Fall River will reduce payments it seeks from cannabis businesses

Northeast Alternatives is currently a medical marijuana dispensary in Fall River.John Tlumacki/Globe Staff

Bowing to pressure from the marijuana industry and state lawmakers, Fall River is preparing to reduce the size of payments it seeks from local cannabis operators in exchange for granting them permission to open in the city.

Joseph Macy, Fall River’s top attorney and a former judge, said in an interview Wednesday that city officials are rewriting controversial “host community agreements” they had negotiated with local marijuana stores and cultivation facilities.

The deals had called for recreational pot companies in Fall River to hand the city 4 percent of their annual revenue; now, those payments will drop to 3 percent of annual revenue, the maximum allowed under state law. An additional $50,000 onetime fee will remain intact.

While local marijuana executives acknowledge the change seems relatively minor, it appears to be the first time a Massachusetts municipality has retreated from the financial demands it made of such firms. Critics, including industry attorneys and several Massachusetts legislators who drafted the state marijuana laws, have accused local officials across the state of routinely shaking down pot companies for payments far in excess of the legal limit — a practice they fear will drive up prices, sustain the illicit market, and allow deep-pocketed companies to buy their way into town while elbowing out smaller operators.

“The intent of the law is clear — there’s no wiggle room in it,” said Chris Harkins, founder of the Fall River marijuana dispensary Northeast Alternatives, one of about six businesses in the city that should benefit from the new contracts.

Most other Massachusetts municipalities have justified payments above the 3 percent ceiling as separate “development” fees or mandatory “donations,” arguing the cap applies only to a specific fee meant to offset the local impacts of a marijuana business.

Fall River, on the other hand, simply asked for 4 percent. Detractors have said for months that the arrangement is blatantly unlawful, and repeatedly cited the city as a prime example of municipal excess.

Also fueling discontent was Macy’s statement earlier this year that Fall River officials were “aware” of the 3 percent limit but “weren’t sure of its enforceability or how it would transpire.”

That remark prompted state Senator Patricia Jehlen, who cochairs the Legislature’s committee on marijuana policy, to scoff: “It’s certainly a creative reading of the law to think that 4 and 3 are the same number.”

Even now, Macy insists a 4 percent fee is essentially legal, since the state Cannabis Control Commission voted 4 to 1 in August not to review the contents of host community agreements for compliance with state law before issuing companies recreational marijuana licenses.

(The agency has said it will work with the Legislature to clarify its authority over the contracts.)

Nonetheless, Macy said, he would reduce the fee in response to the backlash.

“To keep everything on a level playing field and avoid any future controversies, we’re willing to do it,” Macy said. “The questions caught up with us.”

Asked whether the additional $50,000 payment was legal, Macy said that no operators in Fall River have complained about it.

Harkins, whose firm pushed for the contracts to be revised, said that while he believed Fall River had negotiated the deals in good faith, “I don’t think they really understood or even looked very closely at what the legislation says.”

The 4 percent fee originated in contracts Fall River signed earlier with medical marijuana dispensaries, which are governed by a separate law and not subject to the 3 percent cap.

Rather than draft new agreements when those operators sought to expand into the recreational market, Macy’s office earlier this year slightly revised those existing contracts, retaining the requirement that the firms pay a 4 percent fee.

Macy first offered to reduce the fee in a letter sent last week to Northeast Alternative’s attorney.

“While we firmly believe that our recreational marijuana agreements are valid and enforceable,” Macy wrote, “we are unwilling to appear defiant of the rules and regulations of the Commonwealth.”