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 retail 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.

• June 12, 2017, Governor Sandoval approved Senate Bill 487.  Section 18.5 of this legislation includes limits on license taxes on marijuana both medical and retail marijuana establishments. Section 18.5 caps license fees that local governments can impose at three percent (3%) of the gross revenue of the retail or medical marijuana establishment.  Senate Bill 487 also stipulates that marijuana establishments do not need to designate their marijuana inventory as medical or retail. Marijuana inventory can be kept as a single inventory until the point of sale to the consumer.

The version of Bill 2719 disseminated for stakeholder input for the Business Impact Statement (attached), and for the first reading of the bill on June 26^th, prescribed that the gross receipts portion of the business license fee would be equal to the maximum amount the State of Nevada permits the City of Sparks to charge a retail marijuana cultivation facility. For the Second Reading and public hearing, Bill No. 2719 has been revised, based on Senate Bill 487, to clarify that the City’s gross receipts fee will be three percent (3%) for all medical marijuana establishments which are also licensed by the State of Nevada under the authority of NRS Chapter 453D for retail marijuana.

On June 26, 2017, the City Council considered and adopted a Business Impact Statement based on the proposed fees in Bill 2719.

The proposed amendments to Title 5, Chapter 5.80 (Licensing of Medical Marijuana Establishments) of the SMC would revise Sections 5.80.010 to 5.80.200 and add Sections 5.80.35, 5.80.55 and 5.80.195 to license, for at retail operations:

• medical marijuana dispensaries to sell or dispense marijuana and marijuana-infused products;
• medical marijuana cultivation and production facilities to cultivate and produce marijuana and marijuana-infused products;
• independent medical marijuana testing laboratories to test marijuana and marijuana-infused products; and
• distributors to transport marijuana and marijuana-infused products between marijuana establishments.

The City would not issue a business license for a MME to operate as an at retail marijuana business until the applicant has been approved for a temporary license by the Department under the authority of Nevada Revised Statutes Chapter 453D. All other requirements of SMC Chapter 5.80 for MMEs would also apply. These provisions include those addressing revocation of a license (SMC 5.80.100-130), the duties of the City’s chief of police (SMC 5.80.160), and access of City officials and officers to marijuana establishments (SMC 5.80.170).

The license fees proposed in the ordinance for retail cultivation, production, sale and distribution of marijuana and marijuana-infused products (see Section 5.80.195) 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 of three percent (3%). The additional fee of three percent is the maximum amount the State of Nevada permits local governments to charge a retail marijuana establishment, as provided for in Senate Bill 487. That bill was passed by the Nevada Legislature in 2017 and has been approved by Governor Sandoval. However, as of the date this staff report was prepared, implementation of SB 487 was pending the outcome of a legal challenge. Bill No. 2719 also proposes that marijuana independent testing laboratories pay the same license fees applicable to other non-privilege business licenses in Sparks, as specified in Section 5.12.100 of the SMC.

Senate Bill 487 also stipulates that marijuana establishments need to designate their marijuana inventory as medical or retail. Marijuana inventory can be kept as a single inventory until the point of sale to the consumer. Bill 2719 would require, however, that any marijuana establishment licensed by the State of Nevada as a marijuana establishment under the authority of NRS Chapter 453D (for retail marijuana) obtain a City of Sparks retail marijuana establishment license.

The license fees proposed for retail marijuana cultivation, production, sales and distribution are a new fee for a new type of business and are higher than those the City charges other businesses. Accordingly, NRS 237 is applicable and so staff prepared 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. The BIS for Bill No. 2719 was considered and adopted by the City Council on June 26, 2017.

PLEASE NOTE, WHEN REVIEWING BILL 2719, THAT THIS BILL (VERSION 2) HAS BEEN REVISED FROM THE VERSION (VERSION 1) PROVIDED FOR THE FIRST READING OF BILL NO. 2719 ON JUNE 26, 2017. STRIKE-THROUGH TEXT IN BLACK INK ARE PROPOSED DELETIONS FIRST INTRODUCED IN VERSION 1. UNDERLINED TEXT IN RED INK ARE PROPOSED ADDITIONS FIRST INTRODUCED IN VERSION 1. STRIKE-THROUGH TEXT IN GREEN INK ARE PROPOSED DELETIONS IN VERSION 2. UNDERLINED TEXT IN BLUE INK ARE PROPOSED ADDITIONS IN VERSION 2.

1. The City Council can approve and adopt Bill No. 2719; or
2. The City Council can direct the City Manager to not take any action on the proposed amendment to SMC Chapter 5.80; or
3. The City Council can provide alternative direction to the City Manager.

I move to approve and adopt Bill No. 2719, an ordinance amending Title 5 of the Sparks Municipal Code.