Grow, Gift, Repair

All this HCA action!

Under state guidelines, municipalities are able to command from retailers a “community impact fee” of up to 3% of gross sales, which are meant to offset “costs imposed upon the municipality by the operation of the marijuana establishment” on public services and infrastructure.

Yet numerous cities and towns across the state have succeeded in demanding and extracting more than that from cannabis businesses—either in the form of larger cut of sales or via a lump sum payment to the municipality or, in many cases, a local organization and charity that can cost tens of thousands of dollars.

Pro-marijuana lawmakers have already taken issue with this state of affairs. Massachusetts State Sen. Patricia Jehlen, who chairs the state legislature’s Joint Committee on Marijuana Policy, describes such arrangements as “illegal” in an interview with Fortune. Along with her committee co-chair, Rep. Mark Cusack, Jehlen wrote to the CCC in August and urged the regulatory body to review HCAs to ensure they were in compliance with the law. The five-member CCC subsequently voted against doing so, with chairman Hoffman expressing concerns over whether the body has the legal authority to review municipal agreements.

“It’s a barrier for businesses to get into operation,” says Jehlen, bemoaning the impact that additional monetary demands from municipalities can have on “small entrepreneurs without a lot of capital,” in particular. “It’s very expensive to set up these facilities; to add to that additional payments?” And as far as retailers donating money to local organizations and charities as part of their HCAs, she adds: “So-called voluntary contributions written into a contract are not voluntary.”

A CCC spokesperson tells Fortune that the body “continues to gather data on this issue” and had issued a guidance “to help municipalities and applicants work cooperatively to structure host community agreements in compliance with state law.”

But for many pot advocates in the state, that stance is far from adequate. Jim Borghesani, a pro-cannabis consultant who served as a spokesman for the 2016 legalization campaign, says that without real oversight, “communities can drag their feet on these agreements and there’s nothing the applicant can do about it except wait and hope that they eventually get one signed.”

“We’re seeing it in practically every host community agreement,” Borghesani says of the financial “sweeteners” that retailers have found themselves agreeing to in order to set up shop in Massachusetts. “[Municipalities] are playing this shell game of, ‘It’s voluntary, they don’t have to sign this agreement.’ But if they don’t make this contribution, they’re not going to have an agreement. [Retailers] know they have to give the town almost anything they ask for.”

One industry advocacy group, the Massachusetts Grower Advocacy Council, has said it is considering legal action that would force the CCC to review HCAs. Sources say there is talk that the state legislature could consider taking action that would explicitly ban the practice of municipalities demanding more than 3% of retailers’ gross sales.

For now, the status quo remains. As cannabis industry advocates claim that marijuana businesses are being unfairly squeezed, local politicians argue that they’re within their rights to bargain for more from retailers seeking to set up shop in their towns and cities.