In November 2016, the citizens of Nevada voted to pass an initiative (also known as Question 2) to regulate businesses and to tax marijuana sales to adults 21 years or older. The initiative declares the use of marijuana is legal for persons 21 years of age or older and that cultivation and sale of marijuana should be regulated under a controlled system, where businesses will be taxed and the revenue dedicated to public education and enforcement of the regulations of the Act. The Nevada Department of Taxation has 12 months after the effective date of the Act (January 1, 2017) to adopt all the regulations necessary to carry out the regulation of the marijuana establishments. “Marijuana establishment” means a marijuana cultivation facility, a marijuana testing facility, a marijuana product manufacturing facility, a marijuana distributor or a retail marijuana store.”

The Nevada Department of Taxation is working on establishing interim regulations. The target date for publication is May 8, 2017. The Department of Taxation has indicated that the interim regulations will allow existing Medical Marijuana Establishments (MME) to apply for growing, processing, testing, distribution and sales of recreational marijuana on May 10^th with the intent of permitting existing MMEs to be in operation in July 2017. Based on this schedule, it does not consider time for the local jurisdictions to review and adopt regulations for operation and taxing of marijuana businesses before the July 1^st date.

As the State Legislature is in session, there are numerous bills being considered at the Legislature on both medical and recreational marijuana operations/facilities. It is anticipated that by the end of the year, the full regulations will be published. The City of Sparks has been working with a group of the jurisdictions in the State (Boulder City, Carson City, Clark County, Henderson, Las Vegas, Mesquite, North Las Vegas, Reno, Sparks, and Washoe County). The group composed a nine-page document of issues and concerns relating to recreational marijuana which was presented to the State of Nevada Department of Taxation.

The City of Sparks currently regulates medical marijuana establishments (MME). The City requires all MMEs to be reviewed through the Administrative Review process. Per State regulations, all MMEs must be located over 1,000 feet from a public or private school and 300 feet from a community facility (park, church, day care, playground, public swimming pool, facility with the primary purpose to provide recreational opportunities or services to children and adolescents). There are two separate regulations in Title 20 (Zoning Code). By State law, the maximum number of allowed medical marijuana dispensaries in Sparks is three.

In Sparks, cultivation, production (making oils or other products) and testing of medical marijuana are only allowed to operate within the Industrial zoning district. There are restrictions on loading/unloading procedures and hours of operation. Operators must provide a written safety plan, comply with air quality emission standards and no smoking or consumption of any marijuana or products is permitted on the premises. In Sparks, there are nine cultivation operations that are open or under construction, four production facilities in operation and two testing laboratories.

The city restricts medical marijuana dispensaries to the Mixed-Use District – Mixed Use Commercial (MUD-MUC) and General Commercial (C2) zoning districts. In the Industrial Zoning District, dispensaries are restricted to buildings with public access readily visible from the arterial upon which the dispensary is situated. Some portion of the dispensary parcel must be located within 1,000 feet, as measured from the center, of the following intersections: McCarran Boulevard and Glendale Boulevard; McCarran Boulevard and Greg Street; and Rock Boulevard and Glendale Avenue. Medical marijuana dispensaries cannot be located within 1,000 feet of a Nevada licensed substance abuse treatment centered measured from the front door. The maximum size of patient access area of a medical marijuana dispensary is 2,500 square feet. There are restrictions on loading/unloading procedures, hours of operation, provide a written safety plan, and no smoking or consumption of any marijuana or products on premises. In Sparks, here are three medical marijuana dispensaries open or under construction. All three are in the Industrial zoning district.

Section 5.80.050 of the Sparks Municipal Code (SMC) requires that MMEs must file a business license after receiving the necessary approvals from the city for the operation and have a provisional certificate from the State of Nevada. The operation must comply with the City of Sparks Safety Plan and Operational Requirements. The SMC regulates requirements for posting of the license, revocation, unlawful operations, duties of the chief of police, and access of officials and officers to the MME premises. License fees for medical marijuana cultivation or production operations are based on $3,000 per year plus for each quarter based on the establishment’s gross receipts for previous quarter an additional dollar for each $1,000 in gross receipts in excess of $10,000. License fees for medical marijuana dispensaries are a base fee of $5,000 per year plus, for each quarter based on the gross receipts in the previous quarter, an additional $5.00 for each $1,000 in gross receipt in excess of $10,000.

The current SMC regulations only regulate MMEs while recreational marijuana establishments (RME) are not permitted by current zoning or business licensing codes. The City Manager requests direction on whether to proceed with developing code amendments to permit existing MMEs to add the cultivation, production, testing or sale of recreational marijuana. With the State’s projected plan of having the interim regulations out in May and final regulations later this year, the City Manager recommends undertaking the Code amendments in two steps. The first step, if City Council decides to permit existing MMEs to expand into growing, processing, testing and selling of recreational marijuana, would be to amend the SMC to regulate the existing MMEs to operate as RMEs. Step Two would follow the State’s adoption of final regulations on RMEs which will not occur until later this year. The City would then have to review, write and adopt any changes in the City regulations (both Title 5 and Title 20) pertaining to RMES.  The City Manager would bring Step Two back to City Council later this year for direction.

This agenda item asks the City Council to provide the City Manager direction only regarding the allowance of the existing MMEs to expand into a RMEs. If applications are submitted for recreational marijuana uses before the SMC is amended, the City Manager will have to either deem them incomplete or deny the applications.

The City Manager asks that the City Council consider several questions and issues.

First Question – Does the City Council want to permit the sale, cultivation, production, testing and distribution of recreational marijuana in Sparks? Or a combination of these uses such as only cultivation, production, testing and distribution?

• If so, does the City Council want to amend SMC Zoning and Business License regulations to permit existing MMEs to add recreational marijuana operations? And related, how fast does the City Council want to see the review and adoption occur?
• Rather than amending the SMC twice this year for RMEs, would the City Council like to just wait until the final State RME regulations are published in late 2017 and skip the interim step?
• To understand the interim process, the following is best case timeline for amending the SMC:

May 8^th – Publication of Interim State Regulations

May 9^th – 12^th – City Manager review of and understanding of Interim State Regulations

Week of May 15^th – Preparation of a Business Impact Statement and start work on the proposed RME regulations

May 22^nd – Public release of and start comment period on the Business Impact Statement (15 working days plus 3 mailing days)

June 15^th – End of comment period for Business Impact Statement

June 19^th – 23^rd – Review of comments on the Business Impact Statement

June 27^th – Deadline for Staff Reports for the Business Impact Statement and First Reading of the Code Amendments

 July 10^th – City Council review and possible approval of the Business Impact Statement and First Reading of the Code Amendments

July 24^th – City Council review and possible approval of the Code Amendments

• The following table discusses the possible options with pros and cons.

Second Question -Should the City Council adopt a moratorium for licensing of recreational marijuana establishments to permit the City Manager time to write the regulations for operation and taxing?

Based on the timeframe to adopt the interim regulations for recreational marijuana which is tentatively May 8^th and operating by July 1^st, staff is recommending that a short moratorium be instituted. The State’s proposed timeline for allowing existing marijuana establishments to grow, produce, test or sell does not take into consideration time for the local jurisdictions to adopt their regulations. A moratorium would allow the City Manager to review the State regulations, draft code amendments, and then adopt Code amendments for the allowance of MMEs expanding their operations into RMEs. The adoption of a moratorium would prevent the City Manager from having to deny RME applications submitted to the City when there are no regulations in place to approve.

1. City Council could establish the policy of not allowing recreational marijuana establishments within the City of Sparks.
2. City Council could establish the policy of not allowing existing medical marijuana establishments to expand their operations into recreational marijuana establishments within the city of Sparks. This process would also require the preparation of a business impact statement and the public comment period.
3. City Council could direct the City Manager to prepare code amendments that permit only limited existing medical marijuana operations to expand into recreational marijuana establishments such as cultivation, production and testing while not allowing sales. This process would also require the preparation of a business impact statement and the public comment period.
4. City Council could direct the City Manager to prepare code amendments to permit all existing MMEs in Sparks to add recreational marijuana operations. This process would also require the preparation of a business impact statement and the public comment period.
5. City Council could direct the City Manager to prepare a moratorium for future City Council consideration, to allow the City Manager time to prepare regulations for recreational marijuana establishments. This process would also require the preparation of a business impact statement and the public comment period.
6. City Council could direct the City Manager to wait for the final State regulations adoption (later 2017) before amending the Sparks Municipal Code.

To be determined.