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Marijuana business booming in Yellowstone County, but not in Billings city limits

Posted at 6:26 PM, Apr 06, 2022

BILLINGS — It's now clear that cannabis is a cash cow in Montana, with dispensaries across the state seeing millions in revenue since recreational sales first went online at the beginning of this year.

"Our traffic has doubled. Our overall intake of customers has doubled," said Kyle Knight, owner of Frosteez Cannabis Company just south of Billings, on Wednesday.

In March, medical marijuana sales in Montana reached $9.8 million, compared to $15.8 million in recreational sales during the same time, according to the state Department of Revenue. The year-to-date total sales of medical and recreational combined reached $72.9 million at the end of March.

Frosteez Cannabis Company owner Kyle Knight speaks with MTN News on Wednesday.

That's the story across much of Montana, but marijuana business inside Billings city limits isn't booming. There are eight medical marijuana dispensary licenses available in Billings, but the city has so far received only one applicant: Montana Advanced Caregivers.

"The zoning restrictions that are in place are pretty limited to the areas of town that we can have marijuana businesses. We've been told that it's pretty challenging to find a place," said Andy Zoeller, finance director for the city of Billings.

Andy Zoeller, finance director for the city of Billings.

Zoeller said the lack of applicants in the city likely boils down to three things: zoning, high fees ($3,950 annually for a license) and the added profits from a shop selling both recreational and medical outside city limits. Only medical shops are allowed in the city, but not recreational shops.

"A lot of us talk and a lot of us say they almost made it impossible on purpose. That barrier to entry was just too much for places to overcome and that’s why you’re not seeing very many applicants," Knight said.

A marijuana bud that is a few days away from harvest at Frosteez Cannabis Company in Billings.

A former electrician, Knight opened up Frosteez Cannabis Company near Billings as a medical dispensary three years ago before recreational sales were legal.

It's often assumed that recreational sales would far outweigh medical sales once legalization hit, but that's not the case at Frosteeze.

"So far, this first quarter it's been about one to one as far as medical vs recreational," Knight said.

Knight said he had looked into opening up shop in the city limits but found the red tape and fees are too much to jump through.

Another hurdle now is the June 7 election, where all Yellowstone County voters could put a stop to recreational sales - hurting the 47 already established dispensaries.

"It leaves us going backwards. There's a lot of investments that we've made trying to keep up with demand. There's a lot of suppliers, vendors and other local businesses that are affected by that as well. We see that directly," Knight said.

A portion of the cannabis plants inside the grow room at Frosteez Cannabis Company near Billings.

Regardless of the election derision, Yellowstone County and its municipalities will still get its share of marijuana tax revenue. Zoeller said Billings is expected to receive between $350,000 and $400,000 from the 3% local option sales tax on marijuana sales.

The issue of where to spend the marijuana money will likely be tackled at a Billings City Council budget meetings in May, Zoeller said.

“There is no limitations from the state on what they can use it for. So right now, Council can put it towards anything," Zoeller said.

As far as the remaining medical licenses in the city, Zoeller said he expects there won't be much more interest, because the state isn't letting out-of-state companies apply for licenses until the end of June next year, and the locals have already looked and decided to pass.

“When that opens up, then people from outside of our state will likely be investing in our state. At that time, there may be more interest. Until then, I’d be surprised if we see more than one more before that," Zoeller said.

The high price of a Billings medical dispensary license could be reviewed by the City Council at some point this year, Zoeller said. The fees were established based on the expected lift for code enforcement to inspect the marijuana dispensaries.

"After we have a better picture of here's what the real need was for the city, can we adjust that fee at all, up or down? It will really depend on the demand and if there's just really only a handful of the businesses in Billings ever, then I imagine that fee would come down. Because the demand isn't going to be as high," Zoeller said.

RELATED: First quarter of adult-use marijuana sales in Montana ends, taxes due Apr. 15