Key points in this article:
- Minnesota is one of at least two adult-use cannabis states that allow local governments to operate cannabis retail.
- Anoka Cannabis Co., Minnesota’s first city-run cannabis retail store, opened Feb. 5.
- The store pays no federal taxes, sidestepping Internal Revenue Code Section 280E.
- Other Minnesota cities are seeking retail cannabis licenses.
When Minnesota legalized adult-use cannabis, cities saw an opportunity in the state’s unique law to create a new revenue stream: a marijuana business that could be run much like the municipal liquor stores that have been in business since 1937.
In Anoka, a Twin Cities suburb, the result is Anoka Cannabis Co., a city-owned cannabis store that opened Feb. 5 adjacent to the liquor store the city has owned and operated for 33 years.
It’s staffed by city employees, governed by the City Council and built on city-owned land.
The model gives Minnesota cities a direct economic opportunity beyond tax revenue. And city ownership changes the financial picture.
As a municipality, Anoka does not pay federal taxes, a potential advantage in a sector where private operators have long been squeezed by Internal Revenue Code Section 280E.
“It’s rare that a revenue stream can open for a city that won’t impact the levy,” said Kevin Morelli, who, as Anoka’s enterprise operations director, oversees the municipal liquor and cannabis stores as well as the city’s golf course.
Since its Feb. 5 opening, Anoka Cannabis has generated a net profit of nearly $250,000, Morelli said, and is budgeting for net revenue of $600,000 in 2027.
Are other Minnesota cities thinking about opening cannabis stores?
Minnesota’s cannabis statute allows cities and counties to apply for cannabis retail licenses following the same requirements and procedures all other applicants must follow.
Municipal stores procure their cannabis products through the same avenues as privately run stores. They also pay the same prices.
Anoka isn’t the only Minnesota city that wants in.
Thirteen cities applied for municipal cannabis licenses when they were first offered, a window that has since closed.
- Next in line to open a store is Saint Anthony Village, which was awarded its license on Sept. 29.
- Grand Rapids also announced plans to open its own dispensary.
- Elk River has dropped out, said Josh Collins, spokesperson for the Minnesota Office of Cannabis Management.
- The Osseo City Council in July approved up to $3 million in tax abatement for construction of a dispensary.
Cities interested in operating their own cannabis stores can apply during the next licensing round, which isn’t likely to open before July, Collins said.
“Others may be in the wings waiting for us to open a licensing window – particularly as they see how other jurisdictions perform,” he said.
“Anoka will have a lot of interest.”
Are other locales considering government-run cannabis stores?
Though 17 states impose some measure of direct control on liquor sales, including state-run retail outlets, government-run cannabis sales is an experiment seen in as few as two states.
A city-run retail outlet in North Bonneville, Washington, closed in 2021 after six years in business. Lawmakers in Pennsylvania and New Hampshire, where cannabis remains medical only, rejected state-run adult-use cannabis sales.
A commission appointed by North Carolina Gov. Josh Stein is considering whether the state should operate dispensaries, with cultivation and manufacturing left to private businesses.
That commission can only issue a nonbinding recommendation to state lawmakers, who so far have failed to move medical cannabis legalization despite popular support for capturing an estimated $3 billion illicit market – and successful tribal cannabis sales.
“Cannabis, the way I see it, is just like Prohibition all over again,” said Paul Kaspszak, executive director of the Minnesota Municipal Beverage Association, which represents city-owned liquor operations.
“We live in a world of cycles. Each state, each community is trying to figure it all out across the country. There are different systems for each state just like for alcohol.”
Why did Anoka want a cannabis store?
The push to open a dispensary came from Anoka’s finance director, who flagged it as an unusual opportunity.
Revenue is always needed as costs for things like employee salaries and capital improvements rise each year, Morelli said. Increased revenue from the store also helps the city keep the tax rate down.
“The city of Anoka has quite a few parks so there will always be a need for revenue to keep them maintained,” Morelli said.
Morelli’s team started attending cannabis conferences. They brought in a consultant, built a business plan and presented it to the City Council.
The council said yes, with a clear directive: find a location, build it fast and build it cheap.
A vacant city-owned lot adjacent to the liquor store was the obvious choice. The “cheap” part got dropped: Anoka spent $3 million building the facility.
But the speed held.
How did a Minnesota city build out a cannabis retail store in less than a yera?
The city broke ground on the building on May 12, 2025. The project was finished by Thanksgiving, although opening was delayed as it waited for the OCM to perform its final inspection before the city received its license.
“It’s the fastest city project I’ve ever been involved with,” Morelli said.
For the first four days after opening on Feb. 5, customers needed an appointment to visit the store.
The city also has access to capital that most new cannabis licensees don’t, including its own electric utility that helped finance the $3 million project.
The building is compact: a 680-square-foot sales floor, a check-in lobby, a secure vault and staff spaces.
Solar panels – funded largely by a grant and federal tax credits – are expected to generate 88% of the store’s electricity needs.
The city brought in Point Seven Group, a Colorado-based cannabis consultancy, for two rounds of staff training before opening. The store has a full-time manager, an assistant manager, a lead budtender, 13 part-time budtenders and four check-in clerks.
All original hires are still there.
Is compliance different for municipal cannabis stores?
Compliance has been one of the biggest lifts, Morelli said.
Municipal operators face a unique wrinkle: Most licensing requirements were written with private businesses in mind.
He worked with state legislators to clarify that city councils shouldn’t have to go through the same background-check process as individual owners.
Does the city cannabis store give back to the community?
The store, Morelli said, is more than a revenue generator. It’s a community asset.
Because city employees cannot accept tips, the shop places donation boxes near the point-of-sale area and lets employees choose which nonprofits will receive the funds.
Beneficiaries have included a food shelf, domestic violence services, pet-related causes and veterans’ services.
“We have a check presentation at the council meeting every month,” Morelli said.
Margaret Jackson can be reached at margaret.jackson@mjbizdaily.com.
