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Marijuana sales help Pittsfield save for rainy day

Recreational marijuana sales have been a boon to Pittsfield’s ability to stash money away in case of an emergency or downturn, a strategy that a state official said Thursday could be useful in other communities.

Through the first two quarters of fiscal year 2020, Pittsfield brought in $448,000 in revenue from the two adult-use recreational dispensaries that operate within the city. A third will likely open soon, which could push the total figure close to $1 million per year, Mayor Linda Tyer said Thursday.

Half of that money goes directly to Pittsfield’s general stabilization fund, which budgeters often refer to as a “rainy day account.” As a result, pot sales could lead the account to grow $500,000 a year — a dedicated focus on savings that city officials said they had not been able to execute before the stores opened in 2019.


“We’re not a community that typically raised and appropriated money to go into the stabilization account,” Pittsfield Finance Director Matthew Kerwood told the Municipal Finance Oversight Board at a Thursday meeting. “We’re looking to grow our reserves, and we saw this as a way to do that with new revenue we’ve never seen.”

“That’s the first time,” Kerwood added, citing his past experience alongside Tyer as city councilors. “I don’t ever remember us making dedicated deposits or investments into our stabilization account.”

Under state law, adult-use marijuana is subject to the state’s 6.25 percent sales tax and a 10.75 percent state excise tax. Cities and towns can also choose to impose an additional 3 percent excise on establishments within their borders to help fund local needs.

In Pittsfield, revenue from the local tax is divided into three dedicated uses: 50 percent toward the main stabilization fund, 25 percent for the general fund, and another 25 percent for public works stabilization.


Tyer said the public works funding could help address fleet maintenance issues or other needs as they pop up.

“We have many, many demands in terms of public works when it comes to stabilizing our neighborhoods, so having that resource from this new revenue we felt would be an appropriate use for long-term planning,” Tyer said.

In December, officials said state marijuana tax collections have been “a little bit shallow” in the first portion of fiscal year 2020 and will likely end up between $93 million and $173 million. However, they said that figure should grow to between $102 million and $189 million in fiscal year 2021.

State officials have cautioned local budget-writers against unrealistic expectations for marijuana revenue and suggested they do not include the new figures in operating budgets. In March, the Department of Revenue’s Division of Local Services said cities and towns would need to submit written evidence to accommodate revenue estimates from cannabis sales because the streams “are new and there is no historical information available to help with forecasting future revenue.”

Mary Jane Handy, Bureau of Accounts director for the Division of Local Services and a member of the MFOB, said Thursday that the department still believes “budgets need to be done based on conservative estimates.”

During the meeting, she praised savings approaches like the one taken by Pittsfield as a viable strategy while suggesting representatives from Webster, which has one retail host agreement in place and another in the works, decide how to direct the money from the forthcoming 3 percent tax revenue.


“It’s a great revenue stream for stabilization and to do other things,” she said.

Lynn, the third community that appeared before the board on Thursday, just saw its first retail marijuana establishment open in October but has only brought in a few thousand dollars in revenue so far, which will be directed to its general fund, Lynn Chief Financial Officer Michael Bertino told the News Service.

Cities and towns go before the board to request the state issue bonds — which it can do with a better rating than most local governments — on behalf of the communities for capital projects and larger expenses that cannot be addressed by annual operating budgets. The state then withholds a portion of local aid every year to cover borrowing payments.

The board unanimously approved Pittsfield’s request for $17.3 million in bonds for a range of projects, including reconstruction of Tyler Street, purchase of an empty former gas station, vehicle acquisitions, and more. The board also authorized $9 million in bonds for Lynn, set to be used on other bond refunds and purchase of heavy equipment vehicles, and $5.05 million in bonds for Webster for work on a water filtration plant and first responder vehicles.