Still waiting on a license to sell cannabis, Anoka starts construction on city-run dispensary

Despite still waiting to receive a state license, Anoka has already started construction on a marijuana dispensary, hoping to be the first in Minnesota to open a city-run cannabis shop.

Some cities are rushing to open government-run dispensaries, a concept that industry-watchers say Minnesota is pioneering. Across the state, cities such as St. Anthony, Blaine, Elk River, Byron, Buffalo and St. Joseph, have submitted applications for retail licenses.

Many are working with consultants, hiring cannabis managers, securing locations and learning the ins and outs of the weed industry. But several city officials, consultants and others working on the retail marijuana roll-out across the state said they believe Anoka is the first to actually start building a dispensary.

The process is made more complicated as cities wait for approval from the state’s Office of Cannabis Management. The first businesses could be licensed by the state within the coming months, but city officials said the timing for getting their approvals remains fuzzy.

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The state is requiring private businesses to apply for retail licenses through a lottery. But municipalities are allowed to obtain licenses without going through the lottery process, making them guaranteed as long as other requirements are met.

“We want to control what we can control. We can get this built now,” said Kevin Morelli, Anoka’s manager of cannabis and liquor operations. “We just didn’t want to get the license and not be ready. We’d rather just be there waiting and hopefully we’ll have the license by the time we’re ready to go.”

City leaders broke ground on their new pot shop, Anoka Cannabis Company, on Thursday afternoon, next to the city’s municipal liquor store on East River Road.

Many Minnesota cities already sell alcohol due to a quirky Prohibition-era law allowing municipalities to control the sale of liquor. Anoka has been in the booze business for nearly 90 years.

“You always kind of wonder, why would a city like Anoka start owning and operating a place that sells alcohol back in the day?” Anoka Mayor Erik Skogquist said. “I can see how those leaders back then coming out of Prohibition thought about this.”

Skogquist said the city plans to open a dispensary so that it can better control and regulate the sale of marijuana in town. And similar to the liquor operation, he hopes to use revenue from the business to lessen the burden on taxpayers and help fund parks, capital projects and city programs.

Patrick Hurley, with Voyageur Cannabis Services, a consultant firm working with cities, said other municipalities are selecting sites for their dispensaries and deciding whether to lease or own.

“Some even own a site and are just waiting for the license to be awarded before making major renovations,” Hurley said. “Most cities I’ve spoken with are taking a more conservative approach and are waiting to get a license in hand before taking next steps.”

Consultant Flora Delaney said cities are feeling the push to establish a presence in the marijuana market early as they compete with the private industry. In addition to being allowed to open up their own dispensary, local governments must allow one retail license for every 12,500 residents.

“If they make a decision down the road to finally jump in and come late to the party, they could have a much more difficult time in attracting shoppers,” Delaney said.

She said even with experience selling alcohol, starting a new business is challenging for cities, since many municipal liquor operations have been running since the 1930s or ’40s. And the cannabis industry has much different and rigorous requirements, including related to security and the tracking of every product and sale.

Cannabis also remains illegal under federal law, even as more states legalize it, making it more difficult for dispensaries to secure insurance and loans.

Several cities have hired consultants to help navigate the cannabis industry, while others are partnering with private equity firms to finance and run their dispensaries. Some have explored the idea and decided not to get into the weed business, at least for now.

Anoka is building a 3,000-square-foot dispensary with a secured area for deliveries and several other security features. The city estimates the project will cost $2.7 million, financed through an internal loan with bonds paid back with cannabis revenue.

Point Seven Group consultants estimated the city’s dispensary could bring in a net income of about $1.7 million in 2027.

Meanwhile, the city has lost money on its municipal liquor operation in recent years after it closed one of its two stores due to Hwy. 10 construction. The second store remains open, but Morelli said it has been struggling with competition from a big box store nearby.

The city is planning to open two new liquor stores. Morelli said the new dispensary might be a temporary site as the city considers eventually opening up a liquor store and pot shop together in a mixed-use building.

Morelli said the city recently hired a cannabis manager, who will start working full-time in September. That’ll be ahead of the city’s anticipated dispensary opening this coming winter.

“We believe we’ll be the first newly constructed municipal retail cannabis dispensary in the state of Minnesota and possibly in the United States,” Morelli said.

He added: “Things can progress a little slower in city government. Not this project, though.”