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07-22-24 CC WS MinutesCITY OF SHOREWOOD 5755 COUNTRY CLUB ROAD CITY COUNCIL WORK SESSION MEETING COUNCIL CHAMBERS MONDAY, JULY 22, 2024, 5:30 P.M. MINUTES 1. CONVENE CITY COUNCIL WORK SESSION MEETING Mayor Labadie called the meeting to order at 5:30 P.M. A. Roll Call Present. Mayor Labadie; Councilmembers Callies, and Zerby; City Attorney Brooksbank; City Administrator Nevinski; City Clerk/HR Director Thone; and Planning Director Darling; Absent: Councilmembers Maddy and Sanschagrin B. Review Agenda Zerby moved, Callies seconded, approving the agenda as presented. Motion passed 3/0. 2. CANNABIS REGULATIONS City Administrator Nevinski gave an overview of the two key decisions that needed to be made by the City regarding registration and certifying cannabis businesses as well as zoning standards to regulate the cannabis business locations and operations. He explained staff are looking for direction and guidance from the Council and then could bring back draft ordinances for their consideration at a regular City Council meeting. City Clerk/HR Director Thone explained that staff had attended several meetings with the County on what registration may look like and noted that they have been soliciting input from the cities as well. She stated that the first thing the City needs to decide is whether the City or the County would handle the registration process and also if the City wanted to limit those businesses to one in twelve thousand five hundred residents. She stated that because Shorewood is a small city, she felt it begged the question on whether the City wanted to go through all the work and training to handle the licensing for just one possible cannabis business. She reviewed some of the benefits she felt may come with the County handling the licensing process, such as expertise and a more robust system. She explained that the only thing she has seen as a possible negative with having the County handle the registration process was that the City may lose a bit of their enforcement capabilities. City Administrator Nevinski clarified that the State will be handling the licensing for these businesses. He stated that the City would just be handling the regulations around where they can be located in the City and registering the businesses so there is a formal acknowledgement of their operation in the City, for the State. Councilmember Callies stated that she felt this could be a brief conversation because, if the City was only going to have one cannabis business, she did not really see a good reason for the City to go through all these machinations for just one business. CITY OF SHOREWOOD WORK SESSION COUNCIL MEETING MINUTES JULY 22, 2024 Page 2of8 Councilmember Zerby stated that SLMPD handles enforcement for four cities. He stated that they have been able to come together for things like dog ordinances so there is not confusion between the different cities and explained that he felt like this was another area where they would want to work with the SLMPD and come up with something that would work for all the cities. City Attorney Brooksbank stated that SLMPD can always do enforcement or compliance checks whenever they wanted to. He stated that the potential risk is, if they find non -compliant products, then there becomes a limit on what the City can do about that other than forwarded the complaint to the County or the Office of Cannabis Management (OCM). He stated that he felt the question was whether the City felt the need to keep that enforcement power directly or if they felt comfortable that if they were to find something like underage sales that it be forwarded to the County and have trust that they will do something about it. He stated that from what they have seen so far, the County is very proactive and seem to be setting up a robust system but acknowledged that they have not yet seen it in operation. Councilmember Zerby stated that in terms of zoning, they are also basically one community, but Excelsior has about thirty liquor licenses and Shorewood only has about two, however, Shorewood was bigger in land mass and population. He stated that as he was driving down Lakeshore Drive, he saw a sign on the side of the road for delivery service to the docks for hemp - derived THC products and asked how this would affect delivery services. He asked if there was any benefit in the City having some control over the delivery services and if so, how it could be enforced. City Attorney Brooksbank stated that it is a developing area and noted that they are looking forward to seeing what the OCM regulations end up as. He explained that their current understanding is that delivery would probably not include full potency cannabis products, but with those types of delivery services, by design, there is not much that the City can do about them. Councilmember Zerby asked if there was a definition of low potency and how this may affect it. He stated that he knows that some grocery stores are carrying things like THC beverages. City Attorney Brooksbank stated that there is a potency maximum of 5 mg/serving, for seltzers it is no more than two servings per can, and for gummies they are allowed to have up to ten servings per package. He noted that there is also a source requirement that it must come from hemp plants rather than cannabis plants. He explained that the limit on retailers for full potency cannabis would not affect the lower potency hemp businesses. Councilmember Callies stated that one concern she had was related to event licensing and noted that theoretically one business could have a number of different licenses. City Attorney Brooksbank explained that there were quite stringent limitations on having multiple license types, so for example, one type of license is `event organizer' and they would not be allowed to have any other licenses outside of being an event organizer. He stated that events, as envisioned in the law, are more like a block party kind of thing. He explained that the City is required to allow events to operate within City limits but is not required to allow on -site consumption at the events. Councilmember Callies asked if that would be a separate location from the registered business. CITY OF SHOREWOOD WORK SESSION COUNCIL MEETING MINUTES JULY 22, 2024 Page 3 of 8 City Attorney Brooksbank stated that it would sort of be envisioned like a farmer's market as it would be a bit more temporary, but would also be more stringent, because there would need to be access controls and ID checks for age verification. Councilmember Zerby stated that it would be similar to how alcohol would be handled. Mayor Labadie stated that it was her understanding that cities cannot prohibit one retail operation per twelve thousand five hundred residents but did not need to permit more than one. City Attorney Brooksbank confirmed that the City could establish a limit of one retailer, could pick a number greater than one, or could also not set a limit. Mayor Labadie stated that she felt that was a big topic that the Council should focus on in determining how many they want in the City. She stated that she also had the same concerns about trying to mirror the neighboring cities related to SLDPD enforcement, but she did not anticipate that all four cities would be like-minded on this issue. She gave an example of decisions related to the number of vendors that will be allowed. She stated that in theory, for enforcement purposes, it would be great to have all four cities mirror each other, but she does not believe that was realistic. She suggested that rather than getting hung up on that point that the Council look at what is right for Shorewood. She asked about the location of the existing smoke shops and asked if the location that is near the S.A.I.L. building could apply for a license of this nature. Planning Director Darling answered that it would depend on the buffer requirements. She stated that the City's primary two commercial districts are C-1 and C-2, and C-2 only applies to three parcels currently. She noted that all three of those parcels have been re -guided to high density residential, so they will end up being rezoned. She stated that the C-1 zoning district, in her mind, is the only real option, and if they apply the maximum buffers of one thousand feet from a school and five hundred feet from the other protected uses, then there would only be three parcels in the City that will qualify. Councilmember Callies asked if those parcels were near the storage facility. Planning Director Darling confirmed that it would be the storage facility, Red's Savoy Pizza, and the Starbucks. Councilmember Callies asked whether it would be legal if the cities put in zoning requirements so that there really would not be availability for a site. City Attorney Brooksbank stated that there must be parcels that are allowed to have these businesses, but the City does not have to guarantee that one of those parcels is available and what the business wants it to be. He stated that means what was just described showed that there are parcels where one of these businesses could operate, but they may need to convince someone to sell it to them first. Councilmember Callies noted that even if it turns out that there is one or none in the City, people will not have to go very far before they can find another establishment and procure this product. City Attorney Brooksbank stated that he had misspoken earlier related to deliveries and explained that there are cannabis delivery services, and the restriction is not based on the potency, but on CITY OF SHOREWOOD WORK SESSION COUNCIL MEETING MINUTES JULY 22, 2024 Page 4 of 8 the amount that can be delivered. He noted that the delivery service businesses were not one of the businesses that the City would have the authority to limit the number. City Administrator Nevinski noted that he believed that the delivery businesses did have to be licensed so there would be some type of regulation in place. City Attorney Brooksbank agreed that they do have to be licensed and cannot be someone with a car, like an Uber driver, because there are also security requirements for the transportation vehicles. Mayor Labadie asked if the maximum buffer that could be applied would be able to be changed. Planning Director Darling stated that the State could make changes to those rules in the future. City Attorney Brooksbank stated that the maximum buffer amounts come from the Statute and is a cap on what the City can impose. He noted that if the City took no action, there would be no setbacks from anything, but they could impose the setback of up to one thousand feet from a school. Councilmember Zerby noted that the staff report mentioned that if the City takes on their own ordinance there would be more of a burden on City staff and asked for more detail on what this burden may be. City Clerk/HR Director Thone stated that for her department, registering the businesses would essentially be the same as what they do for liquor or tobacco licensing but noted that there will be some additional training involved. She noted that she did not think this would overtax city staff seeing the limited opportunities for businesses in the city. City Administrator Nevinski stated that he thinks the big question is how much staff time the City wants to devote to becoming experts, even if there is only one cannabis business, or possibly none. He stated that because they do not know what will happen, the question becomes whether this is a good use of City resources when the County will be doing this across the County for many other cities, which may be more efficient. He explained that he thinks there has been a concern from cities that if they agree to let the County do it that the cities will not be able to back out if the County is not performing. He noted that he believes that the County has heard that concern and would suspect that should the cities want to back out of this arrangement, they will be able to do that. City Clerk/HR Director Thone stated that since they added the hemp to the tobacco licenses, they do require extra time and effort because they are a little more problematic. She gave examples of the businesses frequently switching hands and quite a few compliance issues. She stated that it was a little unsettling to take on these new requirements because they do not understand those products well and it is really up to the enforcement agencies to determine if they are selling the correct products. She explained that was why she was a bit cautious about cannabis and what that would actually look like for City staff to regulate. Councilmember Zerby suggested that the City could let the County handle the enforcement and the licensing. He stated that the City could then update their zoning in order to attempt to place these businesses where they feel would be appropriate. CITY OF SHOREWOOD WORK SESSION COUNCIL MEETING MINUTES JULY 22, 2024 Page 5 of 8 Mayor Labadie asked if the City went the route of using the County if they could dictate how the City's zoning and ordinance could be written. She asked if the County could be less strict on the cities than State Statute would be. City Attorney Brooksbank answered that it would depend on the specific agreement with the County and noted that so far, they have not seen the County asking for any of those types of conditions. He stated that the message from the County has been that they will do enforcement if the cities would like, and the cities can do their zoning however they want to. Councilmember Callies asked for clarification around the term 'enforcement' and asked if it essentially meant registration. City Attorney Brooksbank stated that it was registration and at the very least, annual compliance checks of the registered businesses. Councilmember Callies stated that she felt the issue before the Council was whether the City should defer to the County to register the businesses. She explained that she agreed with Councilmember Zerby that the City should defer to the County for these services. Mayor Labadie stated that she agreed that They City should get the County to assist in this matter especially if the City is able to set up the maximum buffer distances, because they would only be looking at a few locations for these businesses. City Attorney Brooksbank stated that there are thirteen total types of licenses available which range from cultivation to retail sales and six of those must obtain a registration before they can operate, which is anyone making retail sales to customers for recreational or medical use. He stated that the City has the authority to limit the number of three of those types of retailers and explained that they can limit recreational retail to one per twelve thousand five hundred residents. He noted that they would have to register recreational retail, medical retail, and lower potency hemp, but must allow all thirteen types of businesses. Councilmember Callies asked if that meant that the other types of businesses would not be limited by the distance requirement they have been discussing. City Attorney Brooksbank stated that the distance requirement would be for any of the retail businesses. Planning Director Darling clarified that it says for `any' of the cannabis businesses, so they can be subject to those buffers. She noted that the City would still just be looking at the three parcels mentioned earlier, but, in theory, they could all have different types of businesses located on them. Councilmember Zerby asked about the large acre hobby farm that is in the City. Planning Director Darling stated that hobby farm was located within a residential zoning district. Councilmember Callies asked if the Council was only concerned with the recreational sales for the purposes of zoning. CITY OF SHOREWOOD WORK SESSION COUNCIL MEETING MINUTES JULY 22, 2024 Page 6 of 8 Planning Director Darling stated that the City must have their zoning set up for the other types of businesses as well, or the City will not be able to limit them. She explained that the concern she has related to manufacturing and cultivating was the smell. Councilmember Callies asked about the nursery property that was located on Smithtown Road. Planning Director Darling stated that the nursery property was currently zoned residential, so they could not have a license for cultivating and manufacturing. She explained that they could only grow the amount that an individual could grow. Councilmember Callies noted that area did not look very residential to her. Mayor Labadie asked if it was zoned residential with a variance to operate as a nursery. Planning Director Darling explained that by State law, except for cannabis products, that anything you can grow on your site, you can sell on your site. Mayor Labadie asked for a more detailed explanation of temporary cannabis events. Planning Director Darling stated that she pictured it as more of an event, like if someone rented a room in the community center and had a promotional event where they were displaying product but did not know if people would be able to consume during the event. She explained that she envisioned it being set up similar to how a trade show would be set up. City Attorney Brooksbank clarified that they were envisioned to be a stand-alone cannabis event that could have different vendors at the event, but you would not be at someone else's event. City Administrator Nevinski stated that it would not be like having a food truck at the Movie in the Park event and would be its own event. Councilmember Callies asked if she was correct that the City cannot limit the type of cannabis businesses. Planning Director Darling explained that they must allow them in the City but can zone them into a very small area, based on the buffer requirements. City Attorney Brooksbank noted that the cannabis events would count as a cannabis business. He noted that a question was raised about consumption at a cannabis event and explained that the City must allow the event, but allowing consumption on site would be at the discretion of the City. Councilmember Zerby asked about the Section 3 amendment with the parking requirements and whether that was just referring to the cannabis businesses. Planning Director Darling explained that they do not have a laboratory category which is essentially what a testing facility is. She noted that she wanted to make sure that she had something she could lean on if there was a cannabis business came into the City. She stated that she had noticed that the ordinance implies that you can have more than one type of business and explained that she gets a bit nervous when things are implied and not overtly stated and would like to add a sentence that makes that clearer. CITY OF SHOREWOOD WORK SESSION COUNCIL MEETING MINUTES JULY 22, 2024 Page 7 of 8 Councilmember Zerby noted that he had seen chiropractors selling supplements, including the low dosage hemp products, and asked if that was considered. He asked if a chiropractor would not be able to do it or if they would just need more parking. Planning Director Darling stated that the City currently does not regulate low potency hemp products, so to do so, they would have to adopt regulations. She stated that she was mostly concerned about the manufacturing, cultivating, processing, and sales of the cannabis. She explained that you will find that for a salon or doctor's office, there may be a small amount of retail area, which would not really affect the parking calculations. Mayor Labadie asked if the neighboring cities that share the services of the SLMPD have started work on a draft ordinance yet. Planning Director Darling stated that Minnetonka has because she knows that they have just put a moratorium in place but has not heard about the other cities. City Administrator Nevinski acknowledged that he also did not know, but staff could follow up with the neighboring cities. He noted that this information may influence further discussions and help create consistency. Councilmember Zerby stated that he would be interested in finding out what Chanhassen and Victoria were planning as well. Councilmember Callies stated that she felt it would be useful to see what others are doing, but she would like to see Shorewood be as restrictive as they can because it will be available very close -by. Mayor Labadie explained that she did not think that Shorewood needed to mirror what other cities were doing and their language but would be curious to see how far along in the process they are. Councilmember Callies stated that she would not be in favor of a moratorium in Shorewood and would like to see them get something on their books and go from there because it can be amended later, if needed. Mayor Labadie noted that she would echo basically everything that Councilmember Callies had stated. She stated that Councilmembers Maddy and Sanschagrin were not able to attend tonight's meeting but would be able to give their input when staff brings this back to the full Council. She stated that she agreed with Councilmember Callies and would like the City's language to be as restrictive as possible considering it would only be a handful of places where this would be allowed. Councilmember Zerby stated that he agreed and felt it would be good for the City to get out ahead of this because he is sure that there are entrepreneurs that are looking around trying to find places where they may be able to set up shop. Councilmember Callies asked if there was truly no distinction within the law for a cultivator business and noted that she felt that they should be able to restrict those within a residential area. CITY OF SHOREWOOD WORK SESSION COUNCIL MEETING MINUTES JULY 22, 2024 Page 8 of 8 City Attorney Brooksbank stated that right now, the draft ordinance essentially says that all cannabis businesses are in C-1, but for cities that have other zones, they could say something else, for example, retail would only be allowed in commercial zoning, and cultivation would only be allowed in an industrial zone. Planning Director Darling stated that she believed that the Council that was present tonight had given staff enough information for staff to begin moving forward but cautioned that she felt the City would need to work quickly with the zoning element so that the buffer requirements are in place. She explained that if the Council was leaning towards having the County handle the registration, she may put it together as a conditional use with those buffer requirements. She noted that there were some businesses that were allowed an early approval process who will be able to submit licenses between July 24, 2024, and August 12, 2024, which is why she would want to have those rules in place before they come to certify with the City for those locations. She stated that will mean holding a public hearing on August 20, 2024, with a rapid turnaround to the Council related to those zoning restrictions. Councilmember Callies asked if she was saying that all of these businesses would require a CUP. Planning Director Darling confirmed that she was saying that all these businesses would require a CUP, if the City would not be handling the registration in-house. She stated that way they can have the buffer requirements as conditions within the CUP. 3. ADJOURN Zerby moved, Callies seconded, Adjourning the City Council Work Session Meeting of July 22, 2024, at 6:25 P.M. Motion passed 3/0.