Towns Protest New Limits On Fees They Can Collect From Cannabis Companies

New Massachusetts regulations prevent municipalities from abusive community impact fees via Host Community Agreements, but some cities aren’t ready to lose their cannabis cash cows

At a Cannabis Control Commission hearing in September, Athol Town Manager Shaun Suhoski showed up to testify about Host Community Agreements. Specifically, he was there to warn commissioners that with the direction they were headed in, the rewritten HCA language could spur “600 lawsuits.”

An extensive rewrite of rules governing host community contracts was set in motion last year, when state lawmakers passed An Act Relative to Equity in the Cannabis Industry (Chapter 180) requiring the CCC to draft new regulations that, among other changes, improve municipal transparency and accountability. The proposed tweaks, which were first presented at a commission meeting in July, included a requirement for host communities to only assess so-called “impact 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 businesses predetermined amounts, as many have done since pot shops first opened.

At the September hearing, Suhoski said he had heard concerns from municipal leaders around the state “that rules are coming into effect which would affect our contracts which were negotiated in good faith and many times with corporate interests.” Critically, he added that his town’s attorneys don’t believe the intent of Chapter 180 was for HCA rule changes to be retroactive: “We are very concerned looking at the draft regulations that all of these contracts which would have sunset in five years anyway under the prior law now will be subject to a state agency review to comply with new rules.”

Ali DiMatteo, a legislative analyst with the Massachusetts Municipal Association, also testified against “language in the regulations subjecting hundreds of existing HCAs retroactively.” In the end, though, the likes of DiMatteo and Suhoski were steamrolled by the process. For years, cannabis companies have complained of abuse and even extortion at the hands of their hosts, but with the final rewrites of the HCA rules, which were promulgated into state law this week, cities and towns will no longer be able to take total advantage of businesses in their borders.

“Commissioners and staff worked tirelessly for months to revise our regulations—driving a transparent process and listening to feedback from diverse constituents, convening numerous public meetings, and making thoughtful changes,” Acting Chair Ava Callender Concepcion said in a statement on Oct. 30. “I am grateful to our partners in the Legislature and in the Executive Branch for entrusting us with the authority to move the agency and industry forward and am proud of the final product.”

Out in the towns, though, hostility was building up before the changes came down. Companies across the commonwealth have made more and more noise about unreasonable HCA requirements and the reluctance of municipalities to play by the rules, including with a suit filed in Massachusetts Superior Court by Caroline’s Cannabis. The first woman-owned recreational cannabis shop in the commonwealth, Caroline’s contends that officials in the town of Uxbridge, where it operates one of its two retail shops, haven’t justified via actual documentation the $90,000 in quarterly fees they’re collecting.

In the Merrimack Valley, Stem Haverhill filed suit against its host city in 2021. They paid nearly $900,000 in community impact fees in their first three years of operation, and sued to stop paying until Haverhill shows how the money it’s collecting is used to offset the impact of hosting their business. A judge denied a preliminary injunction which would have allowed Stem to stop making payments, or to put their payments into an escrow account until the legal matter is settled. A trial is scheduled for next February in Essex County Superior Court; in the meantime, other owners from around Mass are watching the case closely. Haverhill also elected a new mayor this week, which could alter the case if the city adjusts its position.

Out in Western Mass, Berkshire Roots is suing Pittsfield. And on the South Shore, Rockland Town Administrator Doug Lapp vented to the Patriot Ledger last week that the new regulations “effectively ‘move the goalposts’ after the game has started.” “My fear has come true,” he said. “I can’t express enough how outrageous I think it is that the contracts that were entered into voluntarily by both parties … can now be retroactively changed. It’s simply outrageous. But the law’s the law.”

Lapp told the paper that Rockland, which has three operational dispensaries, “might end up waiving the community impact fees altogether rather than spend the time and resources to document and calculate costs incurred through each dispensary.” “It might cost us more than we’re going to get by following this new methodology, so we’ll have to look at that,” he said. But while that town of 20,000 people on the South Shore may not fight back, it’s likely that others will.

Nicholas Obolensky, a Rhode Island-based attorney who has worked with several applicants in Mass, told the CCC in September that HCA rule changes should be retroactive, saying “almost all of my clients have been over a barrel.” Even in cases where municipalities were supposed to account for impact fees per their agreements, Obolensky noted, “I have been routinely pushed back on to provide waivers if the towns need to quantify or document its costs.”