The city of Anoka broke ground on what could be one of the first government-run cannabis dispensaries to open in the U.S. since 2015.

On Thursday, city officials met at 839 East River Road for a groundbreaking ceremony to commence the $2.7 million construction of a new cannabis store.

Anoka is among 13 cities and counties in Minnesota that have applied for a license to operate a cannabis store. City liquor and cannabis operations manager Kevin Morelli says they’re waiting on the state’s Office of Cannabis Management to approve their license.

“We might be waiting around for it, but at least we’ll be ready to go, and we’ll have that in hand, and we can hit the ground running,” he said.

According to Morelli, Anoka appears to be the first municipality to start building out a space for a dispensary so far in Minnesota. Other cities, like St. Joseph and Osseo, want to secure the license before construction.

The Office of Cannabis Management says municipalities are guaranteed a license as long as they fulfill requirements for the license application. The deadline to apply for a municipal license was March 16.

The agency has 90 days to approve or deny an application after final documentation is submitted, including local government approval.

Office spokesperson Josh Collins says the agency expects to start seeing businesses, including municipal cannabis dispensaries, open up this summer. In addition to reviewing municipal applications, the cannabis agency is in the midst of reviewing 3,500 license applications and preparing to hold a license lottery on June 5.

Washington experience

The state of Washington was the first to open a city-run cannabis store in 2015. By 2018, the store struggled to break even as more retail stores opened and the dispensary eventually closed down in 2021.

Minnesota law requires local governments to allow a minimum of one cannabis retailer for every 12,500 residents, but also gives local governments the option to limit the maximum number of retail cannabis dispensaries in their community.

Anoka has a population of about 18,000, so the city council limited the number of private dispensaries in the city to one. Morelli is optimistic the limit will allow the city-owned dispensary, which is located across from Anoka’s municipal liquor store, to thrive.

The state’s cannabis agency says they will be able to make adjustments, like adding additional licenses, based on supply and demand in 2026. It will keep an eye on how the market matures in the first year before making changes.

“Demand studies have shown that there is a great deal of interest from Minnesotans for cannabis products,” said Collins. “We don’t view this as a situation where there’s one winner and and the others are losers. I think that there’s going to be significant demand, and there’s opportunity for success, for our social equity applicants, for municipalities, for our tribal partners, and for general applicants as well.”

Collins says it’s an exciting time for Minnesota. The state is on the cusp of opening dispensaries and launching the cannabis market.

Minnesota will also be leading the nation not only in municipal dispensaries, but also in allowing tribal-run dispensaries off tribal lands.

Cities want to use cannabis profits to offset property taxes

Anoka has been operating in the liquor business since 1937 and wants to be at the forefront of cannabis.

“I think the logic is very similar, where the city is the one in control, making sure that we are operating, operating well, operating responsibly, setting a good example. And then the secondary portion of it is also the financial side of it,” said Anoka Mayor Erik Skogquist.

It’s estimated the dispensary will not be profitable until the third year of operation, when it could net $1.5 million. Skogquist says the revenue will be used to pour back into the city, similar to what the city has done with the profits from its liquor store.

“This is an opportunity for the city to basically expand our current enterprise, to be able to have this as well and potentially raise millions of revenue that we can use to cover things like parks or some policing or other things that won’t have to come off of the backs of the property-tax-paying public,” he said.

Other cities like Osseo and St. Joseph don’t operate a liquor store and see a cannabis dispensary as a way to bring in money they need to repair infrastructure.

“St. Joseph is pretty progressive in general and we want it for just the additional money that it’d bring to the city so we’d be able to do different projects like improving our crosswalks,” said Mayor Adam Scepaniak.

He says the city is also waiting to get their license before making next steps. And the earlier St. Joseph gets into the market, the better.

“We still want to be on the front edge of this and be an early adopter, because the earlier you can get into this, the better chance you have of being viable and basically surviving once the market becomes diluted and it progresses,” said Scepaniak.

Most states have avoided municipal cannabis because of the conflicts with federal law — the Drug Enforcement Administration still classifies marijuana as a Schedule 1 substance. That also poses risks that banks may not accept cannabis funds because it’s federally illegal.

But cities pursuing municipal cannabis sales now point to the cultural acceptance of cannabis. And cannabis is now legal in Minnesota.

Scepaniak says the number of banks in Minnesota that are willing to work with cannabis businesses have gone from one last year to 10 to 12 banks this year.

“The less this seems like a boogeyman activity and people are starting to realize that’s normalized — not only in Minnesota, but around the United States — and the positive attributes of everything that this can bring, people are just coming on board. And these financial institutions are also recognizing how much of a cash cow this is, so it really behooves them to participate,” he said.

And in the city of Anoka, consumer habits are evolving in favor of cannabis after recreational use was legalized in Minnesota. The city’s liquor store has been selling low-dose THC products since 2023 and has seen success with it.

“As beer, wine, hard spirit sales have decreased, the low dose have increased, and so that’s complemented the products as people’s familiarity grows with it and needs and desires change for people,” said Skogquist.

Anoka is aiming to finish construction of its cannabis store in December and hopes to open in January. But all of it hinges on when the city will get its license.