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HomeMy Public PortalAbout08.15.2023 Work Session Meeting Packet Posted 5/29/2009 Page WORK SESSION AGENDA MEDINA CITY COUNCIL Tuesday, August 15, 2023 6:30 P.M. Medina City Hall 2052 County Road 24 I. Call to Order II. Discussion on the Sale of Edible Cannabinoid Products III. Adjourn Posted 08.11.2023 1 ME230-1A-894671.v1 David T. Anderson Fifth Street Towers 150 South Fifth Street, Suite 700 Minneapolis, MN 55402 (612) 337-9274 telephone (612) 337-9310 fax danderson@kennedy-graven.com MEMORANDUM TO: Honorable mayor and council members FROM: David Anderson, city attorney DATE: August 10, 2023 RE: Options for temporarily regulating the sale of THC edibles under Minnesota Statutes, section 151.72 ______________________________________________________________________________ I. Introduction On November 1, 2022, the city council adopted a one-year moratorium on the sale of edible cannabinoid products, including both edibles and beverages (collectively herein, “THC Edibles”)1, which were legalized in 2022 under Minnesota Statutes, section 151.72. The interim ordinance incorporating that moratorium, which took effect on November 17, 2022, is enclosed for reference. While the moratorium is in effect, no business, person, or entity is allowed to begin selling THC Edibles in Medina. The moratorium cannot be extended beyond its one-year term, meaning that it will expire on November 17, 2023 unless the city council repeals it earlier. This memorandum is intended to provide an overview of the city council’s options for regulating the sale of THC Edibles under section 151.72 following the term of the moratorium. Keep in mind that due to the eventual statewide regulation of recreational cannabis and hemp products, which includes THC Edibles (defined in the new law as lower-potency hemp edibles), section 151.72 is scheduled to automatically repeal on March 1, 2025. Therefore, any action taken by the city council with regard to regulating the sale of THC Edibles under section 151.72 will be temporary. Eventually, retailers of THC Edibles will need to obtain a license from the State to sell these products, and so it should be anticipated that any local regulation on THC Edibles established during this transition period might later become unenforceable. However, additional guidance and rulemaking from the State needs to be provided and reviewed before confirming that. Attached is a copy of my memorandum, dated May 31, 2023, which summarizes various changes to section 151.72 that took effect immediately following the recent adoption of Minnesota’s 1 By definition, these products have low levels of THC when compared to other products that will now eventually become available to consumers. Specifically, edible products cannot contain more than 5 mg delta-8 or delta-9 THC per serving with no more than 50 mg per package, and beverages cannot contain more than 5 mg delta-9 THC per serving and the container cannot contain more than 2 servings. 2 ME230-1A-894671.v1 comprehensive cannabis legalization bill. As was the case in 2022, these recent updates neither expressly allow nor prohibit local regulation of the sale of THC Edibles as authorized under section 151.72. Accordingly, I take the position that cities may rely on their general police and general welfare powers to regulate such sales, at least to the extent they are conducted under section 151.72. As a reminder, local regulation of cannabis and hemp products is significantly curtailed under Minnesota Statutes, chapter 342, meaning that once sales of THC Edibles are conducted under that chapter, the city’s authority to impose regulations on the sale of such products will be significantly scaled back. That said, the city does have authority to regulate the sale of THC Edibles under section 151.72 during this transition period. Generally speaking, the city council has the following three options for regulating such sales upon the expiration of the existing moratorium: 1) regulate through a licensing and/or zoning ordinance; 2) prohibit such sales altogether; and 3) let the moratorium expire and do nothing. II. Options for Temporary Regulations a. Licensing and/or Zoning A city may license a business or activity either (i) when expressly allowed to do so by state statute; or (ii) when implied by statute, such as when a license is necessary for a city to perform its general statutory powers (like preventing public nuisance or protecting the general welfare). Since there is no express authority for a city to license a business selling THC Edibles under section 151.72, the city must look to implied authority. The authority granted under the “general welfare” clause in Minnesota Statutes, section 412.221, subd. 32, which allows a city “to provide for the government and good order of the city, the suppression of vice and immorality, the prevention of crime, the protection of public and private property, the benefit of residence, trade, and commerce, and the promotion of health, safety, order, convenience, and the general welfare…”. While amendments to section 151.72 in 2023 provide additional regulatory requirements, consumer protection, and general control of the sale of THC Edibles, the city clearly has an interest in ensuring that these products are being sold in a safe and responsible manner. To that end, there is authority to establish a local licensing program. A city licensing ordinance must be reasonable in its terms and conditions and cannot place unnecessary, unreasonable, or oppressive restrictions that conflict with the state or federal constitutions. Zoning controls generally relate to uses of property and not the sale of individual products, and so using the city’s zoning authority alone may not be an effective way to regulate the sale of THC Edibles. However, the city may incorporate zoning restrictions into a licensing ordinance. For example, the city could limit license eligibility to businesses that are not within 300 feet of school (similar to city liquor licenses). Should the city desire to establish a licensing program, it may include various requirements, such as: • terms; • insurance requirements; 3 ME230-1A-894671.v1 • hours of operation limitations; • restrictions on locations, e.g. not within 300 feet of school (similar to city liquor licenses) • eligibility requirements, including age, no criminal convictions or license revocations related to controlled substances; • revocation and suspension of license processes; • transferability limitations; • license fees; • limitations on the number of licenses; and • establish a system for compliance checks. Again, it is worth noting that any local licensing program for the retail of THC Edibles under section 151.72 would be temporary due to section 151.72’s automatic repeal on March 1, 2025 and the fact that the Minnesota Office of Cannabis Management will soon take over all licensing of cannabis and hemp retail activities throughout the state. That said, whether the city council deems it worthwhile for staff to administer a local licensing program for a short period of time is a question of public policy. b. Prohibition of Sales Authorized Under Section 151.72 Another option is to expressly prohibit the sale of THC Edibles under section 151.72 altogether. Because section 151.72 is silent with respect to local regulation, cities appear to have authority to prohibit the sale of these products if they deem such a prohibition to be in the best interest of the city and its residents. Again, cities may not outright prohibit the sale of THC Edibles if conducted in accordance with Minnesota Statutes, chapter 342 (the new chapter allowing such sales with a state-issued license). Therefore, any prohibition would only apply to the sale of THC Edibles under section 151.72, which is allowed through March 1, 2025. c. Take No Action Finally, one other option is to do nothing and allow the moratorium to expire without any additional action. The result of this would be that certain businesses could begin selling THC Edibles to the extent allowed under section 151.72. For example, a retail business operating in accordance with existing zoning regulations could sell THC Edibles. Additionally, on-sale liquor establishments are expressly allowed under section 151.72 to sell THC Edibles for on-site consumption. It is worth noting that if the city chooses to do nothing, businesses that begin lawfully selling THC Edibles would likely be able to continue selling similar products notwithstanding any future zoning restrictions that might otherwise prohibit such sales. That is especially relevant because the city will likely adopt a more comprehensive set of zoning regulations pertaining to cannabis and hemp businesses in the coming months, most of which are subject to a separate moratorium that remains in effect through January 1, 2025. As a reminder, state law did not allow for that separate moratorium to include restrictions on the sale of THC Edibles under section 151.72 or similar products under chapter 342. III. Conclusion 4 ME230-1A-894671.v1 The city council should discuss and decide if and how it wishes to regulate the sale of THC Edibles under section 151.72 through March 1, 2025 when the law is repealed. Please know that should the council desire to adopt local licensing or zoning restrictions or prohibit the sale of THC Products under section 151.72 altogether (the first two options above), a duly noticed public hearing before the planning commission will be required. Therefore, staff is seeking direction from the council in the next couple of weeks so that we can prepare accordingly due to the lead time that may be necessary to get something in place before November 17. 1 ME230-1A-879338.v1 David T. Anderson Fifth Street Towers 150 South Fifth Street, Suite 700 Minneapolis, MN 55402 (612) 337-9274 telephone (612) 337-9310 fax danderson@kennedy-graven.com MEMORANDUM TO: Honorable mayor and council members FROM: David Anderson, city attorney Jason Hill, attorney DATE: May 31, 2023 RE: Summary of immediately effective changes to Minnesota Statutes, section 151.72 (2022 legalized edible cannabinoid products) ______________________________________________________________________________ I. Introduction The purpose of this memorandum is to provide guidance on the impact of the recently enacted cannabis legalization bill (the “Act”) to Minnesota Statutes, section 151.72, which you might recall was amended in 2022 and resulted in the expanded sales of hemp-derived THC products in Minnesota. The Governor signed the Act yesterday, May 30, 2023. Unlike the majority of the provisions in the Act, which take effect on July 1, 2023, the provisions amending section 151.72 are effective immediately. In addition to amending section 151.72, the Act also amends Minnesota Statues, section 340A.412 to allow edible cannabinoid products to be sold at exclusive liquor stores. However, on November 1, 2022, the city council adopted a one-year moratorium on the sale of edible cannabinoid products, meaning that no business, person, or entity may sell these products in Medina while the moratorium is in effect. The purpose of the moratorium was to provide time to study the issues related to regulating edible cannabinoid products. II. Regulation for Sales The Act clarifies what types of products are considered under the two categories of products created in 2022: 1) nonintoxicating cannabinoids; 2) edible cannabinoid products. A. Nonintoxicating Cannabinoids Previous guidance from the Minnesota Board of Pharmacy provided that nonintoxicating cannabinoids could include a wide range of products that could be ingested by humans and animals in many ways. The Act limits nonintoxicating cannabinoid products to products that are meant for 2 ME230-1A-879338.v1 external application only, but which do not produce an intoxicating effect when consumed by any route of administration. The new language explicitly prohibits the sale of nonintoxicating nonedible products meant for vaping or inhaling of smoke, chewing, drinking, swallowing, injection, or by application to the mucus membrane. B. Edible Cannabinoid Products The definition of edible cannabinoid products remains the same – a product that is intended to be eaten or consumed as a beverage by humans, contains a cannabinoids in combination with food ingredients, and is not a drug – but a number of minor changes contained in the Act impact the sale edible cannabinoid products. 1. Likeness In addition to the previous requirements specific to edible cannabinoid products, such as the requirement that they not bear resemblance to a real or fictional person, animal, or fruit that appeals to children, be modeled after a brand of products primarily consumed or marketed to children, or be made by applying an extracted or concentrated hemp-derived cannabinoid to a commercially available candy or food snack item, they now also must not be substantially similar to a meat food product; poultry food product, or dairy product (the latter two have statutory definitions elsewhere in law). 2. Beverage Serving Size Edible cannabinoid products that are meant to be consumed as a beverage may contain no more than two servings (5 mg per serving means a beverage may contain no more than 10 mg per package). The limits for edible cannabinoid products that are not intended to be consumed as a beverage remain the same – 50 mg of any THC total per package and each serving must be differentiated by wrapping, scoring or other indicator, and must not contain more than 5 mg of any THC. 3. Type of THC Allowed The Act adds new definitions for “artificially derived cannabinoid” and “synthetically derived cannabinoids.” Artificially derived cannabinoids are cannabinoids derived from hemp that are changed after extraction and synthetically derived cannabinoids are substances with a similar chemical structure and have a similar impact to a cannabinoid, but which are not extracted or derived from hemp plants or parts. The Act clarifies that an edible cannabinoid product may contain delta-8 or delta-9 cannabinoids that is extracted or derived from the hemp plant or is an artificially derived cannabinoid but edible cannabinoid products cannot contain a synthetically derived cannabinoid (not derived or extracted from hemp). 4. Display and Storage The Act requires that all edible cannabinoid products available for retail sale must be displayed behind the checkout counter where the public is not permitted or in a locked case. This display 3 ME230-1A-879338.v1 and storage requirement does not apply to edible cannabinoid products meant to be consumed as beverages. The Act adds additional and specific age verification requirements. Retailers must verify that a client is over the age of 21 before completing a sale. Proof of age can be established only via passport, driver’s license, Tribal ID, state ID, or instructional permit. Retailers may seize IDs if they believe them to be falsified or used in violation of the law but must then deliver the same to law enforcement within 24 hours of seizure. 5. Exclusive Liquor Store Sales Authorized In addition to amending Minnesota Statutes, section 151.72, the Act amends Minnesota Statutes, section 340A.412 to specifically allow exclusive liquor stores to sell edible cannabinoid products. C. On-Site Consumption – Edible Cannabinoid Products and Nonintoxicating Cannabinoids Products may be sold for on-site consumption if the retailer has an on-sale liquor license under Minnesota Statutes, section 340A. Additionally, products must be served in their original packaging and cannot be sold to patrons who a retailer knows or should reasonably know is intoxicated. Retailers cannot permit the products to be mixed with alcohol, and products that are removed from packaging must be consumed on-site. This change allows the on-site consumption of both nonintoxicating cannabinoid products and edible cannabinoid products, including both traditional edibles and products meant to be consumed as beverages. D. Regulations for Testing The Act adds a definition for “batch.” A batch is a specified amount of product that must meet certain manufacturing requirements, a portion of which is then submitted to the testing facility. Each batch must be tested and each label must identify the batch. The Act also requires additional testing and disclosure requirements. Manufacturers must submit a sample of each batch of products for testing to an accredited, independent laboratory before July 2, 2023. The manufacturer must further disclose to the lab all known information regarding pesticides, fertilizers, solvents, and other foreign materials applied or added to the hemp during manufacturing. The commissioner of health is entitled to review test results at any time. E. Regulations for Registration The Act also transitions the state level enforcement of aspects of Minnesota Statutes, section 151.72 to the Minnesota Department of Health. All individuals selling edible cannabinoid products must register with the Minnesota Department of Health on or before October 1, 2023. Selling without registration after that date is prohibited. F. Penalties for Violations 4 ME230-1A-879338.v1 The new legislation makes violating or falsifying records to comply with Minnesota Statutes, section 151.72 a gross misdemeanor punishable by a $3,000 fine, up to one year imprisonment, or both. III. Termination of Minnesota Statues, section 151.72 Under the Act, Minnesota Statues, section 151.72 will be automatically repealed on March 1, 2025. The Act also contains regulations for products defined as “lower-potency hemp edibles” which are defined similarly (but not the same) as edible cannabinoid products, although it is still unclear how the transition between Minnesota Statues, section 151.72, i.e. edible cannabinoid products, to lower-potency hemp edibles will occur between now and March 1, 2025. IV. Conclusions; Next Steps The amendments to Minnesota Statues, section 151.72 make clarifications to the types of products that may be sold as edible cannabinoid products, increase testing and labeling requirements, and provide for additional criteria and requirements related to sales. In addition, changes to Minnesota Statutes, section 340A.412 allows edible cannabinoid products to be sold in exclusive liquor stores. Because the city’s moratorium is still in place, the city council will need to decide between now and November how it wishes to regulate edible cannabinoid products through March 1, 2025 when section 151.72 is repealed. Given the expansion of cannabis legalization in the Act that goes well beyond product allowed via section 151.72, there is still some confusion and uncertainty about what the city’s options might be. That said, my office will continue to work with staff as it relates to the ongoing study regarding edible cannabinoid products and provide the city council with a summary of options at a future work session. 1 CITY OF MEDINA ORDINANCE NO. 696 An Interim Ordinance Authorizing a Study and Imposing a Moratorium on the Sale of Edible Cannabinoid Products The city council of the city of Medina ordains as follows: Section 1. Legislative Findings and Authority A) There is a great deal of uncertainty regarding the effect of Minnesota Laws 2022, Chapter 98 amending Minnesota Statutes, section 151.72 (the “Act”), which expressly allows the sale of edible cannabinoid products, as that term is defined therein. B) Because the proposal to allow the sale of edible cannabinoid products received little publicity until after the Act went into effect on July 1, 2022, the city of Medina (the City”) did not have an opportunity to fully study or consider the potential impacts of the Act or engage in policy discussions regarding the potential regulation of the sale of edible cannabinoid products in the City. C) Although the Minnesota Board of Pharmacy is authorized to enforce the Act, the Act does not provide for any state-level licensing of businesses that manufacture or sell edible cannabinoid products. The Act is also silent regarding the enactment of local regulations related to edible cannabinoid products. D) The Act does not expressly prohibit or limit local regulations of edible cannabinoid products. Additionally, the regulations established in the Act clearly do not constitute the Legislature having occupied the field of regulation regarding the sale of edible cannabinoid products. E) The city council finds that the uncertainties associated with the sale of edible cannabinoid products, as well as the options for local regulation, strongly suggest the need for a study to develop information the city council may use related to potential local regulation of the sale of edible cannabinoid products through the adoption of licensing or zoning controls. F) Pursuant to Minnesota Statutes, section 462.355, subdivision 4(a), the city council is authorized to adopt an interim ordinance “to regulate, restrict, or prohibit any use within the jurisdiction or a portion thereof for a period not to exceed one year from the date it is effective.” G) The city council is also authorized, under Minnesota Statutes, section 412.221, subd. 32, “to provide for the government and good order of the city, the suppression of vice and immorality, the prevention of crime, the protection of public and private 2 property, the benefit of residence, trade, and commerce, and the promotion of health, safety, order, convenience, and the general welfare.” Pursuant to its general police power authority, the city council may, for example, adopt business licensing requirements related to the sale of edible cannabinoid products. H) The Minnesota Supreme Court in Almquist v. Town of Marshan, 245 N.W.2d 819 Minn. 1976) upheld the enactment of a moratorium despite the lack of express statutory authority as being a power inherent in a broad grant of power to municipalities. The enactment of business licensing requirements, for example, is based on a city’s police powers, which is the broadest grant of power to cities. Inherent in that broad grant of authority is the power to place a temporary moratorium on a particular business activity to study and potentially implement regulations on that business activity. I) There are both licensing and zoning issues associated with the sale of edible cannabinoid products. The city council determines that it needs time to study the matter and to consider the development and adoption of appropriate local regulations. To protect the planning and decision-making process and the health, safety, and welfare of the residents while the City conducts its study and the city council engages in policy discussions regarding possible regulations, the city council determines it is in the best interests of the City to impose a temporary moratorium on the sale of edible cannabinoid products. Section 2. Definition. For the purposes of this ordinance, the term “edible cannabinoid product” has the same meaning given the term in Minnesota Statutes, section 151.72, subdivision 1(c), as recently amended by the Act and as may be amended from time to time. Section 3. Study. The city council authorizes and directs City staff and consultants to conduct a study regarding edible cannabinoid products and provide a report to the city council on the potential regulations relating to the sale of such products in the community. The report shall include recommendations on whether the city council should adopt regulations and, if so, the recommended types of regulations. The study shall consider, but is not limited to, the following: i) the potential impacts of the sale of edible cannabinoid products within the City; (ii) licensing the sale of edible cannabinoid products and related regulations; and (iii) zoning regulations related to the sale and distribution of edible cannabinoid products. Section 4. Moratorium. A moratorium is hereby imposed within the City regarding the sale of edible cannabinoid products. No business, person, or entity may sell edible cannabinoid products to the public within the jurisdictional boundaries of the City during the period that this ordinance is in effect. The City shall not accept, process, or act on any application, site plan, building permit, or zoning or other approval for a business proposing to engage in the sale of edible cannabinoid products during the period that this ordinance is in effect. Section 5. Exceptions. The moratorium imposed by this ordinance does not apply to the sale of medical cannabis or hemp products that were lawful to sell prior to the effective date of the Act. 3 Section 6. Enforcement. Violation of this ordinance is a misdemeanor. In addition, the City may enforce this ordinance by mandamus, injunction, or other appropriate civil remedy in any court of competent jurisdiction. Section 7. Severability. Every section, provision, and part of this ordinance is declared severable from every other section, provision, and part of this ordinance. If any section, provision, or part of this ordinance is held to be invalid by a court of competent jurisdiction, such judgment shall not invalidate any other section, provision, or part of this ordinance. Section 8. Effective Date and Term. This ordinance shall take effect and be in full force from and after its adoption and publication, as provided by law. This ordinance shall remain in effect for one year after its effective date or until the city council expressly repeals it, whichever occurs first. Adopted this 1st day of November, 2022. BY THE CITY COUNCIL Kathleen Martin, Mayor ATTEST: Scott T. Johnson, City Administrator Published in the Crow River News on the 17th day of November, 2022.