These Two Words Could Shift The Dynamic Between Cannabis Companies And Host Cities

“Hopefully this gives host communities and licensees some clarity” on Host Community Agreements and Community Impact Fees in Massachusetts

Earlier this month, Massachusetts Cannabis Control Commission members announced long-awaited proposed changes to state regulations around Host Community Agreements. The draft came out of an agency working group that studied the nature of HCAs and Community Impact Fees that cities and towns collect from cannabis businesses in their borders, and were especially anticipated by operators who feel they have been taken advantage of by bloodthirsty municipal hosts.

The closely watched rewrite was set in motion last year, when 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 first presented at a public meeting of the commission on July 14, 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 at the July 14 meeting. “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.”

In putting these safeguards in place, regulators drilled down on the definition of two critical words: “Reasonably Related.” Which, for the purpose of preventing cities and towns from gouging, the proposed changes define as “a demonstrable nexus between the actual operations of a Marijuana Establishment or MTC and an enhanced need for a Host Community’s goods or services in order to offset the impact of operations.”

“This has been the million-dollar question since the beginning of HCAs,” Roy said at the July 27 follow-up CCC meeting, which served as a public drafting session ahead of the actual vote on proposed changes at a subsequent July 28 meeting (all present members voted in favor). “It’s right in the statute that the Community Impact Fees shall be reasonably related to the costs imposed upon the municipality by the operation of the Marijuana Establishment or medical Marijuana Treatment Center as documented [pursuant to the law].”

“We spent a lot of time [on ‘Reasonably Related’],” Roy added. “Hopefully this gives host communities and licensees and prospective licensees some clarity.”

Asked to break down a line that reads, “Fees customarily imposed on other non-marijuana businesses operating in a Host Community shall not be considered Reasonably Related,” Roy explained: “Let’s say trash pickup has a fee, and that’s a customarily imposed fee for everyone. So why would a marijuana establishment be treated differently or held to a separate different standard for trash pickup in their HCA or with their impact fee?”

Commissioner Bruce Stebbins described the added language as “trying to level the playing field.” While Commissioner Ava Callender Concepcion expounded, “It’s to make sure that [licensees] are not paying double costs. … The idea is that the Community Impact Fees are fees associated with the unique operation of a [cannabis business]—things that are, because there is this type of operation, there are additional fees and costs [incurred] by host communities.”

Other new wording in the draft includes:

  • The Commission shall review and approve each HCA as part of a completed license application and at each license renewal.

  • No Host Community may impose an unreasonable condition or a term that is Unreasonably Impracticable in an HCA.

  • The parties shall ensure that HCAs include a statement of all stipulated responsibilities between a Host Community and a License Applicant or between a Host Community and a Marijuana Establishment.

  • The parties shall ensure that HCAs provide clear, specific terms regarding a Host Community’s assessment of a CIF if applicable, including, but not limited to, a provision requiring a Host Community to transmit its invoice of alleged impact fees to a Marijuana Establishment within one month of the anniversary of a Marijuana Establishment’s final license date. (There was talk of changing the word “alleged” to “proposed,” “documented,” or something else that “captures the claim assertion.”)

  • A Host Community shall not attempt to collect impact fees relating to any operations occurring prior to the date a Marijuana Establishment is granted a final license by the Commission.

  • No License Applicant, Marijuana Establishment, or Host Community shall enter into an HCA that includes a promise to make a future monetary payment, in-kind contribution, or charitable contribution.

The draft also includes HCA and CIF-related additions relative to Social Equity and Economic Empowerment applicants, as well as regarding when the CCC would require cities and towns to get in line: “Host Communities must adopt local rules or bylaws to comply with this section on or before May 1, 2024.”

Friday’s favorable vote on the above proposed adjustments and others does not automatically change the regulations, but rather starts the official process in which the approved changes will be sent to the secretary of the commonwealth. The regulations will 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 will 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 Social Equity opportunities at the municipal level.

“Good job on the HCAs,” Camargo said to fellow commissioners and CCC team members who worked on that piece. “I know it wasn’t easy, but I can tell you thought it through. It was thorough.”