“Communities need to immediately return all money that wasn’t spent on reasonably-related costs.”
Nearly two years ago, Caroline’s Cannabis “filed a lawsuit in Worcester Superior Court seeking an order requiring the Town of Uxbridge to produce documentation to substantiate the community impact fee it has been collecting” from their business, the first woman-owned recreational cannabis shop in the commonwealth.
The lawsuit stemmed from our state’s imperfect Governing Adult Use Marijuana Act. As the law was initially written, adult-use as well as medical establishments were required to secure Host Community Agreements (HCAs) with municipalities where they planned on setting up shop. The Act also allowed cities or towns to impose an optional local tax of up to 3% of gross sales, as well as an impact fee to recoup expenditures related to the business they are hosting.
The catch: municipalities had to actually produce receipts. And since many towns across the state have refused to show how they have shouldered these costs, several companies have sued their hosts.
Caroline’s Cannabis was among the first to make that move. In April 2022, they filed their lawsuit claiming “that there have been no impacts or costs to the Town of Uxbridge and, in the absence of documentation of costs, the Town cannot collect the impact fee. In its Complaint, Caroline’s Cannabis alleged that it requested the documented costs and the Town failed to provide any relevant documents as required by [state law].”
Since Caroline’s first brought their suit, the tables have tipped in their favor. In November 2022, state lawmakers passed a law requiring the Cannabis Control Commission to rewrite the section of the law that governs HCAs, and last year the CCC finalized those rules. Among them, the new regulations clarify that towns and cities have to document expenses incurred if they expect to get paid.
With all those changes swirling, this week Caroline’s Cannabis announced that on Dec. 29, 2023, “Uxbridge settle[d] and refund[ed] the majority of Caroline’s Cannabis’s impact fee payments … in what is believed to be the first of its kind in the Commonwealth of Massachusetts.” Specifically, “Caroline’s Cannabis is being refunded $1,171,633.60, which is 80% of the payments made.”
The Massachusetts Cannabis Business Association (MassCBA) wrote in a statement: “For years, Massachusetts cities and towns have been illegally collecting excessive ‘community impact fees’ from local cannabis business operators without transparent accounting and little oversight. In response to a new model host community agreement issued by the state’s Cannabis Control Commission that makes it clear these fees are illegal, the MassCBA today called on communities across the state to immediately return unjustly-collected cannabis impact fees to affected businesses.”
“For years, communities have been treating cannabis community impact fees as piggy banks with zero accountability and little transparency,” MassCBA President and CEO David O’Brien said. “The legislature has repeatedly made it clear that municipalities cannot legally collect fees that are not spent on reasonably-related municipal costs, but cities and towns are holding on to millions of dollars that were unjustly collected over the past few years. Communities need to immediately return all money that wasn’t spent on reasonably-related costs.”
According to the Mass CBA, “a 2022 analysis of cannabis community impact fees in a sampling of 54 cities and towns found that the state’s municipalities had collected more than $50 million from those communities alone. Based on the size of the state’s legal cannabis market, the total amount of community impact fees collected since legalization could be as high as $165 million.”
“After so many municipalities abused the HCA process for years, it’s gratifying to see a fresh start initiated by new guidance from the CCC and some cities and towns even reversing course and returning some of the excessive fees,” former Cannabis Control Commissioner Shaleen Title said in a statement. “The small businesses who stood up for themselves and led this change should be commended.”
“I’m happy that we were able to come to a mutual agreement,” Caroline’s Cannabis owner Caroline Frankel said. “Unfortunately, it took litigation for the Town to recognize there are no known impacts, and to resolve the case. This case should help other operators and municipalities to work out an agreement.”
In 2021, Northampton, where NETA opened the first rec dispensary in the state in 2018, announced that it would stop assessing impact fees moving forward. And in November 2022, Boston became the first municipality in the state to stop collecting impact fees and return the money that they collected via HCAs up to that point.
