Mass Cannabis Regulators Propose Changes For Host Community Agreements

“Cities and towns have created their own barriers for these businesses. … A lot of folks have been blocked at the municipal level.”

The Massachusetts Cannabis Control Commission released proposed regulatory changes to keep better checks on Host Community Agreements that have allowed cities and towns to treat local operators like ATMs.

State law requires prospective cannabis operators to negotiate an HCA with their host municipality. In part, this allows communities to recoup any additional costs that local governments could incur as a result of allowing a cannabis business to operate. Often these deals include stipulated fees that companies must pay to towns and cities, which leaves room for abuse by local governments eager to fill their coffers.

Last year, state lawmakers passed a comprehensive reform bill requiring the CCC to draft new regulations that, among other changes, improve transparency and accountability among municipalities. The new draft regulations, which were presented at a public meeting of the commission on Thursday, propose mandating that the CCC reviews every HCA, and that host communities can only assess fees based on actual costs incurred as a result of the operation. Municipalities would also be limited to collecting no more than 3% of gross revenue, and would not be allowed to charge predetermined amounts in fees.

“It’s important that the terms of these agreements are fair and equitable,” Commissioner Kimberly Roy said during the meeting which lasted for more than five hours. “Host communities may also no longer use community impact revenue for attorneys’ fees and judicial disputes. They may only be used to offset actual costs.”

Former Fall River Mayor Correia was convicted of extorting cannabis vendors for approvals they needed to operate, among other crimes

HCAs have long been a point of contention for operators because they theoretically allow municipalities to mandate annual fees from cannabis companies. Those worries infamously came to a head in 2019, when former Fall River Mayor Jasiel Correia was indicted for extorting campaign funds from aspiring cannabis operators.

Since Correia’s fall, companies including Happy Valley have argued that their hosts are overcharging for impact fees without legitimizing the amounts. In Haverhill, Stem took city hall to court for what it characterized as excessive impact fees. And Caroline’s Cannabis, which was one of the first adult-use dispensaries to open in the state, recently sued its host community Uxbridge for collecting impact fees without substantiating those costs.

CCC Commissioner Nurys Camargo suggested that many communities have made the licensing process too burdensome with excessive fees: “Cities and towns have created their own barriers for these businesses. … A lot of folks have been blocked at the municipal level.”

At Thursday’s meeting, commissioners ultimately settled on convening again in two weeks to hold a vote that could initiate these regulatory adjustments.

“We had hoped to have a conversation today about Host Community Agreements, and then have a vote,” CCC Chair Shannon O’Brien said. “The problem is because of the open meeting law, we could not disseminate the proposal in advance of this meeting. It is my intent that we would vote on Monday, but it is not necessarily what we may be comfortable doing.”

If and when their initial vote finally passes, it would not automatically change the regulations, but would rather start the official process by sending the approved changes to the secretary of the commonwealth. The regulations would then need to be vetted through either a public hearing or over a specific time period for public comments. Based on that feedback, the CCC would then go back to make any additional tweaks before voting on a final approval.

Upcoming regulatory changes also include social consumption rules and new rules to strengthen the Social Equity opportunities at the municipal level. All three sets of changes are expected to be discussed at the CCC’s July 27 meeting.

“This is an ongoing process,” O’Brien said. “What is being released today is the first draft.”