In 2014, the Sparks City Council amended Title 5 (Business Licenses, Taxes and Regulations) and Title 20 (Zoning) of the Sparks Municipal Code (SMC) to provide for, respectively, the issuance of business licenses to, and land use approvals for, Medical Marijuana Establishments (MMEs).

In November 2016, Nevada citizens approved an initiative (known as Question 2) to permit, regulate and tax marijuana sales to adults 21 years or older. The ballot measure, codified in NRS Chapter 453D, also provides for the operation and taxation of (retail) marijuana establishments, which will be regulated by the Nevada Department of Taxation (the “Department”). The Department has until December 31, 2017 to adopt all the regulations necessary to carry out the provisions of NRS 453D to provide for the taxation and regulation of marijuana establishments. Regulated marijuana establishments are cultivation facilities, testing facilities, product manufacturing facilities, distributors and dispensaries.

On April 10, 2017, the City Council directed the City Manager to examine the City’s business licensing and zoning ordinances and prepare code amendments to enable the City to permit existing medical marijuana establishments to operate as non-medical marijuana establishments.

On May 8, 2017, the Nevada Tax Commission adopted, for the Department, temporary regulations for an “early start program” to allow existing MMEs that are in good standing with the State to apply for a temporary license to sell, manufacture, cultivate or produce non-medical marijuana. Existing MMEs had until May 31, 2017 to apply to the Department for a temporary license. The Department has stated it intends to approve MMEs to begin cultivating, processing, testing and distributing and selling non-medical marijuana on July 1, 2017.

On May 22, 2017, the City sent letters to businesses with medical marijuana licenses in Sparks, cannabis organizations and licensed alcoholic beverage wholesalers soliciting their input regarding the proposed changes to SMC Chapter 5.80. On May 24, 2017, City staff held a stakeholders meeting to discuss the proposed changes to Title 5 and the business impact statement process. At the meeting, copies of the proposed Title 5 amendments and questionnaire were provided. There were 18 stakeholders in attendance.

The proposed amendments to Title 5 add a new Section 5.80.195 (License Fees for retail marijuana establishments). The license fees proposed for the retail cultivation, production, sale and distribution of marijuana and marijuana-infused products are a one-time application fee of $5,000 and, for each quarter based on the establishment's gross receipts for the previous quarter, an additional fee equal to the maximum amount the State of Nevada permits the City of Sparks to charge a retail marijuana cultivation facility. Senate Bill 487, which would establish the maximum fee at 3 percent of gross revenue, has been approved by Governor Sandoval. As of the date of this staff report, however, implementation of Senate Bill 487 was pending the outcome of a legal challenge. The ordinance also proposes that marijuana independent testing laboratories pay the same license fees that apply to other non-privilege business licenses in Sparks, as specified in Section 5.12.100 of the SMC.

The license fees proposed for retail marijuana cultivation, production, sales and distribution are a new fee. Accordingly, NRS 237 is applicable. It obligates the City to prepare a Business Impact Statement (BIS). NRS 237.090 requires that the BIS be available and considered by the City Council at its regular meeting next preceding the regular Council meeting at which this proposed ordinance may be adopted. For this reason, consideration of the BIS is a companion item to the Council agenda item providing for the first reading (on June 26, 2017) of the ordinance amending Title 5 as the public hearing, second reading and possible adoption of that proposed ordinance is anticipated to occur on July 10, 2017.

The City solicited comments from existing medical marijuana establishments, cannabis organizations and licensed alcoholic beverage wholesalers in Sparks concerning the potential business impacts of the proposed Title 5 changes to their operations and compiled the responses into a Business Impact Statement.

The two responses received by the City indicate that the proposed amendment would not impose a direct and significant economic burden upon their business, or directly restrict the formation, operation or expansion of their business. One respondent remarked that the “cannabis industry supports a 3% ceiling on license fees enacted by local government.” The other respondent expressed concern over requiring a retail marijuana license from the City of Sparks and that under a single stream inventory program as reflected in Senate Bill 487 a testing lab will have no way to distinguish retail from medical marijuana.

It is common for the City of Sparks to base a licensing fee on a percentage of gross receipts. For example, the City’s fee for providing telecommunication service is five percent (5%) of total gross receipts. With passage of Senate Bill 487, staff will explore revising the proposed Title 5 amendments to address the single stream inventory program. Both responses to the City questionnaire indicated that the proposed business fee or fee structure will not directly restrict the formation, operation or expansion of their business.

The City Council may choose to not adopt the Business Impact Statement and provide direction to the city manager.

I move to adopt the Business Impact Statement related to the proposed amendment to SMC Chapter 5.80 concerning the licensing and operation of existing medical marijuana establishments and distributors as ‘at retail’ marijuana establishments.