Massachusetts cannabis companies have paid $50M-plus in community fees since 2018
Cannabis businesses based in Massachusetts towns and cities have paid more than $53 million in “impact” fees since recreational cannabis sales kicked off in the state. This is the conclusion reached by a survey carried out by Northeastern University researchers on 88 communities.
The survey was published by the Massachusetts Cannabis Business Association as lawmakers debate on a final bill that would compel these towns and cities to justify their actions. An action many critics call a government shakedown.
One of the sponsors of the legislation, state Senator Sonia Chang-Díaz affirmed that the report further proves how unequal and arbitrary the local process of approval had become. She added that she’s looking forward to a time when the cannabis marketplace meets our expectations, aspirations, and values.
Presently, Massachusetts state law enables communities to charge a 3% tax on cannabis sales. Communities also get to charge impact fees to a max of 3% of a firm’s yearly revenue given the fee is ‘reasonably related’ facility imposed cost. However, given the absence of state supervision, a lot of these communities charge cannabis business to the maximum percentage without quoting specific impacts.
Meanwhile, local officials have argued that the fees were arranged in good faith. They said the fees have gone a long way in curbing the cost of setting up cannabis regulations, managing heightened traffic, and reviewing license applications.
Nonetheless, the Northeastern report has brought forward new questions relating to the practice, which entrepreneurs and advocates have long criticized as a form of bribery. They believe the funds are being channeled to unrelated state projects while locking our small cannabis businesses that can’t afford to pay the fees.
Out of the 88 communities that claimed to have changed the impact fees as inclusive of the agreements made with the cannabis business, only 47 communities provided a public record of fees collected. This means that the $53.3 million is way less than the actual amount collected by these towns and cities.
The Exception: Brookline
Fall River, a city whose ex-mayor is currently serving a 6-year jail time in federal prison for receiving bribes from applicants for cannabis licenses earned $5.33 million in impact fees, more than any other city that took the survey. Although Fall River did not disclose how the money was spent.
Brookline, the home of NETA, one of the most successful dispensaries in the country, is the second city on the list has and received $4.9 million in fees. The total fee amounts to hundreds of thousands of dollars cannabis businesses have remitted to enforcement officials working compulsory town security details at cannabis dispensaries.
The city’s director of administrative services, Devon Fields, admitted that the inception of cannabis stores has led to considerable administrative costs and headaches in the neighborhood. Fields claimed the neighborhood has been impacted by various disorderly conducts including neighborhood trashing, parking, traffic, and various endowment issues. She believes the impact fees are justified and it would be a shame if the cash inflow is halted.
Different from other cities, Brookline diverted the funds into a separate account overseen by a community board that publishes a comprehensive account of all expenditures when due. Fields believe the town has judiciously managed the funds which have been used to kick start initiatives for racial justice and employ counselors for substance abuse cases. He also noted that the funds have helped Brooklyn push local cannabis retailers to also prioritize diversity in hiring.
Brookline has maintained a transparent process that everyone can see. Fields added that more oversight would be appreciated but the city does not want to be in a situation similar to Fall River. Brookline was quick to accept that legalization of legal cannabis was bound to happen, which gave the city the edge, time, and resources to make everything work.
Current Stance of The Massachusetts Municipal Association
As a representative of the local government, the Massachusetts Municipal Association is lobbying against the planned ban on impact fees. The association argued that the impact fees are fair and are a practical incentive for towns and cities to host cannabis facilities.
The executive director of the Massachusetts Municipal Association, Geoff Beckwith, affirmed in a statement that the cannabis industry is publishing another report that cares for the financial interest of its members. He believes this is an attempt to discredit agreements between host communities that had been fairly negotiated in the interest of the public.
Geoff believes that towns and cities should retain the power to make decisions on behalf of taxpayers and residents as regards agreements with the marijuana industry.
In the course of the survey only 42 cities made available their spending records to the researchers as proof of revenue disbursement. Among these cities, half claimed that the money is diverted to their general funds which are then spent on various budget items and local initiatives. This is regardless of if they were connected to the effects of growing facilities and cannabis stores.
For instance, Wareham used a larger percentage of its $1.7 million impact fees to fund the latest police headquarters, while Maynard used a percentage of its $137,000 impacts fee for the construction of four park benches. Other communities claim the fees were used to fund various things like police cruisers, fire equipment, rides are programs, storm drains, and so on.
However, according to Jeffrey Moyer, a professor of public policy at Northeastern University, while few of these claims are true, most of these cities are not transparent about their spending habits. The resident of the cannabis business association, David O’Brien, affirmed that many of these cities are using these impact fees mud funds with little transparency and zero accountability.
Just a few towns like Lee and Northampton have stopped receiving impact fees claiming cannabis businesses have been good to their neighborhood and exact several measurable costs. Meanwhile, other cities have doubled down. For instance, Haverhill is challenging a lawsuit issued by a local cannabis store disputing the impact fees.
As it stands, cannabis businesses are willing to cover the real impact costs they may inflict on communities. However, what’s objectionable is the compulsion to pay a flat rate fee that isn’t compelled on non-cannabis businesses with identical impacts. While there’s certainly the need for local control in towns and cities, the impact fee seems too ambiguous for comfort. It is basically legalized bribery.