Calling the work session to order for Monday, June 22nd at 6 p.m.. We have four of the five council members present this evening. Mayor Poppy is not here with us this evening. Um, uh, approval of the agenda. I’m sorry to make a motion to approve the agenda. Thank you, Mr. Hancock. Is there a second? Second. Okay. Motion and seconded. All in favor? Aye. Aye. Opposed? Nay. Okay. Unanimous approval. Moving on to the next item and agenda. Item number four. Discussion items. Administrators, update on the Associated Press room. Dispensary project. Acting mayor and council. Um, I was asked to just put something together here for this work session where we kind of go through where we where we, well, where we came from, where we are currently, and then kind of where we’re going when it comes to the dispensary. Um, municipal cannabis discussions have been ongoing at the council level for approximately three years. So this memorandum, my memo outlines the sequential milestones from the inception of, uh, to June of 2026, providing the necessary context for current bonding proposals regarding the city owned cannabis retail facility. So in 2023, the legislature and the state of Minnesota legalize adult recreational cannabis. This legislation included a specific provision granting municipalities the authority to own and operate cannabis retail operations. Now, I was not a city administrator at that time. I was actually the police chief. And to be honest, at that point in time, I was down at the state Capitol telling them not to legalize recreational cannabis. So we had an initial legal review done by our city attorney on September 25th, 2023, during a council work session. Uh, Mary Teach and presented a memorandum outlining the statutory framework for governing municipal cannabis businesses in. The Council heard that um, at that time, they decided that they wanted to or right after that, they wanted to establish a committee to oversee and look at, um, our cannabis, uh, possible municipal cannabis store. So on October 10th, 2023, the council took its initial formal action by establishing the Cannabis Sales Committee to explore a local implementation. Um, in January of 2024, uh, at a work session, staff provided an update detailing critical variables for the council to consider, including location sourcing, physical site acquisition versus leasing. The city employee operational model. The application process, which at that time was still getting frame worked out by the Office of Cannabis Management because there were so new. And just general store operations. What the council may see or hear in the upcoming years, as we tried to get this out and done in June of 2024, the city of Osseo closed on the purchase of a commercial property at 33 second Street Northeast. Um staff and the Cannabis Committee continued evaluating alternative purchase and rental options for the dispensary location. So this is about the same time I came in about April of 2024. So I was, uh, involved in looking. Um, we were looking on 81. We had looked at, uh, some other locations on central and nothing really fit. And but we had purchased this building. I think we had looked at it as a possible location for our police department or a fire department or, you know, some sort of a city, um, functioning place that, that all we went all the way through to actually having drawings done. But it didn’t work as far as the cost. And so that we stayed with this municipal, uh, campus that we’re on right now. And that building, um, sat I thought July 17th, 2024 work session. Um, the council discussed potential uses for 33. So this is when we talked about police. We talked about possibly leasing the space to a third party. Um, renting the space, maybe selling it. All of those things were, uh, looked at and had some viable, uh, seen what was viable at that location. Then in July of 2024, so the end of July, the city council received a formal presentation from Voyager Cannabis. And I think that’s in the packet. Um, that was done in July and then September, the council received a formal presentation from what was called the Red pine Group. We did following that, uh, September 30th, we had a, um, uh, a letter of intent that was signed with Red pine Group. They had said they were going to purchase everything, build everything out. Um, and they were going to secure a location. And that was reviewed by staff, the cannabis committee and the city. We did this letter of intent with Red pine. Oops, sorry. Um, then the staff and Red pine conducted. I went door to door out on 81, asking people if they were willing to sell, asking if they wanted a location, if they could build a location out there. There was some talk of of someone else purchasing property and then creating a location for the city, uh, for that commercial along County Road 81. Again, we even we looked at, I think, two different properties on Central Avenue and nothing really fit really well. Um, as far as what we could make happen. Um, in March of 20, 25, uh, the city and Red pine group signed a memorandum. Memorandum of understanding to facilitate the state licensing process through the Office of Cannabis Management. Municipal applications for the licensing part. So this started in 2023. The applications opened in April, May of 2025, and Osceola successfully secured a preliminary OCM state license in August of 2025. So again, negotiations for a primary lease location collapsed in August of 2025. We had a location in Osceola that we were having some conversations. Uh, the Cannabis committee was involved in that. And then prompting us to pivot because that fell through and we couldn’t find anything on 81 or on central that really fit. So utilizing that city owned property, uh, as the primary dispensary site that happened, um, in August ish of 2025. So now we’re going from August to to now in June, which is a very short period of time. In November, the council approved the city license for operation on November 24th, 2025, due to evolving project needs, the council adjusted course and executed a service contract with Voyager Cannabis. And they became our vendor that we were going to use in December of 2025 or tell. So this was seven months ago or till architect was retained for the schematic design phase of the building redevelopment, and they did some initial drawings, looked at the size of the space, made sure that we had enough room. Uh, we’re we’re hired to do that. And that was a joint venture between us and, uh, Voyager Cannabis. They gave a presentation on that in February. The council retained 45 North Group as a project manager, establishing a project delivery deadline of November. That was something that the council was very poignant to staff and 45 North that they wanted something done to redevelop this building. And accommodate two distinct business suites within that building, and that’s what 45 North has been helping us since February. So for February through June, Staff Council 45 North and Voyager Cannabis have, uh, successfully executed building demolition produce, finalized architectural plans, completed technical specification for the entire facility, including the the buildout and the naming of the Osceola Press Room dispensary. So February 9th, we finalized the cannabis management proposal with 45 North Group. March 9th, we completed the financial matters proposal with Voyager Cannabis and the formal hiring of Ten and Green, which was our architects. March 30th, 45 North Group conducted a comprehensive layout and planning review during the council work session, and some of that is again in the packet on April 13th, Miller Trucking was contracted and authorized to begin site demolition. May 7th, the council reviewed architectural renderings alongside updated dispensary floor plans presented by Voyager Cannabis. Now. Throughout this development cycle, staff has returned to council for sequential approvals regarding demolitions plans and specs, budget adjustments, branding, logo assets and exterior renderings. Um, and it took us a little while to get a budget together. And so, um, on June 24th, the council adopted a reimbursement resolution enabling this is in 2024 because they purchased. And then right afterwards, we got a resolution, uh, enabling the city to recover original acquisition costs. So that’s $727,000. Building purchase price has been integrated into the total capital request, bringing the total estimated project to around 4 million. Approved plans and specs are currently out for competitive bidding, so we really don’t know what the total, at least the build out on, um, the building side. We don’t know what that is yet. Specifically, we have a budget. It’s about 2.9 million for the total, uh, redevelopment cost. That will get us to a point where the cannabis, municipal cannabis will be built. The all the, um, the other site inside will be leasable, um, allowing us to sign a lease, which will be happening later on this evening. I hope, um, and we should the construction bids return at a lower than estimated. The total project cost and final bonding numbers will be adjusted downward accordingly. Now, there are some things that I just wanted. I. I laid out in here. Um, so this would be a build out. So renovation and garage addition was about 1.5 million. There’s some utility work, uh, water, sanitary, storm and electrical, about 120,000. Some infrastructure equipment, HVAC, electrical, plumbing. It’s about 100,000 parking lots, sidewalk, concrete, patio, 110,000. So total construction is about 1.8 million. Of that. Uh, probably about half of that last a little less than half of that is just on the, uh, cannabis side. So some professional services, um, that’s all your architects and WSB and assisting with some of the utility work in the parking lot structure. Uh, some furniture and equipment. It’s 324,000 technology, which would be all the. It also project contingency. Um, that’s about a $300,000 contingency, just in case there’s some unknowns that we don’t see. So if you look at that, the subtotal is about 2.959 million. Now that is what the estimated total is going to be. So we don’t know until we get those bids back which will be back. Uh we’re hoping the end of July I believe is when we’re. Supposed to get. The, the bids back from the, the bidder and then the building acquisition reimbursement, um, is 727,000. It doesn’t have to happen. That doesn’t have to be rolled in there. That that could come out of of cannabis revenues. Uh, the city could decide or the council could decide not to, to do that if they wish. So I also asked council to give us some questions or give me some questions so that I can maybe answer some questions that either they had or that they’ve heard from residents. And so, um, one of the questions is the general fund on the hook for cannabis project expenses? If there’s not sufficient revenue from the cannabis operations? If so, will this increase residential property taxes? So I’ll break that down into two different things. Is the general fund on the hook? Yes, because it is a municipal project. And that bond payment is something that we are going to have to pay back one way or the other. Um, does it increase residential property taxes? That depends on what the council wants to do with the budget. And depending on how much that could be, it could be nothing. We could make a whole ton of money. We don’t. I mean, that’s what all the projections say. Um, is that these residential property taxes may not. That’s a loaded question because I can’t answer that. Um, council would have to decide what to do with the budget to try to offset some of the costs that we have, which we do, uh, pretty consistently when it comes to bonding issues, whether it’s the streets or infrastructure or we’re buying a building, it all, uh, they try to, as council has done here this last year, you try to go low, as low as we can and that we can do so. I can’t say this is going to increase residential property taxes because I don’t know, there could be other things that we were able to do. And and another question was what has been spent out of the general fund this year for the cannabis project of this amount, how much will be paid back from the cannabis revenue? So we’ve spent about $115,000, but that all is in this budget. And it’s been sitting in this budget that I just gave to you on these estimated costs that oops, sorry, that’s all been built into this. So it’ll be if the bonding goes through, that money will be paid back to the city. So we will not show a negative for this year because all of that’s been taken in when they when we’re paying for land and green to do, uh, architecture work and do the plans and specs that’s in this budget, and it comes back after we do the bonding. Uh, what will be spent or budgeted out of the general fund for the cannabis project next year? And will that amount be paid back next year out of cannabis revenues? I think that’s the hope or that’s what I believe is going to happen. After looking at and doing my due diligence, I’ve been speaking to Anoka Cannabis, um, because they are the first second one with Saint Anthony. They were supposed to be up and running, but I haven’t heard that they’re up and running yet. And everything that I’ve talked to Anoka, they’ve given me some background work, which you guys have seen. Um, that they’re doing very well. Um, as far as, uh, somewhere between 60 and $70,000 a month in net profit. So I think they’re they say they are on track with their, um, pro forma as far as they’re following their pro forma that they had, which had a fifth year, I believe, if I remember correctly, of, uh, city profits, about 5.6 million. So they had 12 million in sales in year five. Now they say they’re following, their there. They started in February, so they started February 5th. And they’ve just been going up and up and up in sales, in net revenue. They do have a different setup than we do. They do. They did hire all their own employees. And so their first couple of years when they started this project, they did show a negative value because they had to hire a manager and an assistant manager before the project was even up and running. So they hired a gal out of Colorado, and then somebody out of Minnesota as an assistant manager. And I think some of you, as far as council, were at their presentation at their facility when they talked about it. So they did it a little bit differently than we are going, we’re going to be the first city, um, in this probably the country right now to to hire a vendor to run our store the day to day of the store. So, um, so, you know what, what’s budgeted. There’s nothing that’s going to be budgeted out of the general fund. Um, that wouldn’t be paid back by cannabis revenues, because the only cost that could come up would be the original amount of money that we see to buy the leaf. But we’re hoping to be open this year. So, um, the only thing we can’t use bond proceeds for is actually to purchase the actual marijuana. So. It’s as if Voyager is supplying the financial administration of the project. Why is there a new finance director with dedicated 40% time to the cannabis project? Well, that 40% of the time we I’m expecting a little bit more than that. Um, because we not only are working with Voyager, but it’s our license and we’re responsible for, um, overseeing the finances no matter what anybody says they’re doing the day to day, they’re going to be doing all of the selling and the backroom, and then we need to then confirm what they’re telling us is the truth. Right? That’s how we have to oversee. And at looking at that, we were looking at somewhere between 30 and probably 20 and 25 hours a week. But we’re not quite sure because I’ve been talking with Anoka. Um, they’re putting in at least that amount of time and energy. Ours is a little bit different. But yes, we we and this is not just a position. Um, it’s a needed position. We’ve been, uh, so small for so long, and we keep getting told we need some backups. We have no backup for payroll. We have no backup for, um, sewer and water. And that’s what this position. Not only will it be doing cannabis, but also a lot of our budgeting and future costs. That way. So that would be that’s that’s where this came out of. And we did speak at HR at the human resources level and talked about it. And actually, uh, had um, did a job description, which then was approved by council and we went out for hiring. And we’re currently in that state right now with it out for hire. Um, will cannabis revenue reimburse the general fund for the cost of the purchase of the city building? We would we would like to reimburse ourselves the building acquisition reimbursement. Now, if that number doesn’t work, the council can decide not to do that. It could come out of the revenue. Absolutely. But that will be a council decision. Um, because that is something that as the budget gets set and we see revenues, um, then we, the, the council will decide how they want to approach that. If there’s, um, some type that they want a certain amount every year or if we want to, um, not do that, that’s going to be a total, uh, whole council decision. And will this be paid in one lump sum or prorated over the life of the bond? Well, if we did a bonding project which included the building acquisition reimbursement, um, that would just be a one lump sum. But if the life of the bond, um, that schedule or how much will be reimbursed over the time, uh, that’s going to be up to a council decision. So that’s during the budgeting process. What is the latest revenue expenses, net profit, after all expenses, including debt payment and Voyager contract fees projection for 2027 the council is using to justify the success. Can you throw up that last sheet? So this was the latest pro forma, which I received last week. And so this includes the operator fee. So if we if we get our our bonding which we’re looking at about $350,000 a year. So you would show right now just under 300 the first year. So 618 um, and then 6.9573186902 our net profits, um, so that would be where the 350 would come out. And then whatever’s left is considered a net profit. So then that’s what the council’s been looking at. And I again, that pro forma from Anoka 5.6 million I don’t know where they got it. But that is what they’re expecting in year five. So and we’re starting to just see in their first few months that they’re everything seems to be going up. Uh. What is the projected annual revenue from cannabis. That’s out there.? No, I well, sorry, what is the projected annual revenue from cannabis that will be directed to the general fund? And will this contribute to lower residential property taxes? Again that’s a council decision. Um, what, you want to use those funds for? There’s nothing that needs to be dedicated. The state of Minnesota has said that the revenues are your revenues to do. Um, if you look sorry and I apologize, I didn’t bring this up. But if you look at it, it’s about an 18.6% profit year. One, 19.7. Year two, 19.9. Year 321.3. Year 421.6. Which are pretty high numbers for any type of business. So. That is what I have for the council as far as where we where we were or how we started and then where we’re coming to. So I can say, hang on here. So. So they started February 5th and they made $370,998 in that month for sales. They paid 254,000. And um, cost of goods, 116 and gross profits, net profit was 32. March was 45. April was 54, but their total expenses have gone up and down depending on what they’re doing. So we’re just seeing that trajectory about 10 to $15,000 a month right now for Anoka. Was there any questions for me that I can answer for for you as council? Counsel. Any questions? So this is a work session. I know we do have some people that would like to ask some questions as counsel. Okay. If we entertain questions up until 655. Okay. So questions are going to kind of be along the lines of along the lines of public matters. That’s the intent tonight. So you can respectfully speak on anything you want. But we ask out of respect for time that you limit your comments to three minutes. We will cut off any public questions or comments at 655. Okay. So with three minutes, that gives us plenty of time for questions if you have any. We’re not. We’re going to do the best to answer what questions we can. There might be some things that come out of left field that we’re not prepared to answer right now, but we will come back with answers to those questions at a future meeting. Okay. Um, as necessary, if there’s specific things staff is going to be requested to respond. Specifically, is there anybody that wishes to have any questions this evening? Okay. So I’m going to run a timer, just so you know, so that we keep everything clear. So come on up. Um, please state your name and address. Neal Sonnenberg, 216 first Avenue Northeast Minnesota. Thank you. Uh, they’re right across the street from the proposed building site. I want to thank you and the council for all your work in this area. Okay. The question I have for Sean. Shane. Sorry. Thank you. Is, uh, the numbers that you asked about or did they include repaying of the building costs? So can you be more specific? The last numbers that you talked about, the 3 million sales? Yep. They did not include any building costs. So if if the building costs would come out of the profits. And so there’s about 300 and some thousand now whether the council decides to use portion of those profits for building repayment or to put into the general fund, or to portion it out over time, that that will be a council decision. Okay. Thank you. Yep. Uh, my next point, the question is that parking, since I live right across the street from this, uh, site, is there going to be enough parking for people to to come and go or to come and stay for hours? However, the or they plan on doing it? Is that that been you looked into? Yes. Sorry. I’m sorry I didn’t mean that before. That’s. That’s fine. Um, absolutely. So the tenant space, there’s two of them into that building. One is there’s a lease up for signature tonight or to be approved by council. And that is a brewery. And then, um, there’s also the cannabis store in the same building, so they’ll just be right next to each other. We’ve done parking studies through WSB, and they say there’s enough parking there to handle both businesses. The cannabis business is actually more of an in and out. That nobody stays very long. Um, Patrick could probably speak on that. I’ve never been to a dispensary, so I don’t know, but most of it’s in make your purchase and then they leave. So it’s not a state. There’s not using on site. No. Oh no no no I and I would say that the state of Minnesota has put the kibosh on no usage. Um, on site. You can’t use it in your car, you can’t even transport it outside of it’s labeled container. So if it’s everything sold in a container or a zipped bag or a sealed bag. And so no, there’s no usage there at all. Okay, that’s an answer. Answer my second question about if there’s any orders. Oh. 30s left okay. And my last question would be, uh, the property values, will my property go up or down in value? Well, in, um, I don’t wouldn’t I wouldn’t have that answer tonight, but I would in my educated guess, which I’ve been an administrator for about a year and a half, I would say it’s probably going to go up because that building is getting redeveloped, and it’s going to look much nicer than it does now. So as that property value goes up, so, so would everyone else around there, I would assume. But I can’t answer that. I’m assuming. The last few seconds. I want to thank you for the council, and I appreciate not putting a garage or a gas station with highly toxic fumes around there. Thank you. Another question. Oh, that’s going to go faster than I thought. All right, so one last call for questions. All right. Hearing none. Um, Council, you had your chance to ask questions. Um, so at this point in time, I look for a motion to adjourn. So moved. Councilor Torres. Second, please. Second council member could all in favor of adjournment. I opposed. Meeting is adjourned at 6:28 p.m..