When Massachusetts lawmakers passed a package of reforms to the state’s marijuana business laws over the summer, their intent seemed clear: To crack down on municipalities charging cannabis operators unjustified “impact” fees, which are ostensibly meant to offset the negative effects of a marijuana business.
But now, with the law scheduled to take effect next week, there is widespread disagreement over its implementation — and a likelihood that many cities and towns will for the time being continue to collect impact fees that exceed the new legal limits.
A few communities have even stopped approving new cannabis facilities until state regulators provide guidance.
“The law has had an ironic chilling effect, because no one knows what to do and no one wants to be the municipality that takes less money than everyone else,” said Lesley Hawkins, a lawyer at Prince Lobel who previously managed the Boston Cannabis Board. “Every lawyer in marijuana got calls the day that legislation was signed from clients wanting to go back and renegotiate their [local fees] right away . . . but I don’t think we’re going to see much change in the near future.”
The confusion stems in large part from the new law’s conspicuous silence on the status of hundreds of existing “host community agreements,” the contracts every marijuana firm must negotiate with local leaders before applying for a state license. Faced with pressure both from municipalities to explicitly preserve existing deals and from operators to reform them, the state Legislature did neither, essentially punting the question to the state Cannabis Control Commission.
Millions of dollars that have been flowing into local budgets across Massachusetts hinge on the agency’s answer; an industry-backed analysis earlier this year found licensed pot companies have paid cities and towns over $53 million in impact fees, with the money going toward a variety of initiatives, such as repaving roads and youth anti-drug programs.
Yet the commission is offering little guidance as it enters the year-long period lawmakers have given its five members to set a clear standard and process for reviewing the agreements. In a statement, a spokeswoman said operators and municipalities should consult their lawyers about the meaning of the new statute, while pledging that the commission would seek extensive input as it implements the reforms.
In the meantime, some lawyers for cannabis operators are advising clients to begin withholding fee payments, citing a provision in the law that allows any marijuana company to sue its host municipality and recover fees and legal expenses if local officials cannot list specific harms.
Other attorneys, however, believe the new limits will be enforced only when a company applies for a new state license or the annual renewal of an existing one. Their clients are resigned to continuing to pay impact fees of up to 3 percent of their annual revenues — and sometimes even more, in the form of charitable donations and police details — until the commission finishes its work.
“There’s a strong argument that you shouldn’t pay until you have a compliant agreement,” said Adam Fine, an attorney for cannabis law firm Vicente Sederberg. “But whether or not clients actually want to do that is another question. They value their relationships with their municipalities, and there’s always a hesitancy to rock the boat.”
Municipalities, too, are divided in their interpretation.
A handful are already rewriting their host community agreements. The Boston Cannabis Board, for example, voted in October to stop imposing a 3 percent impact fee, a change the city said in a statement “is being made to come into compliance with state law.” And officials in Taunton last week approved a host community agreement for a new marijuana processing facility that omits the city’s earlier 3 percent impact fee, raising hopes among existing operators there that they can also stop paying.
“If we do impact the city in some way and they give us that specific breakdown, we’re more than willing to pay the cost,” said Philip Smith, the cofounder of edibles manufacturer and delivery firm Freshly Baked, which he said paid Taunton around $60,000 in impact fees last year. “But it’s really expensive to run a cannabis business, and just giving money away to municipalities is burdensome.”
Many local governments appear reluctant to back down, however. Geoff Beckwith, the executive director of the Massachusetts Municipal Association, suggested that agreements signed before the legal change may be entirely exempt.
“The state can’t interfere with existing contracts,” Beckwith wrote in a brief statement, adding, “attempts by the [cannabis commission] to do so would likely end up in court.”
Some communities have frozen their approval processes since the new law passed, citing uncertainty over host community agreements and another provision that requires cities and towns to consider equity in their local pot licensing schemes. They include Natick and Boston, which has not signed a host community agreement in several months. (Boston officials said last week they would resume doing so shortly.)
Blake Mensing, a marijuana attorney who is also applying for a retail license near South Station, said even Boston’s relatively brief pause was painful, costing his company tens of thousands of dollars in rent on an empty storefront. Still, he praised the city for proactively dropping its fees and said other communities should follow suit, arguing it was never legal for municipalities to generate revenue from a fee intended only to recoup demonstrable costs.
“It might seem reasonable for municipalities to say, ‘let’s wait and see,’ but that misses just how clear the law is and how expensive it is to keep these businesses afloat while you’re going through the application process,” Mensing said. “A six-month delay can completely kneecap a small business in this industry.”
Dan Adams can be reached at email@example.com. Follow him on Twitter @Dan_Adams86.