Cannabis News

It’s Local, It’s Legal, and It’s Extortion


Massachusetts cannabis companies have paid over $50 million in community fees since 2018

Cannabis companies based in Massachusetts cities have paid more than $53 million in “impact” fees since recreational cannabis sales began in the state. This is the conclusion reached by a survey conducted by Northeastern University researchers in 88 communities.

The survey was released by the Massachusetts Cannabis Business Association as lawmakers debate a final bill that would require these cities to justify their actions. An action that many critics call a government shakedown.

One of the sponsors of the legislation, State Senator Sonia Chang-Díaz, said the report further proves how unequal and arbitrary the local approval process has become. She added that she looks forward to when the cannabis market meets our expectations, aspirations and values.

Currently, Massachusetts state law allows communities to charge a 3% tax on cannabis sales. Communities can also charge impact fees up to a maximum of 3% of a company’s annual revenue, as the fees are “reasonably related” facility-imposed costs. However, given the lack of state oversight, many of these communities charge the cannabis trade at the maximum percentage without citing specific impacts.

Meanwhile, local officials argued the charges were arranged in good faith. They said the fees have gone a long way towards reducing the cost of implementing cannabis regulations, managing increased traffic and reviewing license applications.

Nonetheless, the Northeastern report raised new questions about the practice, which entrepreneurs and advocates have long criticized as a form of corruption. They believe the funds are being funneled to independent state projects while blocking our small cannabis businesses that cannot afford to pay the fees.

Of the 88 communities that claimed to have changed impact fees as including agreements with the cannabis industry, only 47 communities provided a public record of the fees collected. This means that the $53.3 million is far less than the actual amount received by these cities and towns.

The exception: Brookline

Fall River, a town whose the ex-mayor is currently serving a 6-year sentence in federal prison for taking bribes from cannabis license applicants earned $5.33 million in impact fees, more than any other city that responded to the survey. Although Fall River did not disclose how the money was spent.

Brookline, home of NETA, one of the nation’s most successful dispensaries, is the second city on the list and received $4.9 million in fees. The total charges amount to hundreds of thousands of dollars that cannabis companies have handed over to law enforcement officials working on the city’s mandated security details at cannabis dispensaries.

The city’s director of administrative services, Devon Fields, admitted that the creation of cannabis stores has caused considerable administrative costs and headaches in the neighborhood. Fields said the neighborhood has been impacted by various disorderly conduct, including neighborhood trashing, parking, traffic, and various staffing issues. She believes that the impact fees are justified and that it would be a shame if the inflow of funds were interrupted.

Different from other cities, Brookline has diverted funds to a separate account overseen by a community board that publishes a full account of all expenditures when due. Fields believes the city has wisely managed funds that have been used to launch racial justice initiatives 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 doesn’t want to find itself in a similar situation in Fall River. Brookline was quick to accept that the legalization of legal cannabis was inevitable, giving the city the edge, the time, and the resources to make it all work.

Current Position of the Massachusetts Municipal Association

As a representative of local government, the Massachusetts Municipal Association is lobbying against the planned ban on impact fees. The association argued that impact fees are fair and provide a practical incentive for cities and towns to host cannabis facilities.

Massachusetts Municipal Association executive director Geoff Beckwith said in a statement that the cannabis industry is issuing another report that cares about the financial interests of its members. He believes that this is an attempt to discredit agreements between host communities that had been fairly negotiated in the public interest.

Geoff believes municipalities should retain the power to make decisions on behalf of ratepayers and residents when it comes to deals with the marijuana industry.

During the survey, only 42 cities made their expenditure records available to researchers as proof of revenue disbursement. Of these cities, half said the money is diverted to their general funds which are then spent on various budget items and local initiatives. This is whether or not they are related to the effects of grow ops and cannabis stores.

For example, Wareham used a higher percentage of his impact fee of $1.7 million to fund the last police headquarters, while Maynard used a percentage of his impact fee of $137,000. for the construction of four park benches. Other communities say the fees were used to fund various things like police cars, fire equipment, amusement ride programs, storm sewers, and more.

However, according to Jeffrey Moyer, 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. Cannabis Business Association resident David O’Brien claimed that many of these cities use these impact fee mud funds with little transparency and no accountability.

Only a few towns like Lee and Northampton have stopped receiving impact fees, saying cannabis businesses have been good for their neighborhoods and have demanded several measurable costs. Meanwhile, other cities have doubled. For example, Haverhill is challenging a lawsuit filed by a local cannabis store disputing impact fees.

Conclusion

As things stand, cannabis companies are prepared to cover the real impact costs they can inflict on communities. However, what is objectionable is the requirement to pay a flat fee that is not imposed on non-cannabis businesses with identical impacts. While there is certainly a need for local control in cities and towns, impact fees seem too ambiguous for comfort. It is essentially legalized corruption.

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#Local #Legal #Extortion

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