Lincoln Aldermen set cannabis license fee

 

[January 24, 2020] 

Due to Monday being Martin Luther King holiday the Lincoln City Council met on Tuesday this week for their regular voting session. In the chamber all seven sitting aldermen were present for the voting session. Currently, there is one vacant seat on the council after the resignation of Kathryn Schmidt earlier this month.

On the agenda Tuesday night was one action item pertaining to the new recreational cannabis laws that have been implemented by the state of Illinois. The local municipalities have the right to tax the sale of recreational cannabis, to set fines for ordinance violations made by buyers and sellers, and to charge a local licensing fee to dispensaries.

At the Committee of the Whole on January 14th, Kevin Bateman recommended that the council approve a first-time licensing fee of $5,000 and a renewal fee of $2,500 per year. After much discussion the renewal fee was raised to $5,000. While a number of aldermen did not go along with the $5,000, the ensuing discussions appeared to be going nowhere. It was finally suggested by Tracy Welch that the action item should reflect the $5,000 and let the vote decide.

This week the agenda called for an “Ordinance establishing the Cannabis Dispensary Licensing Fee at $5,000 annually.”

Kevin Bateman made the motion that was seconded by Kathy Horn. The topic was then open for discussion.

Ron Keller was the first person to speak about the motion.

He began by reviewing what he perceived to be the reasons for the $5,000 figure. He said that first it appeared that it was just a number that was thrown out there. Then it was also considered as a revenue source for the city, and finally it was suggested that the high fee would deter dispensaries from making an application if they were not serious about coming to Lincoln.

He said that if the goal is to make tax revenue and to profit from the business, he was sure that was the measures they should take.

Keller said that if those were the reasons, he wasn’t sure that the city should be moving in that direction. He said in order to make the fee more “business friendly” he would move to amend the motion to make the licensing fee $2,500.

Mayor Seth Goodman agreed with Keller and said that some he had talked to were surprised that the city was considering $5,000. He said that was definitely not business friendly. Goodman reminded the aldermen that the dispensary would be bringing more money into the community via other avenues, food, gas, and shopping for example. Goodman said he felt the city should “take a step back and look at what is more respected, and what the community has voiced as well.”

Keller added to the comments that his research online regarding the licensing fees found only ordinances passed for the city of Chicago. He said there the fees are established in a range from $500 to $1,500 per year based on the size of the retail establishment. He added that Chicago is going to be permitted seven dispensaries while the city of Lincoln will have only one dispensary. Even so he said the $5,000 seemed to be unreasonable. He added that he felt the city could consider dropping below the $2,500, but had made the amendment as a compromise.

Steve Parrott asked what the licensing fee is for liquor sales in the city and why. The answer came first as $2,500, then city attorney John Hoblit qualified the answer saying that the liquor fee is $1,500 for liquor and $1,000 for gaming. Parrott wanted to know why the fees were set at those amounts.

Parrott said, “But why? Is it because we can? Why do we have $1,500? Why don’t we have $500?” Parrott said he wasn’t trying to make a change in the liquor, he was trying to make a point. “Just because the city is going to make money off of this isn’t a reason to not make money off of this. If you are going to have a sole provider, then you only have one opportunity to make dollars off of that.”

City Treasurer Chuck Conzo spoke saying that as he had stated last week, what the city is granting is “effectively” a franchise because there is only one license to be had.

Goodman added, “I understand all this, but what incentive are we giving to the business to come here, when they can go elsewhere?”

The aldermen then started moving toward the vote by exploring how to proceed with the vote and an amendment on the floor. Keller had made the amended motion and Bateman at this time seconded it.

Hoblit said that the original motions would stand and the amendment would be the first vote. If the amendment passed then that would be the end of the discussion.

Parrott said he would then suggest that the amount be amended to $10,000. There was no second on that motion.

Sam Downs wondered why the aldermen were so concerned about the high cost of the license when it had already agreed to a three percent tax. He reasoned that the tax was in order for the city to make money, so “why is this different?”

Bateman said that actually, if the city goes with $2,500 for cannabis, it will be the highest license fee in the city. He explained that the fees for liquor add up to $2,500 for two businesses. Liquor alone is $1,500 and if it could be a stand-alone business, gaming would be $1,000. So, the city is still setting the cannabis license higher than any other in the city at $2,500.

Bateman added that he had been contacted by people who agreed that $5,000 was too high.

Tracy Welch said he had received a call right before the meeting from an individual who is interested in obtaining a license. He said that the caller wanted to know where the city is in its decision making process because the caller has to apply with the state and the fee there is very high and non-refundable. Therefore, this person needs to know what the city is doing before he makes his state application.

Welch added that the three percent tax is not coming out of the pocket of the dispensary owner, it is coming out of the pocket of the customer. Parrot then asked, “So this council would rather take money from its citizens than from the business owner making application?”

Welch said that the three percent is going toward added costs that the city knows it will incur (added law enforcement costs), so yes fundamentally, the tax is the buyers fee for having the right to purchase cannabis in the city.

Jeff Hoinacki told the council that they should remember that this is something that can be changed in the future. He said the $2,500 was a “benchmark” or starting point and the fee could be adjusted in the future, just as any other licensing fee in the city.

Goodman then called for the vote.

During the roll call vote, six aldermen voted in favor of establishing $2,500 as the initial fee as well as the annual renewal fee for cannabis dispensaries. Parrot voted in opposition of the motion.

To date, the state has awarded only licenses for same-site dispensaries where medical Cannabis is already being sold.  The application process for recreational only dispensaries began December 10th and closed January 2nd, with the anticipation that up to 75 licenses will be awarded in May.

[Nila Smith]