Proposed Reforms to Local Host Community Agreements in Massachusetts

Burns & Levinson LLP

Burns & Levinson LLP

Earlier this week, the Massachusetts Legislature’s Joint Committee on Cannabis Policy held a virtual hearing on nine proposed bills focused on reforming the approval process of host community agreements (“HCAs”) between municipalities and marijuana businesses licensed to operate in those cities and towns. Massachusetts lawmakers listened to testimony from advocates, former regulators, attorneys, cannabis business leaders, entrepreneurs and others who argued that the existing local approval process gives municipalities undue leverage in HCA negotiations with marijuana establishments.

As a prerequisite to obtaining state cannabis licensure in Massachusetts, marijuana establishments are required to have an HCA in place with the appropriate municipality. HCAs typically include significant fees imposed by cities and towns, which are ostensibly required to offset the impact by the operation of the cannabis business on the surrounding community. Massachusetts cannabis regulations require the community impact fees to be “reasonably related to the costs imposed upon the municipality by the operation of the marijuana establishment.”

Many of the proposed bills in front of the Joint Committee emphasized, in particular, the community impact fees charged by cities and towns in negotiating HCAs with marijuana establishments. A number of the proposed bills centered around further clarifications to ensure that the HCA fees charged by municipalities would not exceed the maximum 3% of a marijuana establishment’s gross annual sales. Moreover, under the proposed bills, the Cannabis Control Commission (the “CCC”) would be granted explicit authority to review and enforce the terms of HCAs.

Testimony at the hearing also sought clarification from the CCC on how community impact fees can be spent by municipalities. A new study, released on the same day as the Joint Committee’s hearing, found that communities often have no plan for how to spend the money they collect from marijuana establishments under HCAs. The report also determined that cannabis businesses have paid in excess of $2.46 million more than required under law.

That study, which was paid for by the Cannabis Business Association and conducted by Dr. Jeffrey Moyer of the McCormack Graduate School of Policy and Global Studies at the University of Massachusetts Boston, reviewed 460 host community agreements between municipalities and cannabis businesses licensed to operate in those cities and towns. Though the fees paid to cities and towns are not supposed to exceed 3% of a marijuana business’s gross annual sales, the report concluded that they often do.

The study recommended, among other things, that the Legislature grant greater oversight authority to the CCC, including the right to review HCAs and establish rules and standards for the use of the funds collected under HCAs.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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