Massachusetts Marijuana Regulators Give Businesses More Time To Settle Host Community Agreement Conflicts With Towns
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“It seems like we are getting notice of a new licensee being impacted on a daily basis. The number is growing.”
By Bhaamati Borkhetaria, CommonWealth Beacon
When Bountiful Farms, a medical cannabis dispensary in Natick, went to renew its license in June, it hit an obstacle: the host community agreement that it needed to renegotiate with the town and have approved by the state’s Cannabis Control Commission (CCC).
The agreement with Natick was in violation of a 2022 law that banned communities from charging fees greater than three percent of gross annual sales and required that the fees be “reasonably related” to the impact of the cannabis business on the city or town. Because the agreement both discouraged Bountiful Farms from ever suing Natick and imposed fees in addition to a legally allowed “community impact fee,” the commission rejected the company’s renewal application, leaving its owners in limbo.
Bountiful Farms is not the only cannabis operator in Massachusetts stuck between a town trying to maximize the fees it collects and the Cannabis Control Commission trying to abide by the law.
Last year, the commission rejected about three quarters of the submitted host community agreements—as of mid-December, 461 out of 615 were ruled non-compliant. Without a compliant agreement, these companies can’t get their licenses approved or renewed and, in some cases, can’t keep their businesses running. In the meantime, companies that are waiting to open are paying rent and spending thousands on legal fees while they wait to get their host community agreements in order.
“I have referred to the concept of HCAs and the negotiations as the ‘wild west’ because it wasn’t a level playing field for negotiation,” said Commissioner Kimberly Roy in September, referring to host community agreements. “The municipalities had an extraordinary amount of negotiation power and leverage with folks trying to get into this new industry.”
After recreational cannabis was legalized through a ballot measure in 2016, the Legislature passed a law requiring host community agreements before cannabis operators could obtain a license. The community impact fees were capped at three percent at that time, but there wasn’t explicit language banning other fees—an opening many cities and towns exploited to charge more.
Industry leaders say that there needs to be more done to help companies that are locked in conflict with their towns—some of which are trying to include provisions in new agreements that would prevent cannabis companies from asking their host municipality to reimburse previous impact fees—to get compliant agreements.
The commission doesn’t have an enforcement mechanism to make communities abide by the 2022 law, but it is taking some steps to support cannabis operators. On January 23, commissioners voted unanimously to allow their general counsel to file a letter of support for the three cannabis companies that are suing Great Barrington to recoup millions of dollars in impact fees they paid as part of past host community agreements. To protect its authority to review agreements, the commission also empowered its general counsel to find a way to become more involved in the lawsuit, though it’s unclear what that might look like.
Great Barrington is taking the position that the commission does not have the authority to review host community agreements that were signed before the law was enacted.
There have been several lawsuits before the case in Great Barrington where cannabis operators have sued their towns to recover fees that would now be illegal. In Uxbridge, the owner of Caroline’s Cannabis sued the town over the impact fees that she paid and received a refund of almost $1.2 million. Caroline Pineau, a cannabis operator in Haverhill, recovered 70 percent of the fees she paid through a settlement after she sued the town.
Another trio of cannabis stores is threatening to sue Newton over past impact fees if the city doesn’t offer a refund. The mayor of Newton said in an email update to the city on January 24 that the city will defend the previous agreements and not allow the cannabis companies to claw back any fees.
Uxbridge and Haverhill declined to comment, and Great Barrington did not respond to questions.
In December, the cannabis commission issued new guidelines that explained what expenses—like consultant costs, environmental impact studies and traffic design studies—qualify to charge cannabis operators as an impact fee. (Jeff Barton, the CEO of Bountiful Farms, said the company brought the new guidelines to the town to try to amend the agreement with Natick. Bountiful Farms submitted a new host agreement to the commission and is waiting for approval.)
“I think the CCC is aware of the [host community agreement] challenges and they are trying to do what they can within the law to assist, but there is nothing within the commission’s arsenal that would allow any kind of substantial pushback to a non-cooperative municipality,” said Michael Ross, the co-chair of the Cannabis Practice Group at Prince Lobel. “At some point, the Legislature will have to address the larger issue with regards to the HCA when there are bad actors from the municipalities. A company seeking their HCA can be stonewalled, and in those instances, there is no recourse.”
David O’Brien, the president of the Massachusetts Cannabis Business Association, a trade group for industry professionals, said that the guidelines are “two years too late” and still lack enforceability. Municipalities, he noted, can still choose to completely ignore the commission’s guidelines.
“The only person that the CCC has leverage over is the licensed cannabis operator, so the agency says to the operator, ‘You need to go to your community and make them be compliant,’” said O’Brien. “Well, how do they do that? [The CCC says:] Show them this guidance. [The operator says:] What if they don’t want to do it? [The CCC says:] We can’t help you.”
In the meantime, the commission has given extensions of up to a year to companies for their license renewal. But now, more than 60 companies are bumping up against the end of that grace period without compliant host community agreements.
“Those licensees are in a position where they have to make some decisions and are a little bit under the gun to finish their licensing process and submit a compliant HCA as part of that,” Kajal Chattopadhyay, the commission’s general counsel, said in January. “It seems like we are getting notice of a new licensee being impacted on a daily basis. The number is growing.”
On February 13, the commissioners voted to grant licensees yet a longer total extension of 600 days so that those companies caught up in conflict with their towns over host community agreement compliance wouldn’t have to shut down their operations.
“We don’t want to see anyone have to shutter their doors because of this,” Roy said during the February meeting. “I’ve met personally with people who are quite frankly terrified because they need a compliant HCA to do business. Unfortunately, there are still communities that aren’t fully recognizing what I see, in my opinion, as the intent of the [2022] law. At some point, the courts will opine on this, but short of that, I’m relieved that we are doing something to help folks in the interim.”
Ross said the Legislature should get rid of host community agreements entirely. The industry is struggling right now with the falling price of cannabis and the fact that operators can’t get bank loans because of federal law, he added. The process of getting a host community agreement can be time-consuming and expensive for operators who are barely getting by.
“The larger question is whether or not these host community agreements are needed at all,” said Ross. “What practical purpose do they serve to the business or the municipality?”
This article first appeared on CommonWealth Beacon and is republished here under a Creative Commons license.
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