Cannabis impact fees, host agreements get review

Date: 2/6/2024

The Cannabis Control Commission, or CCC, recently completed a public comment period on a model host community agreement, the contract that governs the relationship between a town and a cannabis facility. The CCC also enacted more stringent requirements for the fees charged for impacts on the community.

Brian Domina, town administrator in Whatley, drafted a host community agreement, or HCA, for his town after new regulations for fees were announced last fall. He explained to the Whately Selectboard the industry lodged complaints that municipalities were asking for too much in HCAs.

“Towns around Massachusetts had all kinds of fees they’d ask for,” Domina said. “The industry took exception to that and pushed hard on the Legislature to rein in those types of fees.”

The model HCA proposed by the CCC suggests expenses that may qualify as reimbursable. Those include security details and traffic control, substance abuse education, inspection services, infrastructure wear and tear and unforeseen administrative costs. The model HCA leaves open the possibility for other charges, allowing for some situational flexibility.

The settlement of a recent lawsuit in Uxbridge suggests the complaints of cannabis operators is justified. Caroline’s Cannabis sued the town to receive evidence the fees Uxbridge charged were directly applicable to any costs incurred by the town through the operation of the outlet. The town agreed to return $1.17 million in impact fees and to retain about $230,000.

The Cannabis Business Association reported the city of Boston returned $2.86 million in impact fees to nine outlets in Nov. 2022. According to media reports, Northampton stopped collecting fees when the balance of those fees reached $2 million.

David O’Brien, president and CEO of the Massachusetts Cannabis Business Association, found through research that many municipalities charged 3% of gross annual sales as an impact fee, the maximum allowed, regardless of the costs related to a cannabis business.

“For years, communities have been treating cannabis community impact fees as piggy banks with zero accountability and little transparency,” O’Brien said in a statement. “Municipalities cannot legally collect fees that are not spent on reasonably related municipal costs, but cities and towns are holding onto millions of dollars that were unjustly collected over the past few years.”

The association’s research revealed municipalities had collected about $50 million in excess impact fees, with little or no transparency.

One point the new regulations clarify is what expenses constitute a legitimate cost. Another complaint was whether the CCC is allowed to review HCAs. Under the new regulations, the commission is empowered to oversee those agreements.

Tim Caputo, press secretary for the CCC’s Worcester office, provided information on the regulations adopted by the CCC in 2019 that require dispensary operators show they requested evidence from municipalities justifying reimbursements, receipts and bills for the expenses incurred. The difficulty? Until now, municipalities were not required to furnish those receipts and bills.

Domina’s discussion with the Whately Selectboard suggested the new regulations generate new questions. Will every expense require a receipt? How are impacts to roads and emergency services calculated? What process will the CCC follow in vetting submitted receipts? Cannabis companies will submit the documentation, but when will municipalities receive word on whether a fee is reimbursed? If a fee is rejected, what is the appeals process? How long will municipalities have to wait for reimbursements?

Some questions will be answered in the final versions of the HCA and impact payment regulations. In the meantime, Whately Selectboard Chair Joyce Palmer Fortune commented the town created a bank account to hold payments. Accepting payments, however, may cause problems in the future.

“Didn’t we create a separate account?” Palmer Fortune asked. “[And] do we collect them … because whatever we do has to be certified and by then we’ve already spent the money?”

Selectboard member Fred Baron saw the inadvisability of collecting monies that may have to be given back.

“I think we should not look to collect any impact fees until we know what’s covered,” Baron said. “We’re going to have to wait a couple of years to see what the CCC will allow and what they won’t.”

The public comment period on the CCC’s proposed model Host Community Agreement ended on Jan. 31. The agreement can be found at Draft-Model-HCA-Public-Comment.pdf (masscannabiscontrol.com).