Denver City Council on Monday made several big decisions about the nascent marijuana industry, including allowing stores to sell both medical and nonmedical pot without requiring physical barriers in the shops and setting a proposed 3.5 percent tax rate.

Also, new licensing requirements will give neighbors a chance to raise concerns about public safety, health and welfare of the neighborhood at mandatory public hearings before medical marijuana centers can convert to selling retail marijuana.

“We’ve done a good job here,” Councilman Chris Nevitt said after an afternoon committee meeting.

Denver, which has about 200 medical marijuana centers, is the largest city in Colorado to opt-in on allowing retail marijuana to be sold beginning in January. The City Council has been working on establishing a licensing and regulatory framework since Amendment 64 was passed by state voters last year.

The 3.5 percent sales tax, if approved by voters in November, is expected to raise $3.4 million a year to pay for regulation, enforcement and education around the new industry. Denver Mayor Michael Hancock had wanted a 5 percent beginning tax rate. The tax would be able to be raised as high as 15 percent without a public vote.

“This will create the opportunity to deal with some of those social costs that will come as a result of an expanded presence of marijuana in Denver,” said Councilwoman Debbie Ortega.

“The whole country is watching us,” said Council President Mary Beth Susman. “Come Jan. 1, we are going to have people from all over the country asking us how is it going? We have thought about what it will mean for the future and to be among the first to legalize marijuana in this fashion.”

The council on Monday also set the licensing requirements for the new industry that will begin in January. The new rules range from store hours to the substance of public hearings. The full council will vote on the licensing requirements next month.

Among the highlights :

• For the first two years, the city will allow only established medical marijuana businesses to convert to retail marijuana shops with mandatory public hearings.

• Medical and retail marijuana can be sold in the same store without a physical barrier, which had been called for in an earlier version.

• Retail marijuana shops in Denver can operate from 8 a.m. to 7 p.m., despite a state law that allows them to be open until midnight.

• Public hearings will be required when existing medical marijuana shops convert. But the hearings won’t be as strict as liquor licenses, which determine whether neighborhoods need or desire that a liquor license be issued.

Some council members were concerned that the public wasn’t going to have as much opportunity to make their cases before the pot shops begin operating. Councilman Paul Lopez was pleased that the council put in an allowance for neighbors to talk about their concerns.

“This will give neighborhoods a voice and will keep them at the table and not on the menu,” he said.

Jeremy P. Meyer: jpmeyer@ denverpost.com; Twitter: jpmeyerDpost; 303-954-1367