The Massachusetts Cannabis Control Commission is facing a growing backlash over its recent decision not to crack down on excessive payments from marijuana companies to municipalities — but with state legislators unlikely to force the commission’s hand any time soon, observers say, the controversy seems destined to end up in court.
The panel on Thursday voted 4 to 1 against a proposal by Commissioner Shaleen Title to review the so-called host community agreements every marijuana business must sign with its host city or town.
Under Title’s plan, the commission would have rejected license applications from companies whose agreements violate a state law capping payments under such agreements at 3 percent of the company’s annual revenue and limiting their length to five years.
The limits are intended to prevent municipal shakedowns like those seen under the state’s medical marijuana program and make it affordable for smaller businesses to join the booming pot industry.
The other commissioners shot down the idea, however, saying state law doesn’t clearly grant the commission the authority to review the agreements, and that doing so could invite lawsuits and further delay the debut of sales of recreational marijuana. Instead, the agency will consider asking the Legislature to pass a new, more explicit law.
But critics — including the two legislators who oversaw last year’s revisions of the voter-approved marijuana legalization law — say the vote is a major setback to the state’s efforts to give a shot to local entrepreneurs and communities disproportionately affected by the war on drugs.
And, they said, the commission’s vote practically invites marijuana companies to sue cities and towns that ask for extra money.
“The law is clear and [the commission’s] authority is clear — they’re just choosing not to do an important step of the licensing process,” said state Representative Mark Cusack, cochairman of the Legislature’s marijuana policy committee. “They’re almost guaranteeing lawsuits by knowingly allowing illegal host community agreements.”
Cusack lamented the prevalence of questionable host community agreements; a Globe review published last week found that all the agreements tied to the 19 provisional licenses issued so far by the commission contained apparent violations of the legal caps.
He noted that the Legislature allowed municipalities to charge fees equal to 3 percent of revenue plus a 3 percent tax on retail pot sales — “but it’s still not enough.”
State Senator Patricia Jehlen, the committee’s other cochair, added she was concerned that “small, local companies that can’t match the offers of large out-of-state corporations [to municipalities] will also lack the resources to bring suits.”
Cusack implied the Legislature could slash the agency’s budget if it doesn’t work more closely with lawmakers, saying “nothing’s automatic” when it comes to funding the independent commission.
Still, he conceded it’s unlikely lawmakers would consider a measure clarifying the commission’s authority until the Legislature formally reconvenes next year. Even then, Cusack said, there may be little appetite to take up the controversial issue.
Municipal attorneys had heavily lobbied the commission to drop any oversight of the contracts, arguing the agency should not interfere in negotiations between cannabis operators and local officials and that the caps do not apply to donations and other payments sought by municipalities — or offered by marijuana companies.
They also said it was unfair to criticize municipalities that have opened their doors to cannabis companies when others have banned them.
The commission declined to comment. At the meeting last week, chairman Steve Hoffman said the debate was proof the law is unclear.
But the commission’s decision has drawn a chorus of criticism, including from members of the state Cannabis Advisory Board, which met Tuesday.
“The lack of action on host community agreements, and what we really see as flagrant violations of unambiguous provisions of the law, was very frustrating, to say the least,” board member and businesswoman Shanel Lindsay told commission officials at the meeting. The vote threatened to “stamp out small businesses in the cannabis space,” she added.
Peter Bernard, leader of the Massachusetts Growers Advocacy Council, a coalition of small-scale marijuana farmers, predicted in a letter to the commission that lawsuits could “bring the whole licensing process to a grinding halt” if a court ruling invalidates a host community agreement approved by the agency.
Adam Fine, an attorney for the marijuana law firm Vicente Sederberg, said lawsuits over the question were inevitable.
“If everyone punts on the issue — lawmakers aren’t dealing with it, and the commission isn’t dealing with it — now we’re looking at the remedy of last resort, which is the court,” Fine said. “For towns to consistently violate a law and think there isn’t going to be litigation is naive.”
Perry Bailes, a founder of Wicked Frosty Farms, is working to open a cultivation facility on the North Shore. Noting that the commission has set unusually low fees at the state level, he called the agency’s vote puzzling, because it seems likely to encourage municipalities to ask for more and more money.
“When you look at the landscape now, it’s all these multimillion-dollar conglomerates and holding companies,” he said. “It is absolutely terrifying. I don’t mind competition . . . but I’ve got to have a chance in the first place.”