Sanford Center Finances, Marijuana Zoning Regulations Considered by Bemidji City Council

BEMIDJI — Financial issues at the Sanford Center were a major topic at Monday evening’s Bemidji City Council work session, including the center’s projected budget deficit for 2024 and the need to address cash flow issues resulting from weak financial results in 2023.

The board received an update on Sanford Center’s financial situation from representatives of management firm ASM Global, including Dave Jolette and Justin Jokovich, who explained that the center has significantly depleted its working capital due to poor performance last year. This has led to a capital deficit that ASM projects will last until 2024.

Jokovich noted that uncertainty in the timing of events contributed to the shortfall. But he assured the council that the cash shortfall was temporary and proposed that ASM inject $350,000 into the center’s operating budget, to be paid off by the end of 2024.

The proposal also came with a controversial condition that involved removing the city’s contract termination clause, which allows the city to terminate its management agreement with ASM in certain circumstances, including poor financial performance.

Council members were clearly unhappy with the way ASM had handled the situation and the discussion became extremely tense.

“Your numbers were exactly the same at the end of last year if you had hit those cash injections this summer that could have come naturally for weddings or whatever else was going to happen,” Mayor Jorge Prince chimed in. “That didn’t happen, so that’s the reason for the cash shortage.

“Why don’t you just say, OK, city, if you terminate the contract, at the end of the year give us back the money that we essentially lent you to deal with the cash flow deficit? Why wouldn’t that be an acceptable solution, rather than saying, ‘We’re not terminating the contract?'”

Jolette responded by saying, “The answer I keep getting is, if we’re going to invest the money, we just have to find ways to make the money come back. And without that, I haven’t gotten any approval to just invest the cash without any terms of return.”

Mayor Prince spoke again, adding that a cash flow shortfall is not the same as an operating loss.

“There are times when cash flow is abundant, times when cash flow is low, and ultimately that is separate and distinct from what your net operating loss is going to be,” he explained. “So in my assessment as a finance person, the only reason you have a shortfall is because you’ve used too much of the cash that’s currently sitting in the business to fund receivables, payables, inventory, all of those things to cover some of that loss, so that’s why we’re in the situation we’re in.”

Jokovich agreed with Prince’s analysis of the situation.

Concerns have been raised about repeated funding shortfalls, despite previous assurances. Ward 3 Councilman Ron Johnson has openly criticized the board’s approach.

“You’re doing worse and you’ve convinced us you’re doing better,” Johnson said. “I don’t support any of these moves to eliminate the termination clause because I think we need to talk to each other about how we want to proceed.”

Earlier promises to improve governance and reduce operating losses have become a subject of dispute.

“Last year was devastating,” Johnson continued. “You’re talking about this year being $100,000 over $350,000…we closed our last (management) firm because they couldn’t get below $450,000. I mean, you’re doing worse.”

Similar criticism was expressed by other councillors, who noted that previous management companies had also struggled with problems, but none of them posed such a risk to the city.

“If we wanted to, we could pay back $200,000 of that $350,000 after four years. It’s really not a huge risk or money on our part,” Prince said. “So if you’re asking for a reversal of termination on a loan that short-term, I hope you understand why that doesn’t sound like a very smart business decision.”

The council was presented with two main options to resolve the cash flow issue: the city could either provide $350,000 from its reserves or allow ASM Global to pay the funds, setting repayment terms to ensure that ASM would recoup its investment in the event of termination.

City Manager Rich Spiczka offered a potential compromise, suggesting the city temporarily fund the Sanford Center but keep a termination clause. That would give the council the flexibility to revisit the ASM deal at a later date.

“If I could work out an agreement with ASM that they would pay the money, the termination clause would remain in place, but if we were to part ways, they would get their money back and agree to that if the board agreed to it,” Spiczka said.

The Council generally supported the idea, hoping to bring greater accountability to the process.

No final decision was made at the meeting. The council is expected to return to the matter at a future session, with possible proposals to cover the shortfall and establish more stringent requirements for ASM management in the future.

Also during the lengthy meeting, council discussed zoning regulations for cannabis businesses following the state’s recent legalization of cannabis. The discussion focused on where cannabis businesses could operate in the city and the potential need for buffer zones to protect schools and daycares.

“There are a few things that we control with respect to marijuana regulation. One is registration, the other is zoning,” Spiczka said, emphasizing the urgent timeline because the city’s moratorium on marijuana businesses is set to expire soon. “We need to have an ordinance in place by the time our moratorium expires.”

City attorney Katie Nolting addressed the administrative aspects of registration, outlining options as to whether the city should handle it directly or delegate that responsibility to county officials.

“If the city signs up, the city controls what those funds are, established by statute,” Nolting said. “We can’t say what the fees are. … We would have to do at least one enforcement per year, whether it’s through code enforcement, planning, zoning or some other part.”

The councillors unanimously voted in favour of having the registration be carried out by the city and not the district.

The conversation turned to whether the city would limit the number of registrations for low-potency marijuana businesses.

“I think if we started with a cap, we could always change it,” Johnson said. “We could always add to it. But I think it would be prudent to start with a cap.”

However, Ward Councilwoman Audrey Thayer and Ward 5 Councilwoman Lynn Eaton were not in favor of capping registration from the outset.

“The state is already limiting the number of cases under medical license,” Prince added. “So they see something in this, too.”

Thayer raised concerns about places like gas stations selling THC-infused beverages and how that would be regulated in terms of registration.

“There will most likely be a grandfathering clause that we’ll just have to do,” Nolting said. “If you’re already selling low-potency cannabis, you’ll be able to get tickets to do that … that doesn’t mean you’ll be able to scale that up to start selling cannabis when it becomes available.”

The council also discussed potential zoning for cannabis businesses, with general support for limiting them to commercial and industrial areas. These zones are traditionally used for retail and manufacturing locations, making them a logical choice for cannabis businesses.

Addressing the issue of including community voice in the zoning process, Eaton emphasized the importance of transparency and public participation.

“I think the planning process provides a lot of transparency to the public, so I think this is the right way to go,” he said.

City planner Melissa Fahrenbruch explained that the reasoning behind their zoning recommendations was a reflection of the city’s zones designated for medicinal marijuana cultivation.

The proposed buffer zones are set around sensitive areas such as schools and kindergartens, where certain activities, such as the sale of marijuana, are restricted to minimise the impact on children and minors.

The council then debated what buffers to introduce given the significant number of nurseries and schools in certain parts of the city.

“I’m not in favor of a buffer around daycares, I’ve just talked to them and I can see that someone could strategically try to open a daycare to prevent a cannabis business from opening up,” said Ward 4 Councilwoman Emelie Rivera. “I would maybe consider reducing that to 250 or 300 feet from 500 feet.”

Council members agreed that a buffer should be created around schools, although the specific distance was a subject of discussion.

“What are we ultimately concerned about when it comes to the buffer?” asked Ward 1 Councilor Fiskevold Gould.

“There’s nothing in the city that says you can’t use it on the sidewalk. So you can walk right out of a marijuana store and start smoking,” Nolting explained.

The council also briefly discussed buffers around mental health facilities and parks, with Nolting explaining that parks are defined as places regularly used by minors and specifically include playgrounds and sports fields.

Council members unanimously voted to establish buffer zones around park attractions and sports fields. Further discussion is expected to focus on determining the exact distance between buffer zones and the types of schools they cover.