Election
Under the Act, qualified electors of a municipality or of a county may request an election
on whether to prohibit by ordinance any or all marijuana business categories from being located
within the jurisdiction. An election pursuant to this section may be held in conjunction with a
regular election of the governing body, general election, or a regular local or special election.
B. Limits on Ordinances and Regulations of Local Governments
While the Act allows local governments to create regulations and ordinances regarding
marijuana dispensaries, it also places limits on that power. First, the Act states that any
ordinance or regulation must be set in place "[t]o protect the public health, safety, or welfare."
While the Act's language is broad, it would be crucial that the city articulate a clear health,
safety, or welfare purpose behind any regulation or ordinance adopted and provide a detailed
explanation of how the regulation or ordinance is narrowly tailored to address that purpose.
3 HB 701 requires that a marijuana business not be within 500 feet of a school or place of worship. Additionally, the
bill states that municipalities may not reduce the 500-foot spacing between a marijuana business and a place of
worship or school. This has not made it into the MCA, yet.
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Additionally, a discrepancy exists between the language of HB 701 and the Act as
codified in the MCA. Section 16-12-201(1)(b), MCA, states that "a local government may not
adopt ordinances or regulations that are unduly burdensome." "Unduly Burdensome" is defined
in § 16-12-102, MCA, as "requiring such a high investment of money, time, or any other
resource or asset to achieve compliance that a reasonably prudent businessperson would not
operate." However, HB 701 struck both the restriction on local governments and the definition
of "Unduly Burdensome." It remains unclear whether the discrepancy is merely an error and
what the State will ultimately do to fix it. At this point, the "unduly burdensome" language is
broad and will likely result in litigation. Therefore, the City would benefit from erring on the
side of caution with any ordinance or regulation adopted, especially prior to any guidance that
might come from the Department in October as described in Section E below.
Finally, HB 701 requires license applicants to comply with local ordinances and
regulations to obtain licenses. Thus, the City should send certified copies of any ordinance or
regulation to the Department once adopted.
C. Local Government Taxing Authority
HB 701 states that the qualified electors of a county may authorize their county to impose
a local -option marijuana excise tax within the corporate boundary of the county. The Act states,
"The rate of the local option marijuana excise tax must be established by the election petition or
resolution ... and the rate may not exceed 3% [of the retail value of all marijuana and marijuana
products sold at an adult use dispensary or medical marijuana dispensary]." If the tax is imposed
by the county, 50% of the resulting tax revenue must be retained by the county and 45% must be
apportioned to the municipalities on the basis of the ratio of the population of the city or town to
the total county population. The remaining 5% must be retained by the Department and
deposited into the state special revenue account.
HB 701 allows for broad use of the tax revenue, stating:
Unless otherwise restricted, a county or municipality may appropriate and expend
revenue derived from a local -option marijuana excise tax for any activity,
undertaking, or administrative service that the municipality is authorized by law to
perform, including costs resulting from the imposition of the tax or due to
administrative burdens imposed on the municipality as a result of licensing or
regulatory requirements imposed in this chapter.
In summary, should Flathead County impose the excise tax, the City of Kalispell would
receive a portion of 45% of the tax revenue based on the population as compared to other
municipalities in the county, but the City could use that portion for any lawful purpose.4
4 As an example of an appropriate use of the tax revenue, the City could use the revenue to both employ and train a
Drug Recognition Expert through the Kalispell Police Department to address issues in the prosecution of marijuana
and other drug DUI cases.
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D. Advertising and Signage
HB 701 prohibits persons with licenses from advertising marijuana or marijuana products
in any medium, including electric media.5
E. Guidance from Department of Revenue
The MCA requires the Department to "promulgate rules and regulations to administer
and enforce [the Act]" "[n]o later than October 1, 2021."6 The MCA states that the rules
provided by the Department "may not be unduly burdensome." Id. The Department may
provide more guidance to local governments through the new rules and regulations.
S Another discrepancy between HB 701 and the MCA exists in this section. Section 16-12-211 states that persons
with licenses may not advertise "marijuana or marijuana -related products in any medium, including electronic
media." (Emphasis added.) It remains unclear whether marijuana dispensaries/stores will use this as a loophole to
advertise paraphernalia or other items for sale.
6 Yet another discrepancy between HB 701 and the MCA. HB 701 struck language requiring the Department to
have rules out by October 1. However, the Department's website states, "The Department of Revenue is currently
evaluating what rules and processes are necessary for about these topics."
'As stated above, HB 701 removed the language defining "unduly burdensome."
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