The Vermillion City Council agreed Monday to a set of various fees for anyone who wants to begin a medical cannabis establishment within Vermillion’s city limits. It also agreed that part of that fee structure should be based on the population of the city and be established on a per capita basis.

Stone Conley, assistant to the city manager, reviewed what has taken place over nearly the past two years to make the sale of medical cannabis possible in South Dakota.

State voters approved Initiated Measure 26 in November of 2020, a measure that provides for the sale of medical cannabis in South Dakota as of July 1, 2021.

The initiated measure provides municipal governments the ability to participate in the process for licensing, regulating, and establishing fees for medical cannabis establishments.

Conley reminded the city council members that it passed a city ordinance last May that allows the City to establish various licensing and application fees regarding medical cannabis establishments.

Not long after, however, at its first meeting last June, council members adopted a resolution to delay establishment of these fees until the state promulgated the rules regarding the sale of medical cannabis.

“On Sept. 14, 2021, the South Dakota Department of Health released what they believe will be their final draft of the program’s rules,” Conley told the city council Monday. “It’s already been approved by the Rules Review Committee – that’s a huge step in it officially becoming active.”

Conley said Vermillion may follow the same action that many First Class cities have taken and establish three essential fees that it may charge to anyone wishing to begin a medical cannabis business in the community. Those three fees are the initial application fee, the initial licensing fee and an annual renewal fee.

A “dollar per capita” system, he said, has been suggested for establishing the amounts of the initial application fee and the first year of the initial licensing fee.

“This per capita one dollar system would essentially be in response to the past Census we had in 2020,” Conley said.

The 2020 Census determined that Vermillion’s population is 11,695.

“That would be the dollar amount that we would be charging for our initial application fee,” he said, “and that would include one, singular establishment to also be covered for the calendar year that goes until Dec. 31. If you wanted to own another establishment – say you wanted to also own a second establishment or one for manufacturing – you would also have to pay an additional $5,000 for that initial licensing and application fee.

“Going forward, the City also discussed entertaining a $5,000 renewal fee pertaining to the active initial license of a medical cannabis establishment within the City,” Conley said, “so, essentially, every single establishment that someone owns with that same applicant – they would pay $5,000 annually to renew that. Each establishment would be $5,000 and after that, $11,695 initially. You would also pay $5,000 initially to start it off for each establishment beyond one.”

A portion of the City ordinance that deals with application fees states: “At the time an applicant files an application, applicant shall pay a non- refundable fee to the City in an amount established by resolution to defray the costs incurred by the City for background investigations, review of the application, inspection of the proposed premises, and any other costs and labor associated with processing the application.”

Vermillion’s application fees for medical cannabis establishments will be $11,695, based on the population of the city according to the last census.

City ordinance also defines the process for annual licensing fees: “Within 30 days of receiving a cannabis establishment registration from the South Dakota Department of Health pursuant to SDCL Chapter 34-20G, and at the time an applicant files a renewal application, the licensee shall tender to the City an annual license fee in an amount established by resolution. The annual license fee is in addition to the initial application fee required pursuant to the City ordinance. The annual license fee shall be paid on the basis of a full calendar year regardless of the date of issuance, and no proration or discount shall be given.”

“Essentially, the administration recommends that we utilize this per capita system with $1 using the latest decennial census available, which is 11,695 (Vermillion’s current population) and that the initial application fee also include one singular medical cannabis establishment for the balance of the calendar year in which the initial fee is paid,” Conley said.

He wrapped up his presentation by reminding city council members of the license and renewal fees they had settled on that must be paid by anyone beginning a medical cannabis business in Vermillion.

“All of the medical cannabis establishment license fees are recommended at $5,000 per license and again, continuing on with that annual renewal fee also at $5,000 per establishment per license,” he said.

John Peterson, a farmer from Wakonda, told council members that he and his business partner are “definitely interested in growing some medicinal cannabis. I’m not sure what process we would take as far as being out in the country. I don’t think we would fall under any of the regulations that you’re deciding here tonight.”

“That’s correct,” Mayor Kelsey Collier-Wise said.

“We’re just kind of wondering, under the application fees – would that fall under the same Vermillion City fee structure, or would we go to the county?” Peterson asked.

“It would be the county commission that would determine that,” the mayor said. “We don’t have any say over their licensing.”

Peterson asked if the City has yet determined how many licenses it will be issuing for medical cannabis establishments.

“Our ordinance does not limit the number of licenses,” Collier-Wise said, “so within the City of Vermillion and within the city limits, there is an unlimited number of cultivation, manufacture and dispensary licenses that could be applied for – and testing, although it sounds like the state regulations on testing are a little bit narrower.

“Within the city limits, there are cultivation possibilities, but in our ordinance, it is required that it be indoors and covered, things like that, so it would be a little bit different than what someone may do outside of town, depending on what the county commission wants to do,” she said.

A memo from City Manager John Prescott to city council members notes that while it may be suggested that the state has provided a recommendation for the various fee levels that were discussed Monday night, the City of Vermillion has a right to decide the dollar amount for the municipal fees.

State law defines the right for Vermillion’s governing body to require local licenses, permits, or registration and to charge a fee for said licenses, permits, and registration, according to the memo.

First Class cities in South Dakota have based their fees on differing factors such as a per capita system and charging based on a city’s total population, the memo states.

“Cities have also varied their annual licensing and renewal fees, and nowhere does it say these fees must be equal to one another. For example, the City of Brandon utilizes a $1 per capita system for their Initial Licensing Fee (total is $11,048). However, they have a set rate of $5,000 for the annual licensing renewal fee pertaining to the active Initial License of a medical cannabis establishment within their city,” states the memo. “The City has a right to decide what fee or style of fees best suit the community with regard to medical cannabis establishment licensing.”

The memo points out why Vermillion and other cities must establish initial application, initial licensing and annual renewal fees.

“The City is currently incurring all of the costs for public notice publishing and filing fees associated with each individual aspect of the application and licensing process. Each new applicant shall make arrangements with a law enforcement agency and submit to the fingerprinting process,” the city manager’s memo states. “The applicant must also provide to law enforcement payment to the South Dakota Division of Criminal Investigation and FBI in an amount necessary to cover the costs of the criminal record check.

“These actions must be taken by an applicant prior to publication of hearing notice required by South Dakota law. The applicant's completed application will be attached to the certification of the law enforcement agency when received,” the memo states. “This is in addition to their payment of varying licensing and application fees.”

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