On Tuesday, September 7, Sioux Falls City Council signed off on a cannabis bill that was put forward by Mayor Paul TenHaken’s office. Based on details of the bill, the number of citywide retail stores would be capped at five.

Despite the fact that councilors slashed the City Hall’s requested $100,000 license fee in half, it’s likely that the price of licenses sold on the secondary market will be hiked up as a direct effect of another late rule change.

“The Sioux Falls City Council, by making a license worth $50,000 and transferrable, has just made dispensary licenses into liquor licenses,” reads a social media post from Sioux Falls lawyer and advocate for clients in South Dakota’s alcohol and gambling industry, Drew Duncan.

Brand new liquor licenses usually sell for around $200,000. However, due to a city-imposed state-based cap on the number of licenses available to purchase, they are often sold on the secondary market for $300,000 or more.

Sioux Falls’ cannabis grow proposal: Concerns regarding the artificial value of secondary market-sold dispensary licenses

American businessman and website developer TenHaken has assumed his role as the Mayor of Sioux Falls since May 15, 2018. As a member of the Republican Party, the 43-year-old is not entirely sold on the prospect of cannabis reform and has stirred up plenty of debate for his “de facto ban” on the medicinal plant.

Most recently, TenHaken caused concern among lobbyists regarding his provision barring the transfer of medical cannabis dispensary licenses in Sioux Falls. The majority of medical cannabis advocates are concerned that licenses will have an “artificial value” once sold on the secondary market – a scenario that has also materialized with liquor licenses.

However, Councilor Janet Brekke and other members of the Council came to the conclusion that, if licenses are owned outright. the city’s medical cannabis rules would hinder a retailer’s potential to expand their business.

“We’re not allowing a business owner to develop equity in his business,” Brekke said after TenHaken released his original proposal, which underwent numerous amendments prior to its final approval.

The first-term mayor has faced immense criticism since the ordinance was unleashed in August. Upon learning of the license expenses and strict zoning rules, pro-cannabis lobbyists dubbed TenHaken’s proposal as a “de facto ban” on medical cannabis; even more so due to the fact that the rules prevent much of the city and its commercial districts from participating in retail activities.

Members of the public, many of whom testified at recent meetings where the proposal was pondered over, also expressed dissatisfaction with the five license cap.

Dissatisfaction for Sioux Falls’ cannabis grow proposal came from all corners 

Although most of the negative comments pertaining to Sioux Falls’ cannabis grow proposal emerged from the restrictive zoning map and the five-license cap, dissatisfaction also stemmed from City Hall’s attempt to completely ban cultivation and testing facilities.

In response to related comments from members of the public, not to mention a handful of annoyed city councilors, TenHaken reluctantly agreed to permit an unlimited number of testing facilities across the city. Cultivation facilities are still outlawed across Sioux Falls.

Councilor Rick Kiley also influenced his colleagues to reduce the testing facility licensing fee from the Mayor’s suggested $100,000 to $5,000, as well as amend the renewal fee. Based on details of the final ordinance, the annual dispensary license renewal cost was set at $25,000 and $1,500 for a testing facility.

“All of the power is in the mayor, and they can revoke minutia and that’s kind of dangerous,” Brekke said prior to the meeting’s commencement.

By the time the meeting came to an end, the Council revised the proposal to permit license revocation recommendations exclusively from the City Hall. Meanwhile, the City Council was tasked with making final decisions on licensing.

“We’ve spent a lot of time researching this issue so to ever imply that we haven’t talked to other cities or communities in researching this is simply not true,” said Mayor TenHaken after the meeting, which finished with a 7-1 vote. “There’s been hundreds of hours that our office has spent on this to make sure we’ve done this right.