A Boston Business Journal analysis of 34 such contracts that were provided by the state found that more than two-thirds, or 24 of them, include negotiated payments over and above the 3 percent “community impact fee.” That fee is allowed under state law to help mitigate costs incurred by communities that allow marijuana establishments, such as paying for additional law enforcement. Four additional contracts have the potential to exceed the 3 percent cap, in that they ask for thousands of dollars annually rather than a defined percentage of sales.
The 34 contracts analyzed do not represent all those signed in the state, only those collected by the state’s Cannabis Control Commission through a voluntary municipal survey. The CCC has declined to review such host community contracts to ensure they comply with the state law mandating the 3 percent cap on how much cities and towns can demand. It’s not known how many total contracts have been signed statewide.
But the review offers a telling look at the high price many towns are demanding in exchange for allowing pot shops within their borders.
State Sen. Pat Jehlen, who was one of the authors of the state’s marijuana laws, said that the contracts undermine the goal of the legislation: to keep fees low for small businesses, farmers and minority applicants, who often name capital as their biggest barrier to entry. Jehlen said higher fees pave the way for large, out-of-state companies with more capital to dominate the market.
“This is a dangerous precedent,” Jehlen said in an interview.
The Cannabis Control Commission did not respond to requests for comment.
Taking their cut
The July 2017 law states that community impact fees “shall be reasonably related to the costs imposed upon the municipality by the operation of the marijuana establishment or medical marijuana treatment center.” In addition, the law says, they “shall not amount to more than 3 percent of the gross sales of the marijuana establishment or medical marijuana treatment center or be effective for longer than five years.”
But in practice, some contracts appear to exceed those limits. Medical marijuana dispensary Hope Heal Health, for example, agreed to pay 4 percent of its gross sales to the city if Fall River. If the company receives a state license for a recreational marijuana dispensary, the town has asked for another $50,000 per year.
In Easthampton, three companies — Apical, Herbology Group and I.N.S.A — have each agreed to make a $10,000 signing payment in addition to providing at least 3 percent of gross sales.
In Brewster, Nature’s Alternative and The Haven Center both agreed to pay $25,000 annually to the town on top of the 3 percent cut. The dispensaries will also pay for any consulting and legal fees — including at least $5,000 already provided to the town to negotiate the agreement — as well as any future auditor costs, plus a $15,000 charitable contribution annually.
In total, 15 of the 34 contracts required marijuana businesses to make charitable contributions on top of the 3 percent payment. The mandatory donations ranged from $2,500 to $60,000.
Fifteen of the contracts analyzed also included a “reopener” clause, which stipulates that if a dispensary signs an agreement with another town that includes higher fees than the first town, the first town can bump up its payments to the higher amount.