Massachusetts lawmakers are set to consider new limits on the ability of municipalities to demand fees from marijuana companies, following widespread complaints by businesses, activists, and state regulators that many local officials are unfairly shaking down the firms.
At a hearing Monday, the state Legislature’s joint committee on cannabis policy will take up a number of proposed bills that would tighten the rules around so-called “host community agreements,” the contracts every recreational pot operation must sign with the city or town in which it hopes to open before applying for a state license.
Current state law caps the value of those deals at 3 percent of a company’s annual revenue, for a maximum of five years, and says any payments must be “reasonably related” to the actual costs imposed by the marijuana facility. But many cities and towns have side-stepped those limits, asking for additional payments while arguing the law doesn’t explicitly prohibit them from requiring separate fees or mandatory “donations” to local nonprofits in exchange for local approval.
Critics — including legislators who helped draft the current rules — say such municipal rent-seeking is a key reason that small businesses are struggling to enter the state’s marijuana industry, while larger players who can afford to sweeten the municipal pot are moving ahead. They lauded the cannabis committee’s decision to take up several bills that would ban extra fees, standardize the deals, and impose state oversight of the contracts.
“In a word: finally,” said David O’Brien, the executive director of the Massachusetts Cannabis Business Association. “Three percent means 3 percent, and voluntary contributions should be offered, not asked for.”
Few operators have dared to challenge municipal demands, fearful of souring relations with the local officials from whom they must obtain permits . But advocates fret that smaller operators, especially participants in state programs meant to encourage the licensure of people from communities disproportionately affected by the war on drugs, are simply walking away.
Laury Lucien, an attorney and entrepreneur whose marijuana company has signed host community agreements in Attleboro and Worcester, said the variability of municipal expectations — and demands for up-front payments of $100,000 or more — drastically prolonged the process of finding a home for her business.
“It creates a barrier to moving quickly unless you have a lot of resources,” Lucien said. “I know a lot of people would have gotten discouraged by what we went through.”
The state Cannabis Control Commission voted last August not to review the terms of each host community deal, saying the current law only gives it authority to verify that companies seeking state marijuana permits have signed one.
However, amid growing evidence of abuses, the agency voted in December to formally ask the Legislature for clear power to scrutinize the contracts and deny license applications from companies that agreed to unlawfully large payments or other prohibited terms.
A bill filed by state Senator Julian Cyr and scheduled for discussion Monday would grant the commission oversight of the deals, while another offered by state Representative David Rogers would explicitly outlaw payments beyond 3 percent of a company’s revenue.
“Requesting more than what is statutorily required is a distortion of the marketplace that we would not tolerate in any line of business,” said Rogers, a co-chair of the committee along with state Senator Sonia Chang-Diaz. “It’s about what is fair.”
The Massachusetts Municipal Association, which represents cities and towns, declined to comment. But the group has long insisted that communities have broad legal latitude to negotiate terms with marijuana operators, saying the commission cannot legally “micromanage” voluntary agreements and characterizing industry complaints about fairness as a smokescreen for greed.
Katie Laughman, an attorney at KP Law who represents numerous cities and towns, said a provision in Rogers’ bill making the ban on extra payments retroactive may raise legal concerns.
“Communities that entered into host community agreements with private entities through good faith negotiations would likely be frustrated to see those agreements undone” she said, adding that enforcement of the rule could raise issues of unlawful interference with contractual relationships.
Rogers said he filed his bill before being appointed chair of the committee, and that he would carefully consider feedback from the commission, municipalities, and other stakeholders.
The committee on Monday will also debate proposed legislation that would allow municipalities to more easily opt in to hosting so-called “social consumption” businesses, or pot cafes where patrons could legally buy and consume the drug on-site.