The Mitchell City Council stamped its approval on the medical marijuana regulatory measures during Wednesday’s special meeting, paving the way for the industry to operate in the city in the near future.

During Wednesday's special meeting, the council unanimously approved and adopted the second reading of a pair of ordinances that spell out the city’s rules for medical marijuana establishments to operate in Mitchell. While medical marijuana officially becomes legal in the state on July 1, City Attorney Justin Johnson emphasized the state’s own set of provisions for jurisdictions and the public to follow likely won’t be adopted until October or November. Therefore, Johnson said the city won’t issue any licenses until the state adopts their own.

“By no means is this meant to be a complete and final document, we may have to tweak it further once we get additional guidance on the state’s regulations,” said City Administrator Stephanie Ellwein.

The city’s medical marijuana rollout comes after South Dakota voters approved a measure to legalize medical marijuana during the November election. (Two-thirds of voters in Davison County were in favor of the measure.)

Cities and counties throughout the state now have the authority to roll out their own set of regulations but those regulations are subject to change when the state adopts their provisions. Johnson said Mitchell’s ordinances will be no different.

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Previously, Johnson highlighted the importance of the city establishing its own regulation measures prior to July 1, adding if the city didn’t set regulations “it is essentially the Wild West.”

According to the city’s ordinance that outlines the zoning regulations for medical marijuana establishments, licensed entities that sell, manufacture and cultivate medical marijuana would be permitted to operate in highway business-oriented districts (HB), transportation, warehousing and commercial (TWC) districts, industrial districts and central-business (CB) districts.

“This applies to cannabis cultivation facilities, cannabis manufacturing facilities, testing facilities and dispensaries. With the dispensaries, there is the additional regulation of buffer zones around certain types of other lands,” Johnson said during the May 25 meeting.

The Mitchell Planning and Zoning Commission approved recommending the zoning ordinance in a 5-1 vote in late May.

Although medical cannabis will become legal in South Dakota in roughly a month, it's still criminalized at the federal level, adding legal grey areas to states and cities that moved to legalize it. To legally purchase medical marijuana at licensed establishments, one must possess a medical card that has to be issued by an authorized health professional.

The zoning ordinance also outlines which areas of the city that licensed medical marijuana establishments are prohibited to operate. According to the ordinance, no cannabis dispensary shall operate within 300 feet of an educational institution, religious institution, childcare center (excluding family residential childcare), preschool, nursery, detention facility and mental health facility. While Mitchell's ordinance has a 300-foot buffer zone from schools, Johnson noted state law mandates a 1,000-foot buffer zone. Therefore, Johnson said establishments must adhere to the 1,000-foot rule away from schools.

"Our ordinance wouldn't require the 1,000-foot buffer around schools, but the way the state law is written they still wouldn't be able to be located inside that area," Johnson said. “We selected the 300 feet because it represents the distance of a city block.”

Dispensaries in the city would not be permitted to operate within 1,000 feet of another cannabis dispensary. In addition, all cannabis establishments are prohibited in zoned residential districts, along with neighborhood shopping districts, public lands, institution districts, conservation districts, and urban development and planned unit development districts. A cannabis establishment can't operate anywhere in Mitchell without a city license, regardless of zoning.

Johnson explained there is a legal provision that states dispensaries are “not to be prohibited to operate,” noting it factored into the decision to establish the 300-foot zone rule.

In response to recent concerns from residents who suggested to expand the 300-foot buffer zone to 500 feet or beyond, Mitchell Mayor Bob Everson explained that expanding the buffer zone beyond 300 feet would “make no sense,” as it would restrict marijuana dispensaries to do business in the respective permitted zoning areas, especially the downtown central business district area.

Distances of the buffer zones will be measured “from the closest point of the property lines but excluding public rights of way.” However, those buffer distance requirements may be waived through the variance process, which would require approval from the respective city boards.

Licensing regulations, consumption rules

On the licensing side of the matter, the city has four types of licenses for medical marijuana establishments, which includes cannabis cultivation, cannabis dispensary, cannabis product manufacturing and cannabis testing licenses.

For dispensaries, the city's ordinance sets a maximum of five licenses. However, the remaining licenses available do not have a cap. Johnson said all respective cannabis operations would still have to abide by the zoning regulations and buffer zones.

For all licenses, the city set a $5,000 application fee that must be renewed on an annual basis, making the city's cost to hold a license cost $5,000 annually. All employees at the marijuana establishments must be at least 21. Licensed establishments must also follow strict guidelines to operate in accordance with the city's ordinance.

Jason Bates, a Mitchell mayoral candidate seeking election on June 8, asked several questions and concerns he has with the city’s licensing process. His questions included whether one individual can buy all five dispensary licenses, along with whether a license-holder can sell a license at a higher price than the city’s $5,000 fee.

“If I own a license and want to sell it, do I have to sell it for the same price I paid for it or can I mark it up and sell it like liquor licenses,” Bates asked.

While the city’s ordinance does not prohibit license holders from selling or transferring their license, Johnson said it would have to be approved by the council. Therefore, if license-holders are seeking to sell their licenses above the $5,000 fee set by the city, the council has the authority to deny the sale.

“We don’t specifically prohibit a business from selling a license, but if they want to sell or transfer ownership, it would be subject to council approving that,” Johnson said.

Although the city’s ordinance doesn’t prohibit one individual from being able to purchase all five dispensary licenses, Johnson said a lottery system would make it “highly unlikely” for such a scenario to occur.

That lottery calls for a random draw when there's more demand than available applications, which must meet a list of requirements, such as ensuring safety procedures, meeting building codes, proof of financial responsibility and a sales tax license. A criminal background check will also be conducted on applicants, along with showing any record of delinquent tax payments. The lottery would set an order of applications, and the first entry in line would be subject to approval or denial by the City Council before moving on to the next application in line until all licenses are distributed.

Among the most notable guidelines for dispensaries to operate are implementing a verification lobby separated from the portion of the business where marijuana is on display and sold in the establishment. That allows each establishment to verify a patron seeking to enter has a medical marijuana card. Sales must also take place inside the business, eliminating internet or any remote selling of medical marijuana.

“Only cannabis card-holders can go into the retail area inside dispensaries. An average joe off the street can’t proceed into the retail area,” Johnson said.

The licensing ordinance addresses regulations for the consumption of authorized medical marijuana in the city. Nobody, including those who possess a medical card, may smoke cannabis in any public place, correctional facilities, public transportation and cannabis establishments. In addition, operating a vehicle, boat or aircraft, while under the influence of marijuana is prohibited.

Marijuana establishments must also abide by signage rules, which the city's ordinance states may not display the words "cannabis" or "marijuana" and other words commonly used to identify marijuana.