House passes bill to crack down on municipal marijuana agreements

Cannabis advocates and business owners rejoiced at the news that the House has approved a bill that would crack down on local demands for payments from marijuana companies from host communities.Suzanne Kreiter/Globe Staff

The Massachusetts House on Wednesday overwhelmingly approved a bill that would crack down on local demands for payments from marijuana companies.

The legislation, introduced by Representative Dave Rogers and passed on a 121-33 vote, comes amid a federal investigation into so-called host community agreements, the contracts spelling out payments and other terms that operators must sign with their municipalities in order to win a state license.

It also answers years of complaints by cannabis advocates and license applicants that cities and towns routinely seek more money than allowed by state law, which nominally caps their value at 3 percent of a firm’s annual revenue and their length at five years. Along with other critics, they charge the current system is slowing down the rollout of marijuana shops and freezing smaller, less-wealthy players out of the burgeoning recreational pot market.

If the bill is passed by the Senate and signed into law by Governor Charlie Baker, it would give the state Cannabis Control Commission authority to regulate host community agreements, invalidating provisions that violate the limits. The agency in 2018 said it lacked clear legal power over the deals, and so far has simply verified that every license applicant has signed one. But in January 2019, amid growing evidence of abuses, the commission voted to formally request that the Legislature grant it oversight of the contents of the contracts.

The bill passed by the House would also make clear that any “monetary payments, in-kind contributions, and charitable contributions” count toward the 3 percent cap, and that the five-year term begins when the business opens, not earlier. Other financial obligations that factor into local permitting — explicitly or implicitly — would not be enforceable. The measure would further allow local officials to waive the host community agreement requirement altogether.

“It’s come to light that some host community agreements impose financial obligations that go beyond the 3 percent,” Rogers said on the House floor. “This law makes clear that that is not permissible.”

Municipalities have long insisted the current law allows cities and towns to charge fees beyond the 3 percent cap and require marijuana companies to make charitable donations in exchange for local permits.

The powerful Massachusetts Municipal Association lobbied strenuously against the bill. The group’s executive director, Geoff Beckwith, called it “an overreach that would unwisely interfere with local authority” in a letter to legislators, and accused marijuana industry lobbyists of seeking to “flatten the landscape and remove municipal discretion and flexibility in the negotiation process.” He said other factors, such as “a lack of business and retail experience” and difficulty obtaining capital, are the real reasons smaller, more diverse marijuana outfits have struggled to win local approval.

“Instead of squelching municipal authority to negotiate on behalf of the public interest ... we recommend that policymakers focus on how we can create innovative programs so that small players can get the assistance they need," Beckwith wrote.

However, it appears such concerns were outweighed by other pressures, including the federal investigation by US Attorney Andrew Lelling, a related scandal over bribes allegedly paid by marijuana companies to the former mayor of Fall River, and press coverage of local officials seeking money from marijuana firms for seemingly unrelated matters — such as a requirement in Salem that operators pay an additional 1 percent of revenue annually to fund a feasibility study on a proposed shuttle bus and give $25,000 a year to local charities.

It is unclear how the bill would affect the hundreds of host community agreements already signed across the state. The cannabis commission could require operators to renegotiate the deals before renewing their licenses, or exempt them from the newly clarified requirements.

Regardless, the passage of the bill in the House, which had previously been reluctant to encroach on municipal power, marks a significant political shift in favor of cannabis entrepreneurs and their supporters.

“I am thankful to the leaders and members of the House for listening to our concerns and voting to put a stop to unlawful [host community] agreements,” said cannabis commissioner Shaleen Title. “This is an important first step toward fairness for small businesses.”

House Speaker Robert DeLeo, who last year surprised observers by saying he was unaware of the debate over host community agreements or Rogers’ legislation, characterized the measure as a modest clarification of the cannabis commission’s authority.

“What we heard from some of the folks [was] there was no clarification as to enforcement or [where] they could go if they felt that they were [wronged],” DeLeo said. “This today was meant strictly not so much to reopen the whole discussion or debate relative to marijuana sales, but to clarify the powers that the Cannabis Control Commission has.”

Senate President Karen Spilka did not immediately respond to a request for comment. A spokesman for Baker said the governor would carefully review the legislation if it reaches his desk, adding that he “supports collaboration with local partners, the Cannabis Control Commission, and other stakeholders on the safe and responsible implementation of adult-use of marijuana and on potential opportunities to improve the statutory and regulatory framework.”

In the wake of the Fall River scandal, Baker last fall said he was concerned about a single local official, such as a mayor, wielding unilateral power to award host community agreements. The bill does not reform that aspect of the process, prompting some industry representatives to say it doesn’t go far enough.

“This is a good first step to empower the Cannabis Control Commission with the full authority it needs to enforce the rules at the local level,” said David O’Brien, the president of the Massachusetts Cannabis Business Association. However, he added, “we support a process that treats all license types fairly, particularly small and minority-owned businesses. To ensure the greatest transparency and public trust and confidence in the process, no one person should unilaterally negotiate the host community agreement at the local level.”

Matt Stout and Felicia Gans of the Globe staff contributed to this report.