Village to Set the Stage for Legal Cannabis Businesses

Village to Set the Stage for Legal Cannabis Businesses

With Governor Pritzker’s approval of the Cannabis Regulation and Tax Act, Illinois became the 11th state to legalize the sale and possession of marijuana products for recreational use by adults over 21. That dramatic change poses both challenges and opportunities for Northbrook and other municipalities, as local governments seek to regulate potential cannabis-industry businesses while taking advantage of sales taxes allowed under the law. The Village Trustees are charting a course that may welcome some recreational marijuana retail dispensaries and related businesses, subject to zoning restrictions.

The new state law expands on past legislation that allowed cannabis cultivation and dispensary businesses only for medicinal purposes. Now the industry will expand with new legal businesses for recreational use, including small “craft” growers, retail dispensaries, and processors and infusers who create products using extracted cannabis concentrates. Unlike liquor retail businesses that must be licensed by both the state and the local municipality, the state retains sole control of a limited number of cannabis business licenses. Local governments can only regulate businesses within their borders through reasonable “time, place, manner, and number” zoning restrictions, or by blanket bans.

When the medical marijuana law was passed in 2014, the Village Board amended the Zoning Code to strictly limit the possible locations for medical cannabis businesses, with the result that no such operations opened in the Village. However, in a recent Committee of the Whole meeting the Board showed a more flexible attitude, favoring special use permits for a limited number of cannabis dispensary businesses in commercial districts.
During the meeting, five Trustees and President Sandy Frum informally discussed their views to guide Village staff and the Plan Commission in crafting a zoning strategy for cannabis businesses. The Board reached a consensus that retail dispensaries should be allowed within commercial districts on the basis of special use permits, with some distance requirements to separate dispensaries from “sensitive” organizations like schools, day care centers and churches.

One incentive for the Board’s new interest in cannabis businesses is the potential for significant new sales tax revenue. The state law allows municipalities to collect sales tax of up to 3% on non-medical cannabis sales. According to a published memo from Village Manager Richard Nahrstadt, conversations with industry operators indicate that “a well-located cannabis dispensary could have annual sales of up to $15 million. If the current local sales tax were combined with the maximum 3% tax on cannabis product sales, this could generate up to $750,000 a year in added sales tax revenue.”

The Trustees passed a resolution directing the Plan Commission to hold public hearings and develop specific recommendations for Zoning Code amendments regarding cannabis businesses.