The clock is ticking for local governments in Kentucky, who face an important decision on how they will address the new industry of medical marijuana, which becomes legal in the state on Jan. 1, 2025.
Prospective cannabis businesses are currently reviewing state regulations and making plans to become licensed by the Cabinet for Health and Family Services. So what does that mean for counties and cities?
Local government options for medical cannabis:
- A county and/or city could take no action. Medical cannabis businesses would be allowed to operate in that county or city as early as this year once it is licensed by the state.
- Pass an ordinance to prohibit cannabis operations.
- Pass a resolution to put the matter of cannabis operations to a public vote.
- Place restrictions and/or collect fees related to cannabis businesses operating within that county or city.
Background
The 2023 Kentucky General Assembly passed Senate Bill 47 (2023 Ky. Acts ch. 146) legalizing the use of medical cannabis and establishing a framework for state licensure of cannabis businesses such as dispensaries, cultivators, processors, producers and safety compliance facilities in the Commonwealth effective Jan. 1, 2025. (Most of those provisions can be found in KRS Chapter 218B.)
On the final day of the just-concluded 2024 session, the legislature passed House Bill 829 amending the medical cannabis law to expedite the process of licensing cannabis businesses. This change allows the Cabinet for Health and Family Services (Cabinet) Medical Cannabis Program to begin issuing licenses to those businesses this year rather than waiting until January so that operations and products can be developed. Cannabis dispensaries will still not be allowed to open to the public or dispense cannabis until Jan. 1, 2025.
Types of cannabis businesses
According to the Cabinet, a cannabis business license can be for one of the following:
- Cultivator – responsible for planting, raising, harvesting, trimming and curing raw plant material in an indoor facility.
- Processor – responsible for processing and packaging raw plant material into usable product formats. Current state law does not allow these products to be smokable.
- Producer* – responsible for both growing and processing raw plant material. (The Cabinet is not accepting applications for this license type at this time.)
- Safety compliance facility – responsible for contamination and purity testing.
- Dispensary – responsible for purchasing and selling finished products to medical cannabis cardholders.
Key dates
As amended by HB 829, state law allows the Cabinet to issue licenses for cannabis operations effective July 1, 2024.
Counties and cities can pass an ordinance by Dec. 31, 2024 to prohibit cannabis operations in their jurisdiction. If the Cabinet has already issued a business license and the local government passes an ordinance by Dec. 31 to prohibit this activity, the business would be forced to cease operations. However, if the county or city enacts its prohibition after Dec. 31, 2024, any licensed medical cannabis businesses at that time would be allowed to continue operations.
To avoid confusion and potentially disgruntled business owners, counties and cities should consider making their decision regarding any prohibition, regulation or zoning of cannabis businesses by June 30, 2024, prior to the Cabinet issuing any cannabis business license.
If a county or city passes an ordinance to prohibit cannabis businesses, that local government must notify the Cabinet in writing within five days after passage.
County and city differences
A county or city may pass an ordinance to prohibit all cannabis business operations in its territory. A sample ordinance prohibiting the operation of cannabis businesses in the county can be found here.
- If a county passes a prohibition ordinance, cannabis businesses would be prohibited from operating anywhere in the county, including both the unincorporated and incorporated areas, unless a city takes further action on its own.
- If a city passes a prohibition ordinance but the county does not, cannabis businesses would be allowed to operate in the unincorporated areas of the county, but not within the boundaries of the city.
- If a county prohibits the operation of cannabis businesses, the cities within the county may still pass an ordinance to authorize those businesses within the city limits or they may pass a resolution to place the issue on the ballot for the voters to decide.
Put it to a vote
In lieu of enacting a prohibition ordinance, a county or city may enact a resolution to allow the voters to decide if they are in favor of allowing cannabis businesses to operate in the boundaries of the county or city. The resolution must be received by the county clerk by the second Tuesday in August before the regular election to be on the ballot for that election.
For the question to be on the 2024 regular election ballot, the county clerk would have to receive the resolution on or before Aug. 13, 2024 for the question to be included on the ballot this year. A resolution to place the question on the ballot can be found here.
If a county or city prohibits the operation of cannabis businesses, the voters in that jurisdiction may circulate a petition to place the question of overturning the county or city’s decision on the ballot for the voters to decide.
Pass local regulations
A county or city where cannabis businesses are allowed may enact ordinances “relating to the time, place, and manner of cannabis business operations.”
These ordinances cannot be less restrictive than state law or the administrative regulations promulgated by the Cabinet and shall not “impose an undue burden or make cannabis business operations unreasonable or impractical.”
County and cities may also “establish and assess reasonable local fees to compensate for any additional costs caused by the operation of cannabis businesses.” However, those fees cannot exceed the additional costs caused by the operation of cannabis businesses.
Questions?
Please contact a member of the KACo legal team if you would like additional information.
