Individuals seeking a license to operate a medical cannabis establishment in the city were given a green light to apply after the Mitchell City Council approved the application forms on Monday.
For dispensaries, the city will accept applications from Thursday, Oct. 7 to Oct. 29, which is when the dispensary application acceptance window closes. For the remaining three license types, the city will begin accepting those applications as of Wednesday.
However, there was some discussion over whether an applicant should be refunded the $5,000 application fee if they weren’t granted a license in the lottery system.
“I would have a hard time not giving them the refund to tell you the truth,” said Councilman Jeff Smith. “I’d be willing to give it back. If they don’t get it, I just can’t take their money just for applying.”
While the city’s ordinance states the $5,000 application fee is non-refundable, City Attorney Justin Johnson said the council has the authority to refund the applicants who didn’t receive a license in the lottery system.
“Ultimately, that’s a council decision on whether you are willing to entertain refunding those. But I think it’s very clear that an individual or a company applying for a license should have no expectation of that refund,” Johnson said.
Another key issue with the city’s application form that was discussed on Monday centered around the ability for medical marijuana establishments to transfer licenses, which several council members were concerned could become similar to liquor license transfers. While the city’s ordinance establishes a license transfer fee of $5,000, Johnson said that it doesn’t prohibit a license holder to charge additional costs on top of the city’s $5,000 transfer fee in order for the interested party to receive it in that scenario.
“We would be charging the same price to transfer it, but we would not know whether there were other outside funds and private transactions to acquire that license,” Johnson said.
Council President Kevin McCardle said he’s committed to putting conditions on each license holder that will deter them from transferring it at a much higher cost than the city’s $5,000 fee. For McCardle and Council member John Doescher, they don't want to see the medical cannabis license transfers foster the type of price gouging that comes with liquor license transfers.
“If they get a license then transfer it, they shouldn’t be able to transfer it for $100,000,” McCardle said.
However, Johnson said the council has the authority to place conditions on licenses when they are approved by the council. For example, the council could place a condition on a dispensary license that prohibits the licensee from transferring it to another party.
“When the council is approving those licenses, if you believe that’s a large enough concern, the council has the ability to place conditions on the licenses when you approve them. You could issue those licenses on the condition that they aren’t transferable at the time they are issued,” he said.
Council member Steve Rice said a way to solve a potential problem with the transferring of licenses would be to not cap the amount of dispensary licenses in the city. As of now, the city’s ordinance allows a maximum of five dispensaries to operate in Mitchell at once. For the remaining license types the city offers, which includes cultivation facilities, manufacturing establishments and testing facilities, there is no cap set on those licenses.
Rice pointed to the state’s regulations that put a cap on the number of liquor licenses each municipality has to abide by as the main factor for driving up the prices of liquor licenses.
“Part of solving that problem would be taking the cap of five licenses off and allowing as many as you want. If liquor licenses were unlimited and free market enterprise could dictate that, they would be worth whatever they are on the open market,” Rice said.
Rice said he was concerned that if the council put a condition that prohibited an individual from transferring a license, it would make it impossible to sell their business.
“I’m OK with the transfer being there knowing we will be able to look at each year,” Rice said.
While the council approved its medical marijuana regulations to allow the industry to operate and opened the application period, there is a big caveat. Considering state lawmakers have yet to roll out the state’s official application requirements that each city is expected to follow, Johnson said the city has to wait until then before officially issuing a medical marijuana license.
As part of the city’s application process, each applicant must provide the information they are submitting to the state for state certification as well, putting the city in a bind. The state was initially supposed to have adopted their final medical cannabis regulations for cities to follow by Monday, but Johnson noted he hasn’t seen anything as of yet.
“A person applying with us isn’t going to know what they have to provide to the state, so a person can’t really complete a full application,” he said.