(a) The Department shall apply proceeds derived from the operation of dispensaries first toward the repayment of money that was loaned to or borrowed by the Department.

(b) After repayment under subsection (a) of this section, the Department may create and maintain a reserve fund not exceeding $400,000 to:

(1) provide adequate working capital; and

(2) cover any losses sustained by the Department in operating the dispensaries.

(c) (1) After the distributions under subsections (a) and (b) of this section, the Department shall distribute on or before June 1 annually:

(i) the proceeds generated by dispensaries in rural areas outside of a municipal boundary to the county general fund; and

(ii) of the remaining proceeds:

1. 50% to the County Commissioners; and

2. 50% to the mayors and city councils of Berlin, Ocean City, Pocomoke City, and Snow Hill, and homeowners associations that oversee an area in which a dispensary has been established, in amounts determined under paragraph (2) of this subsection.

(2) (i) The Department shall distribute the proceeds due to municipalities listed in paragraph (1)(ii)2 of this subsection and homeowners associations proportionally according to the net profits on total sales derived from the dispensaries in each municipality or area overseen by a homeowners association.

(ii) If County Commissioners consent for each municipality listed in paragraph (1)(ii)2 of this subsection, to determine the share of a municipality, a dispensary within 2 miles outside of the municipal boundary shall be considered to be within the municipal boundary.

(iii) Distributions paid to a municipality under this subsection shall be used for general municipal purposes.

(iv) Distributions paid to a homeowners association shall be used for the benefit of the special police force of the housing development.