Special LF&A Minutes and Attachment

SPECIAL LEGISLATIVE FINANCE AND ADMINISTRATION COMMITTEE A Special Legislative, Finance, and Administration Committee Meeting was held on August 05, 2024, at 6:01 p.m. with Chairman Rocha presiding. Members of Council present were Council President Anderson, Ms. Arndt, Mr. Boggerty, Mr. Hare, Mr. Lewis, Mr. Neil, Dr. Pillsbury, and Dr. Sudler. Mayor Christiansen was absent. Civilian members present were Mr. Shevock and Mr. Garfinkel (Legislative, Finance, and Administration). ADOPTION OF AGENDA Dr. Sudler moved for adoption of the agenda, seconded by Mr. Shevock and unanimously carried. Discussion – Recreational Marijuana Land Uses, Related Zoning Regulations, and Review of Proposed Ordinances #2024-24 and #2024-25 (David S. Hugg, III, City Manager and Ann Marie Townshend, Rossi Group) Mr. David S. Hugg, III, City Manager provided background information regarding the ordinances and the future timeline. This item was informational, and committee action was not required. Ms. Ann Marie Townshend, Rossi Group, provided members with an update regarding the proposed ordinances. Ms. Townshend explained that the packet includes a version of the ordinances in which retail use is distinguished from other uses. She explained that the reasons for this decision were because state level licenses for cultivation and manufacturing would begin being issued in November, and these facilities are not open to the public. She believed that separating the manufacturing, cultivation, and testing facilities from the initial ordinances could help ease some of the challenges posed by differing opinions. Ms. Townshend also mentioned that they included a white paper explaining the necessity of adopting an ordinance and outlining what the state statute permits and restricts at the local level. Additionally, she explained that they provided background information to address questions about grandfathering a business. Ms. Browyn Sherman, and Ms. Ann Marie Townshend, Rossi Group, reviewed the presentation entitled “City of Dover Recreational Marijuana Ordinances” (Attachment #1). Responding to Mr. Rocha, Ms. Townshend stated that the Delaware General Assembly passed House Bill 408, which allows an existing compassion center to apply for conversion to a recreational marijuana license during the state licensing process. She noted that Dover has one compassion center, Best Buds. Responding to Mr. Rocha, Ms. Townshend stated that yes, Best Buds could convert their license, and they could do both. She explained that the challenge is that if there is a distancing requirement from residential zones and daycares, they would not meet them. However, there is a possibility that they could be grandfathered in due to their existing operation and current location approval. Responding to Mr. Boggerty, Ms. Townshend stated that the ordinance cannot be utilized in reverse. If someone chooses to open a daycare next to an existing retail facility, the facility cannot be forced to close since it was established first.

SPECIAL LEGISLATIVE FINANCE AND ADMINISTRATION COMMITTEE MEETING OF AUGUST 05, 2024 PAGE 2 Responding to Dr. Pillsbury, Ms. Townshend stated that home daycares could be included because they are typically in residential zones therefore it may not have a huge effect. Responding to Dr. Pillsbury, Ms. Townshend explained that daycares are easy to include because they are licensed, providing clear data on their locations. However, churches and places of worship are not as straightforward, since they are only issued a public occupancy permit, which can apply to various uses. Schools, like daycares, are also easy to include because they are licensed, and their data can be accessed to support distancing requirements. Responding to Dr. Sudler, Ms. Townshend stated that the city ordinance would not apply to any property within the city limits that is not annexed into the city. For example, a property on College Road that is near a place of worship could hypothetically obtain a license from the county. She explained that the only thing the city could do would be to provide public comment during the public notice period on the record. However, because the property is not annexed into the city, there would be no way to apply the city ordinance. Responding to Dr. Sudler, Ms. Townshend stated that if the city were to obtain any economic growth it would be through water and electric consumption. Responding to Dr. Sudler, Ms. Townshend explained that the water and electric utilities are self- sufficient and are not supported by tax dollars; instead, they help offset some of the tax burden. She further clarified that she does not foresee a spike in taxes due to the updates required for the water system to sustain cultivation. Ms. Townshend added that if Council is concerned about cultivation creating a higher demand on services, they have the option to prohibit it. She emphasized that Council does not need to accept or reject all proposed uses; they can determine which options best serve the city's interests. Dr. Sudler stated that his constituents have expressed support for recreational usage with certain restrictions, but they are concerned that cultivation could drive up costs that would impact taxpayers. They worry that cultivation may place additional strain on the water infrastructure, potentially leading to a financial burden on taxpayers when the system requires updates. Responding to Mr. Boggerty, Ms. Townshend stated that there are some instances where an area is not in the city but still uses city services. She explained that the draft ordinances include a clause requiring that any utility upgrades necessary to support the use would be funded by the business owner or applicant. Responding to Dr. Pillsbury, Ms. Townshend stated that the distinction between a commercial seller and a cultivator would be reflected in the business license fee. She explained that, to comply with state law, the city cannot impose different licensing fees for these entities. Mr. Hugg stated that the state law prohibits the city from assessing a tax for making revenue other than business licenses and utility services. Responding to Dr. Pillsbury, Mr. Hugg stated that some of the information in the white paper covers the different licenses. He explained that in order to operate within the city they would all need a city business license. The retail license for example could be three hundred dollars and a cultivation could be five hundred dollars. However, the retail license has to be consistent with what

SPECIAL LEGISLATIVE FINANCE AND ADMINISTRATION COMMITTEE MEETING OF AUGUST 05, 2024 PAGE 3 is charged for other retail licenses. He further explained that in the case of those specific business licenses, there is an opportunity to have a small tax on the gross receipts, however, it is not a budget saver. Responding to Dr. Sudler, Mr. Hugg stated that creating a budget saver tax is not feasible because state law explicitly prohibits the city from imposing such a tax. He explained that the issue is legislative, as the state sets the rules. For example, the city cannot declare marijuana illegal because the state has legalized it under certain circumstances. However, municipalities do have the authority to determine where these activities can take place. Furthermore, he noted that while the city's regulatory power is limited, they can implement zoning provisions, designate site locations, and set hours of operation to help mitigate the direct impact. Responding to Dr. Sudler, Mr. Hugg stated that the Delaware General Assembly did not want it to become a profit center for the local governments. Responding to Mr. Lewis, Mr. Hugg stated that he was correct. Aside from the small fees associated with the licensing and the property taxes associated with the potential sale of a building the city would not obtain any amount of revenue. Mr. Hugg confirmed that the property taxes would still apply. He explained that the greatest revenue potential would come from the cultivation because there is a greater possible utility impact. However, there are areas of concern for things like the water infrastructure, which is why the ordinances have a provision that if they require a new water source, they will have to pay for it. Responding to Mr. Lewis, Ms. Townshend stated that the Compassion Centers or medical dispensaries are nonprofit, and the definition came directly from the state statute. Responding to Mr. Rocha, Ms. Townshend explained that they would need to consult the Office of the Marijuana Commissioner to understand how the conversion license would apply to a Compassion Center that operates as a nonprofit, and how it could maintain its nonprofit status under the new regulations. Responding to Mr. Garfinkel, Mr. Hugg stated that, hypothetically, if a legally operating facility within the county that met all state requirements was annexed into the city but did not meet city requirements, the city would face a grandfathering issue because the facility has the right to continue operating as it did before annexation. Since it was legally established prior to annexation, it must be allowed to remain in operation. However, he explained that under most grandfathering ordinances, the facility would be prohibited from expanding or rebuilding if, for example, the building was to burn down. He noted that there are restrictions, and in some cases, the grandfathering rights could be lost if certain circumstances occur. Mr. Hugg emphasized that the enclaves of land that are not annexed into the city but are surrounded by the city are a cause for concern. He stated that those areas could be approved for one of the uses by the county if they so choose and it would be treated like any other retail store. Ms. Townshend finished reviewing the presentation. Responding to Mr. Rocha, Ms. Townshend stated that if the ordinance is passed, there would be limited options for where facilities could be located. She explained that some cultivation could

SPECIAL LEGISLATIVE FINANCE AND ADMINISTRATION COMMITTEE MEETING OF AUGUST 05, 2024 PAGE 4 take place in agricultural areas; however, all cultivation must occur indoors, as state code does not permit outdoor cultivation. Responding to Mr. Rocha, Ms. Townshend stated that the Draper Farms property is located across from the high school. In this case, it would be necessary to evaluate whether the building could be positioned far enough from the school. While cultivation is permitted in the agricultural zone, manufacturing is not. Additionally, since the area is part of the agricultural preservation program, its compatibility with the program would need to be reviewed. Responding to Mr. Rocha, Ms. Townshend stated that odor control is required in cultivation. Responding to Dr. Sudler, Ms. Sherman stated that state requirements mandate HEPA filtration systems for cultivation. In drafting the proposed ordinances, they incorporated language from Maryland that includes provisions for odor control. She explained that while no specific method for odor control is prescribed, the responsibility lies with the business owner to identify an effective solution. As long as the method is effective, the ordinances do not prescribe a particular type of filtration system. Responding to Dr. Sudler, Ms. Sherman stated that she has not done a ton of research on what specific systems are effective. However, the HEPA filtration systems seem to be somewhat effective. Dr. Sudler explained that he would like to see some examples of effective systems. He expressed concerns about placing a facility in a specific area without knowing how it could affect those individuals' health. Responding to Dr. Sudler, Ms. Sherman stated that they are not prescribing a specific method because it is an emerging field, and they are hopeful that new, more effective methods will be discovered. She also explained that there has been continued research on the health impacts coming out of Canada because they were legalized before the United States. Ms. Townshend stated that typically when designing a building where odor control and air quality are a concern, an industrial hygienist or mechanical engineer would be brought in. Mr. Hugg stated that it is not clear in the state regulations, but he believes that an air pollution permit would be required. Responding to Mr. Anderson, Ms. Townshend stated that from her understanding, both cultivation and manufacturing are water and electric-intensive and have potential odor issues. Responding to Mr. Anderson, Mr. Hugg stated that the city receives a water allocation from the state based on hydrology, and the state could potentially determine that the city has reached its maximum allocation. He explained that economic development often involves trade-offs, as heavy water usage can place a strain on the water system and complicate the provision of other services. Similar issues arise with electricity; the electrical grid is stressed, and there may soon be a need to add a new baseload generation facility on the peninsula. One concern regarding the cold storage project at Garrison Oak is that it will draw a significant amount of capacity from the new

SPECIAL LEGISLATIVE FINANCE AND ADMINISTRATION COMMITTEE MEETING OF AUGUST 05, 2024 PAGE 5 substation. While there is sufficient capacity to support the project, it does make system management decisions more challenging. Responding to Mr. Boggerty, Mr. Hugg stated that he could compile a list of typical electric and water consumption for a facility. He explained that while indoor cultivation has a less direct impact compared to growing product in an open field, it still requires a significant amount of water to support plant growth. Ms. Townshend suggested that they could also compare the data to the usage of other large industrial users. Responding to Mr. Anderson, Ms. Townshend agreed that the impact of a testing facility is not greater than that of a retail operation, and she suggested that some of the distancing requirements for testing facilities could be relaxed. Responding to Mr. Anderson, Ms. Townshend stated that the state does not differentiate between types of products in manufacturing. She explained that the definitions were kept consistent with those in the state statute to avoid any unintended conflicts. Ms. Townshend stated that the City of Newark has a facility called, which handles both cultivation and manufacturing and is currently seeking to convert its license. She explained that they have reviewed their water and electric consumption and can provide this information as a Delaware example. Responding to Mr. Anderson, Mr. Hugg stated that there has been a movement at the federal level to decriminalize marijuana, transitioning it to a less regulated drug. He explained that while this shift could impact public safety officials, it primarily concerns the retail sale of marijuana rather than its manufacturing, cultivation, or testing. Under state law, non-retail activities are highly restricted, with public access to those facilities being minimal, thereby reducing the likelihood of code violations. However, the retail side is open to the public, increasing the potential for security issues and building violations, which would ultimately fall under the responsibility of public safety officials. Responding to Dr. Sudler, Mr. Hugg stated that under the current draft ordinances, a dispensary could not be opened downtown. The draft only recognized the C-4 district, which covers the commercial strip along the highway. He explained that if the council wishes to include the downtown district, they would need to add the C-2 zoning district as an allowable option. Dr. Sudler expressed constituent concerns about having a dispensary downtown, especially on Loockerman Street. Ms. Townshend stated that in some western regions, due to environmental and climate concerns, certain areas require facilities to have onsite renewable energy or incorporate a sustainability plan to help address electricity usage issues. Responding to Mr. Hare, Mr. Hugg stated that they could compile data on the facility's square footage, as well as its water and energy consumption. With this information, Mr. Hugg would be able to calculate the facility's costs using the applicable rate schedules.

SPECIAL LEGISLATIVE FINANCE AND ADMINISTRATION COMMITTEE MEETING OF AUGUST 05, 2024 PAGE 6 Responding to Mr. Lewis, Ms. Townshend stated that the current medical dispensary could only convert to selling retail marijuana if permitted under the zoning regulations. She explained that, as the ordinance currently stands, such a conversion is not allowed. However, she noted that the council has the authority to permit the conversion, as the final decision rests with them. Responding to Mr. Lewis, Mr. Hugg stated that the new amendment would not overrule any city ordinance. He explained that it could remain there as a medical marijuana facility because it has already been approved to be in that location. However, if they were to request to become a retail facility and the ordinance says they have to be 250 feet away from a house then they would not be allowed to expand into that. Mr. Shevock stated that the Draper Farm properties are designated as farmland preservation, where the construction of buildings is not permitted. Responding to Mr. Rocha, Mr. Shevock explained that on agricultural preservation properties, the state has purchased the building rights, prohibiting any development. The only permitted activity is the planting of crops. Responding to Mr. Rocha, Ms. Townshend stated that even if the city were to rezone the area, the state has already received funds to remove it from production. Ms. Arndt stated that there are different kinds of agricultural preservation and if that area is in permanent preservation nothing can be done there. Also, there are different districts in which they can be in for ten years and then come out of the district and reconsider the options. Responding to Mr. Garfinkel, Ms. Townshend stated that when the medical marijuana legislation passed a zoning determination was done. It was decided that the facilities would be looked at similarly to a pharmacy because a prescription would be needed. Responding to Mr. Garfinkel, Ms. Townshend stated that section 24.2 is the state definition, but they may need to modify that provision because it was intended to be for retail use. Mr. Rocha moved for adjournment of the Legislative, Finance, and Administration Committee meeting, hearing no objection the meeting adjourned at 7:30 p.m. Gerald L. Rocha, Sr. Chair, Legislative Finance and Administration Committee Attachments Attachment #1 - Presentation entitled "City of Dover Recreational Marijuana Ordinances”

ATTACHMENT #1 Special Legislative, Finance, and Administration Committee meeting of 08/05/2024 City of Dover Recreational Marijuana Ordinances Business Licensing & Zoning

Timeline to Date 7/5/2023 6/11/2024 CCW discussed two draft ordinances and requested additional DE Marijuana Control Act went into effect. research. 9/26/2023 7/9/2024 CCW heard a presentation about the act and discussed next steps. Sense of CCW recommended a moratorium on recreational marijuana uses Council was to allow uses in Dover. through 12/31/2024. Survey was extended through 8/31/2024. 4/9/2024 7/22/2024 Rossi presented on ordinance options and CCW moved to have ordinances City Council passed moratorium. drafted, focusing retail on C-4 and other uses in Industrial Zones.

Survey Update • Promotion: • Link on front page of website • Link shared with City council 7/2/2024 7/15/2024 • Landing Page on City Website • Online Survey • Paper Survey Available • Mailed with utility bills Launched at Public City Buildings & Mailed with Utility • Available at public City buildings Bills • Participation to date (8/2/24) • Online Responses: 924 • Paper Survey Responses: 287 • 1,211 Total

Webpage https://www.cityofdover.com/MarijuanaRegulations

Survey Themes and Trends • Majority (>50%) favors allowing • Biggest concerns are odor and all uses increased crime • Distancing support strongest • Biggest potential benefit of (>50%) for: interest is economic growth • Schools • Daycares • Rehabilitation Centers

Respondent Demographics Age Distribution District Under 21: 1% District 1: 11% Over 64: 21-34: Do not live in 30% 21% City: 25% District 2: 18% 35-44: 55-64: 20% Unknown: District 3: 13% 14% 20% 45-54: Do not live in 15% City, but own a District 4: business in 8% City:, 4%

Why is an Ordinance Needed? • City Code does not currently define any marijuana related business. • City Code does not zone land uses or dictate regulations for marijuana related businesses. • The public, businesses owners, City staff, and OMC will need clear guidance if retail marijuana is to be treated differently than other retail uses. • Absence of Code requirements leaves the uses open to interpretation.

Ordinance Options Prohibit Permit Permit with Restrictions The City may enact a The City may enact a If the City permits policy prohibiting all policy allowing recreational marijuana recreational marijuana recreational marijuana uses in certain zones, businesses within City businesses to open as additional restrictions limits. permitted uses within may be implemented certain zones. to regulate the time, place, or manner in which businesses operate.

Permit with Restrictions Distancing Requirements Additional Requirements • May be used to prevent a • Limiting hours of operation, marijuana facility from opening requiring added odor control, near incompatible uses, such as specifying architectural design and schools. signage standards, prohibiting • Evaluation is needed to ensure that outdoor seating, etc. a proposed location meets any/all distancing requirements, which creates administrative workload for staff.

Other Jurisdictions New Castle County Municipalities Permitting Municipalities Discussing -Working on Ordinance with Restrictions: Permitting: Kent County • Georgetown, Newark, Seaford, • Milford, Wilmington -No Ordinance Planned Wyoming Sussex County -Ordinance with restrictions Municipalities Prohibiting: Municipalities Discussing • Bethany Beach, Bridgeville, Prohibiting: Dagsboro, Dewey Beach, Fenwick • Blades, Greenwood Island, Middletown, Millsboro, Millville, Ocean View, Rehoboth Beach, South Bethany

Proposed Ordinance Strategy Separate Retail From Cultivation, Manufacturing and Testing • Cultivation and manufacturing licenses will be issued beginning in November • There have been fewer public comments regarding these uses • These uses are not open to the public • Amendment needed to add distancing requirements for childcare and rehabilitation centers

Timeline Moving Forward August September October November December January February March 2024 2024 2024 2024 2024 2025 2025 2025 Retail & License Conversion Cultivation Manufacturing State Licenses Testing Apps Licenses Licenses Process Issued Issued Licenses Accepted Issued Issued City Ordinance Council Rec. From First PC Public Hearing & Non- CCW Reading Hearing Action Retail Council City Retail Rec from First PC Public Hearing & Ordinance CCW Reading Hearing Action *Moratorium Expires 12/31/2024

Business Licensing Ordinance • Adds definitions for each license type excluding retail • Adds each license type to the fee schedule in Appendix F- Fees and Fines, Chapter 26 • Cultivation, Manufacturing, and Testing facilities – fees consistent with Manufacturers/Contractors

Zoning Ordinance N Cultivation, Manufacturing, and Testing • Adds Marijuana Cultivation, Manufacturing, and Testing facilities as permitted uses in Manufacturing Zones (M) and Industrial Park Manufacturing Zones (IPM) • Adds Marijuana Cultivation facilities as a permitted use in Agricultural Zones (A) • All uses subject to the requirements outlined in Article 5, Section 24.

Article 5- Supplementary Regulations Cultivation & Manufacturing Testing Facility Restrictions Facility Restrictions • Distancing: 500 ft from the lot line of • Distancing: 500 ft from the lot line of • Residential zone • Residential Zone • K-12 School • K-12 School • Hospital • Hospital • College/University • Odor Control • Valid State License • Valid State License • Door and Window Coverings • Compliance with Code of Ordinances • Applicant pays cost of infrastructure upgrades

N A, IPM, & M with 500 ft buffer from K-12 schools, hospitals, residential zones, and colleges/universities.

Usable Agricultural Zones for Cultivation North of Rt. 8 on West side of City East of Rt. 1 and North of Rt. 8 1 8 8

Usable Manufacturing Zones Kraft Foods and Enterprise Business Park North of Rt. 8 along the railroad 8 *Daycares located nearby

Usable Manufacturing Zones Near Dover AFB McKee Business Park 13 1