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Sparks City Council Meeting 2/25/2019

General Business: 9.2

Title: Consideration, discussion, and possible direction to the City Manager and City Attorney’s Office to institute proceedings to revoke production and cultivation business licenses currently held by NNV Operations I Inc. dba Silver State Trading.
Petitioner/Presenter: Stephen W. Driscoll, City Manager/Brandon C. Sendall, Assistant City Attorney
Recommendation: The City Council provide direction to the City Manager and City Attorney’s Office regarding whether they should institute proceedings to revoke production and cultivation business licenses currently held by NNV Operations I Inc. dba Silver State Trading.
Financial Impact: N/A
Business Impact (Per NRS 237):
    
A Business Impact Statement is not required because this is not a rule.
Agenda Item Brief:

This agenda item gives the City Council the opportunity to review and discuss NNV Operations I Inc. dba Silver State Trading’s business license fee payment history and provides the opportunity to decide whether business license revocation proceedings should be initiated.



Background:

Businesses licensed under SMC Section 5.80 (Licensing of Marijuana Establishments) are required to pay quarterly licensing fees that are based on the establishment’s quarterly gross receipts for the preceding quarter. SMC 5.80.180, .190, .195. These quarterly license fees are due no later than 30 days after the end of each calendar quarter. SMC 5.80.180(C). In July and August of 2018, NNV Operations I Inc. dba Silver State Trading (Silver State Trading) began arguing that it only needed to pay licensing fees for sales that it made from its production or cultivation facilities to dispensaries located within the City of Sparks, while not reporting and paying licensing fees for sales to dispensaries located in other jurisdictions. Under this argument, Silver State Trading underreported its quarterly gross receipts for the second calendar quarter of 2018 and underpaid its quarterly licensing fees.

After months of discussion, the City Manager sent Silver State Trading a letter confirming that the City considered Silver State Trading’s second quarter filings to be incorrect and informed that failure to correct the underreported and underpaid gross receipts filings by October 31, 2018 would result in the City beginning the process to revoke Silver State Trading’s cultivation and production business licenses. On October 30, 2018, Silver State Trading submitted third quarter gross receipts filings based on the same interpretation that limited gross receipts to sales made to dispensaries located within Sparks. The next day, Silver State Trading agreed that its prior interpretation of its quarterly gross receipts obligation was incorrect. Based on that admission, Silver State Trading agreed to submit amended quarterly filings for the second and third quarter of 2018, and agreed to pay all outstanding licensing fees, with all applicable late penalties as directed under SMC by November 30, 2018. Silver State Trading also agreed that it would, in the future, report its full gross receipts based on all sales and would pay the proper corresponding quarterly licensing fees on time. The City Manager informed Silver State Trading that any failure to comply with these terms would result in the City taking the necessary steps to revoke Silver State Trading’s cultivation and production business licenses.

Silver State Trading submitted revised quarterly filings for the second and third quarters of 2018 and paid all outstanding licensing fees (including late fees) in November of 2018 as promised. However, when the City’s business licensing office called Silver State Trading in late January of 2019 to set up a time to process their fourth quarter 2018 license fees (this is standard practice because of the staff time and coordination necessary to process each establishment’s quarterly filings), Silver State Trading informed the business licensing office that it would be unable to pay the quarterly fees due by the January 30, 2018 deadline. Silver State Trading stated that one of its employees or contractors had discussed its non-payment with the City Manager, but this was not true.

The City Manager informed Silver State Trading in writing on February 1, 2019 that in light of (1) its failure to pay its quarterly business license fees for the fourth quarter of 2018, and (2) Silver State Trading’s prior agreement that it would pay all future quarterly fees in full and on time, that the City will initiate the process to revoke its business licenses. Silver State Trading reached out to the City Manager the same day and paid its fourth quarter 2018 licensing fees in full on February 12, 2018, with late fees. In summary, Silver State Trading is now current on all of its quarterly license fee obligations, including all applicable late fees, but has been late in paying its full business license fee obligations for each of the past three calendar quarters, and only paid its fourth quarter 2018 license fees after notice that the City Manager would seek City Council approval to initiate business license revocation proceedings.



Analysis:

Pursuant to SMC 5.80.100, any marijuana establishment license may be revoked by the City Council if it appears to the satisfaction of a majority of its members that the licensee or an employee has (a) failed to pay any license fee, or (b) refused or neglected to comply with any of the provisions of SMC Chapter 5. The process for revocation involves either the City Council receiving a complaint from any person under oath or the City Council making its own motion to institute proceedings to revoke a license. SMC 5.80.110(A). In order to comply with the “under oath” requirement in SMC 5.80.110(A), the City Manager has provided an affidavit declaring that the information presented in this item is true and correct to the best of his knowledge.

If the City Council decides to institute proceedings to revoke a license, a complaint is mailed to the licensee stating the reasons that such proceedings are being initiated. Then, the licensee has 5 days, unless the City Council allows more time, to file an answer to the complaint with the City Clerk. SMC 5.80.110(B). Then, the City Council sets a day and time for a hearing at which the licensee is given an opportunity to be heard, after which the City Council is to enter an order either revoking the license or refusing to revoke the license. SMC 5.80.110(C), (D).

If the City Council believes Silver State Trading’s pattern of failing to pay its quarterly business license fees on time and other behaviors may be sufficient grounds to revoke its cultivation and production business licenses, then it may direct the City Manager and City Attorney’s Office to institute proceedings to revoke Silver State Trading’s business licenses by mailing a complaint as outlined in SMC 5.80.110(A).  After a complaint is mailed, Silver State Trading would have 5 days to file an answer (unless the City Council gives more time), and the City Council would then set a time for a hearing on the matter.



Alternatives:

The City Council may either (1) direct the City Manager and City Attorney’s Office to institute proceedings to revoke Silver State Trading’s cultivation and production business licenses by mailing a complaint as outlined in SMC 5.80.110(A), or (2) decline to institute proceedings to revoke Silver State Trading’s cultivation and production business licenses.



Recommended Motion:

If the City Council chooses to institute proceedings to revoke Silver State Trading’s business licenses, the motion should be stated as follows: I move to direct the City Manager and City Attorney’s Office to institute proceedings to revoke NNV Operations I Inc. dba Silver State Trading’s cultivation and production business licenses by mailing a complaint as outlined in SMC 5.80.110(A).

If the City Council declines to institute proceedings to revoke Silver State Trading’s cultivation and production business licenses, the motion should be stated as follows: I move to decline to institute proceedings to revoke NNV Operations I Inc. dba Silver State Trading’s cultivation and production business licenses.



Attached Files:
     Driscoll Affidavit - Silver State Trading.pdf

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