As some Minnesota cities fret over regulating newly legalized and normalized marijuana sales, others see an opportunity.
Elk River is among 13 Minnesota cities considering opening municipally owned cannabis stores. They would be blazing new trails in this regard, as government-run pot shops aren’t currently in use anywhere else in the country. City Administrator Cal Portner talks about Elk River’s approach as making the most of a situation.
“I don’t sense that our council is enthusiastic about the law to legalize, but they’re accepting of reality,” he said.
Revenue potential from cannabis sales, and how it can be put to use in the community, is part of the appeal. Assuring compliance is also part of it.
“Our liquor stores never fail compliance tests, whether for tobacco or liquor,” Portner said. “We feel we can do the same thing within the cannabis industry.”
Liquor munis as a model
The only state with any track record of a government-run cannabis shop is Washington, where a store in North Bonneville opened in 2015 and operated until 2021. Where Minnesota differed from Washington and other legalized-cannabis states was in the defined path it created for cities to pursue cannabis munis.
Despite being a new concept, Minnesota’s established muni model for liquor, also novel nationally, gives Portner confidence in the feasibility. Cities have entrepreneurial experience on their sides, he said, including already selling hemp-based THC products in liquor stores.
“We’ve had practice time basically to understand the products and understand the customer service side of it,” Portner said.
Municipal liquor sales add nearly $1 million to Elk River’s annual budget.
The city’s two liquor munis keep profits home, Portner said, rather than going to corporations based out of town or state.
“We’re among the top Minnesota liquor store operations within the state and are proud of that,” he said. “It puts a lot of money back in our community.”
Minnesota had 176 cities running liquor munis as of 2023, according to the latest annual report on them by the Office of the State Auditor. Most munis come out ahead, combining for $31.6 million in net profits in 2023. Elk River generated $962,190 of it. Buffalo brought in $710,505. St. Anthony Village was $426,385 in the positive.
Even modest net profits, say $10,000 per year, are good deals for small towns, said Paul Kaspszak, executive director of the Minnesota Municipal Beverage Association.
“You could say it’s not very much money, but there’s nothing else happening in that community that will generate that $10,000,” he said.
In his hypothetical, 100 homeowners in the community could be looking at $100 in savings on their property taxes. In Elk River, Portner said it might take an additional 45 businesses in town to generate enough property taxes to equal net profits from city liquor sales.
Cannabis sales projections are highly speculative, but Portner said it’ll likely take a couple years to turn profits. Between investments in capital, inventory, marketing and education, an estimate prepared for the city in January put first-year losses at $184,698.
All but 18 of the state’s liquor munis are in Greater Minnesota. For cannabis muni applicants, seven of the 13 are in the seven-county Twin Cities metro area.
St. Joseph’s mayor, Adam Scepaniak, and other officials from cities on the list confirmed they were still waiting on OCM approval to get their cannabis licenses as of last week. Plans are taking shape in the interim, with St. Joseph, Elk River and others looking into possible locations for cannabis retail.
Elk River is considering a building to house both cannabis sales and one of its two municipal liquor stores. Northbound would remain the name of the liquor muni, while the cannabis side would assume the name Cannabound.
Owatonna applied for a muni cannabis permit on March 13, said Deanna Sheely, the city’s communications manager, in an email. No decisions will be made on it until the license process is completed.
When Byron moved forward with an application in February, City Administrator Al Roder noted it didn’t bind the city to the idea.
“Applying for the license and even receiving one, doesn’t lock us into going ahead with a dispensary,” he stated on the city’s Facebook post. “But the window to apply for a license is very small.”
Wide spectrum of attitudes toward cannabis industry
As opposed to the 13 cities exploring cannabis munis, Albert Lea sits on the opposite end of the spectrum. A City Council vote last week stopped a privately run cannabis store from opening — an apparent violation of state statute. An update by the city posted on Facebook afterward described the vote being based on “questions of enforcement, liability and responsibility” necessitating further review.
Adopting zoning restrictions on where cannabis businesses are allowed, a lever given to cities in state law, is more of a middle-ground strategy. Combined with caps on the maximum number of businesses allowed to operate, almost all cities implemented some form of this approach or another.
The cap is an area of contrast between the state’s cannabis and liquor muni regulations. A city with muni liquor doesn’t need to allow private liquor stores within its limits, but it can’t monopolize cannabis in the same way. Muni cannabis stores don’t count toward the cap.
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This story was originally published by MinnPost and distributed through a partnership with The Associated Press.
Brian Arola/minnpost, The Associated Press
