Northampton has become the first municipality in Massachusetts to stop charging local marijuana operators an annual “community impact fee,” after Mayor David Narkewicz said his community has seen few negative effects after years of hosting cannabis companies.
The city has so far collected over $2.6 million in such ongoing, automatic payments, which are typically pegged at 3 percent of a company’s annual revenue — the legal maximum — and are ostensibly intended to offset potential impacts of marijuana operations such as increased traffic or drug use.
Under a new policy announced earlier this month, however, Northampton officials won’t charge local cannabis firms anything unless their facilities impose a specific cost or impact.
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“When the regulations were first put in place and we were negotiating host community agreements, I don’t think anyone knew what the potential impacts would be,” Narkewicz said in an interview Friday. “But now, given more experience, we understand that in most respects these businesses operate like any other business, and none of the impacts they do have lead me to believe they should be treated differently.”
The change, he added, is “an acknowledgement that concerns about the impact of these facilities, which were raised primarily by opponents of legalization, simply haven’t materialized.”
He also said it came from a growing awareness among local officials that community impact fees and other municipal red tape have been an “impediment to smaller marijuana entrepreneurs, in particular equity applicants” who were disproportionately impacted by the war on drugs.
Ironically, Northampton’s new policy more or less reflects the intent of community impact fees in the first place, as the state’s 2017 marijuana law says any local fees must be justified by specific, enumerated impacts and costs, up to a ceiling of 3 percent.
However, in the absence of oversight, nearly every cannabis operator in Massachusetts pays its host community the full 3 percent, and the money is often funneled to municipal programs or local nonprofits with only spurious connections to the impact of pot facilities.
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Advocates and marijuana businesses have complained for years that the requirement to negotiate a host community agreement (with its attendant fees) before applying for a state license is an invitation for shakedowns and corruption, plus a barrier to smaller firms with less capital.
Their arguments gained traction after federal agents in 2019 arrested then-Fall River Mayor Jasiel Correia II for allegedly demanding bribes from applicants for local cannabis business permits; US prosecutors have also convened a grand jury and sought copies of every host community agreement in Massachusetts, amid an ongoing broader investigation into the contracts.
Lawmakers in the Massachusetts House passed a bill last year that would grant the Cannabis Control Commission authority to review the agreements, but the state Senate declined to take it up.
Northampton is one of the few communities in Massachusetts that has kept the community impact fees it collected separate from other revenue, and has so far spent some of its haul improving roads, bike lanes, and sidewalks near the busy New England Treatment Access dispensary. As a result, Narkewicz said the new reduction in fees shouldn’t hurt city coffers during the coronavirus crisis, as officials never stirred that revenue into the city’s general budget and relied on it to pay for staff or programming. (The city will continue to collect the standard 3 percent local tax on recreational marijuana sales, however.)
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Northampton hosted one of the first two recreational retailers to open in the state, and today has three operating pot shops, plus a number of other growing and retailing facilities in the licensing pipeline.
Not surprisingly, Northampton marijuana businesses said they were delighted by the change.
Charlotte Hanna, founder of Community Growth Partners, which is working to open a marijuana cultivation facility in the city, said in a statement, “I applaud Mayor Narkewicz’s initiative to waive the community impact fee, and hope that other municipalities will follow his lead and recognize that the myriad of taxes imposed on cannabis companies and consumers has already yielded an abundance of income for the Commonwealth and local communities.” She added, “it’s time for reform in order to disincentivize illicit market activity.”
Cannabis commission regulations now require pot businesses seeking state license renewals to ask their municipalities for a voluntary report detailing the community impact fees they’ve collected and how the money was spent. Advocates hope the requests, though they often go unanswered, will help prompt other communities to trim or eliminate their fees.
Dan Adams can be reached at daniel.adams@globe.com. Follow him on Twitter @Dan_Adams86.