In a case followed by many, a CCC-licensed marijuana retailer has recovered over a million dollars in community impact fees under its Host Community Agreement (“HCA”) with the Town of Uxbridge (“Town”).  In April of 2022, Caroline’s Cannabis, LLC (“Caroline’s”) filed suit in Worcester Superior Court seeking a refund of the community impact fees it had paid to the Town. Caroline’s argued that the Town had failed to maintain and provide required documentation of the costs the Town incurred that were “reasonably related” to the operation of Caroline’s marijuana retailer business, as required by both statute and Caroline’s HCA.

According, to the complaint filed in the case, the HCA between Caroline’s and the Town required an annual community impact fee payment “in an amount equal to three percent (3%) of the gross revenue from [Caroline’s retail operations], as long as the fee is reasonably related to the costs imposed by the town by the operation of the marijuana establishment.” More importantly, state law also has required that any community impact fee collected by a municipality “shall be reasonably related to the costs imposed upon the municipality by the operation of the marijuana establishment” and “shall be documented.”  

The Town was not alone in requiring an annual payment linked to 3% of gross revenue. Indeed, this ubiquitous practice was, in part, the impetus for An Act Relative to Equity in the Cannabis Industry (the “Act”) and the CCC’s most recent regulatory amendments banning percentage-based impact fees and the imposition of any fees not supported by proof of impacts (effective October 2023). The then-existing CCC regulations required a marijuana establishment submit with its renewal application “records of any cost to a city or town reasonably related to the operation of the establishment, which would include the city’s or town’s anticipated and actual expenses resulting from the operation of the establishment.” The complaint alleged that, for years, Caroline’s requested this information and, for years, the Town was unable to provide sufficient detail to demonstrate a reasonable relationship between the fee and Town costs. On that score, the complaint also highlights a September 21, 2020 letter from the Town, which conceded that it was “difficult to provide [such documentation] since the impact of cannabis businesses in Town vary based on their operation.”

Although the recent Settlement Agreement between Caroline’s and the Town was not entered into the docket for the case, the Agreement for Judgment confirms that the parties “wish[ed] to resolve all issues and claims concerning the Litigation” and that “Judgment shall enter in favor of Caroline’s Cannabis, LLC and against the Town in the amount of $1,171,633.60” – which amount is roughly 93% of the amount sought in the complaint. By any estimation, the settlement puts municipalities on notice that they can expect similar claims. Moreover, with the CCC finally empowered to take an active role in policing this previously unregulated practice of billing for and collecting community impact fees, one would expect far more scrupulous recordkeeping and transparency on the part of host communities moving forward. 

But what will happen to the millions upon millions of gross revenue-based community impact fees already paid to cities and towns across the Commonwealth since G.L. c. 94G first took effect in 2017? Will municipalities voluntarily return some of these payments to operators, an approach adopted by the City of Boston in 2022 following passage of the Act, which resulted in nearly $3M being return to licensed operators in the city? Or will operators be forced to follow in the footsteps of Caroline’s and file lawsuits to claw back prior payments? Although the current regulatory climate is more favorable for operators than existed in April of 2022 – for example, there is a new CCC regulation prohibiting HCA provisions discouraging any party from bringing a civil cause of cation or other legal challenge relative to an HCA – these issues remain complex and fact-specific. We would encourage anyone interested in engaging with their host community on reimbursement of impact fees to reach out to us to assist in developing a strategy that is specific to your need and circumstances.