No City Council action is needed at a work session. Council action on the resolution establishing license fees will be on the December 20, 2021 City Council meeting.

On November 22, 2021, City Council approved the 3rd reading regulating the marijuana businesses. These regulations of marijuana industries will require additional resources within Business Licensure, Code Enforcement, and Fire Inspection. 

The goal in determining an appropriate license fee is to set it such that the additional costs associated with regulating marijuana businesses is recouped by the license fee for those businesses. 

Staff estimates the total costs associated with regulating marijuana businesses will require approximately 0.58 FTE's and an estimated $5,000 to administer a lottery, which is estimated to be a combined total cost of $68,189 in FY23 across these three divisions of the City. 
Estimated Costs
Business Licensure - .03 FTE - $2,243
Fire Inspection - .05 FTE $8,060
Code Enforcement - .50 FTE $52,887
Dispensary Lottery Cost (if needed) - $5,000

Next these costs were allocated to each license type (Dispensary, Cultivation, Transportation, Manufacturing, and Testing), based upon an assumed percentage of time spent in each area. 
Allocation

License Type	Business License	Code Enforcement	Fire Inspection	Lottery	Allocated Cost
Dispensary	20%	50%	15%	100%	$33,101
Cultivation	20%	20%	25%	0%	13,041
Transportation	20%	20%	40%	0%	449
Manufacturing	20%	20%	40%	0%	14,250
Testing	20%	10%	20%	0%	7,349
Total	100%	100%	100%	100%	$68,189

Finally, these costs needed to be spread across the estimated number of licensed businesses within each category. In order to estimate the number of licenses within each category, staff looked at locations outside of Montana that had public information available. Compared the populations of these areas and made adjustments to more accurately reflect the City of Billings. The locations that were reviewed were Grand Rapids Michigan, Deschutes County (Bend) Oregon, Jackson County (Medford) Oregon, Anchorage Alaska, and Fairbanks Alaska. Based upon that information the assumption was made that there would be the following number of businesses located within Billings:
Estimated number of licenses

Business Type	Estimated number of Businesses
Dispensary	8
Cultivation	3
Transportation	2
Manufacturing	3
Testing	2

Because it is not realistic to enforce much regulation on the transportation of marijuana due to the mobile nature of the business, staff is recommending that license be set at the regular business license amount of $55.

 

City Council will be asked for feedback on the fees and a resolution will be presented for consideration on December 20, 2021.

The estimated costs of regulating marijuana businesses for FY23 is $68,189. Staff is recommending that fees for marijuana businesses be set such that these costs are covered by the license fees. In order to do so, the following annual fees are being proposed for each license classification:
 

Marijuana Business Classification	Annual License Fee	Estimated Annual Costs to be Recovered
Dispensary	$4,140	$33,101
Cultivator	$4,350	$13,041
Transporter	$55	$449
Manufacturer	$4,750	$14,250
Testing Lab	$3,675	$7,349

Staff has made many assumptions in determining a proposed license fee. Council will be asked for feedback on these assumptions. For example:
Is the overall goal of covering additional costs with revenue from license fees what Council wants?
      If not, how should the costs associated with enforcement be covered?

Does council think the estimated number of businesses in each category is reasonable?
     If the estimated number of businesses changes, the annual license fee will be impacted

Are there other scenarios that Council thinks staff should examine?