MRCC

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Corruption Part 4: Primer on HCAs

Business owners in the Massachusetts marijuana industry have to complete a number of steps before they can open, beginning with local permits and ending with a license from the state’s Cannabis Control Commission. But one crucial hurdle is something called the host community agreement.

Before they can apply for a state license, businesses are required to agree to a host community agreement with the officials in the town or city where they’re located. The contracts are negotiated by the two sides and spell out the terms under which the new business will operate and were intended to ensure that communities had a say on any pot shops or cultivation facilities that wanted to open within their borders.

Host community agreements also set forth how much businesses will pay their local community in fees and taxes.

Cities and towns are allowed to tax marijuana sales up to 3 percent, as well as collect a “community impact fee” from companies. State law says that community impact fees must be “reasonably related to the costs imposed upon the municipality” by the opening of a new marijuana business and cannot exceed 3 percent of the company’s revenue. According to the CCC, those fees are supposed to cover things like police overtime or traffic design studies.

Host community agreements are not the same as non-opposition letters, which prosecutors say Correia used as leverage in his alleged pay-to-play scheme. However, such letters are not legally required for recreational marijuana companies and haven’t been widely used in several years, at least in adult-use licensing, according to those working in the industry (according to the CCC, they’re still required for medical dispensaries).

Kevin Conroy, an attorney at the Boston law firm Foley Hoag, who works with cannabis companies in the licensing process, says most municipalities require the local legislative body — town selectmen or city council — to sign off on host community agreements for both adult-use and medical marijuana companies.

“I haven’t seen a municipality where a mayor or a city official can unilaterally approve a host community agreement,” Conroy told Boston.com. “I do think, in most communities, there are checks and balances to ensure that the entering into a host community agreement is what’s best for the community.”

The concerns are twofold

The first issue is that, to a degree, those checks and balances end at the local level. And advocates say most municipalities are going beyond the spirit of the law when it comes to the fees they charge fledgling marijuana businesses.

Concerns have been raised since even before any marijuana dispensaries opened in Massachusetts. As The Boston Globe first reported back in August of last year, the host community agreements for the first nine companies to receive a provisional license from the CCC appeared to violate the agency’s own laws.

All but one of the contracts included provisions calling for companies to make annual, lump-sum payments to their communities, in disregard of the law capping community impact fees at 3 percent of revenue. And according to the Globe, all of the agreements allowed municipalities to use the funds for any purpose.

In January, an industry study found that 79 percent of the state’s 77 host community agreements at the time required payments exceeding the 3 percent limit. Virtually all of the deals also reportedly called for “voluntary” donations for third-party charities. While some legal experts say the law doesn’t explicitly ban such payments, Shaleen Title, one of the five CCC commissioners, has abstained on nearly 80 percent of the panel’s final license votes in protest of what she thinks are legally dubious host community agreements, as Commonwealth magazine reported last month.

Whether legal or not, cannabis industry members and advocates have argued that the agreements have slowed the statewide rollout of pot shops and exacerbated the lack of diversity in the industry.