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Mass Cities Squeeze Pot Businesses for Millions

Local governments are taking advantage of a state law that allows cities to collect an "impact fee" from pot businesses.

Photo via Pixabay

The practice of collecting fees from marijuana business applicants in Massachusetts through host community agreements (HCAs) was the subject of a committee hearing in early May. 

Business owners and advocates testified before the Joint Committee on Cannabis Policy calling for oversight on the agreements that they say favor local governments and take advantage of marijuana businesses.

The state law allows municipalities to impose an “impact fee” on Cannabis businesses to address the effect the business might have on the community, such as traffic or public safety. However, industry advocates claim that most local governments demand the maximum fee – three percent of the business’ gross sales – without having to demonstrate that the business warrants such a charge or account for what the city does with the money. And some jurisdictions demand more than the three percent allowed by law.

During the committee hearing, business owners and advocates asked that municipalities be made to prove the costs that they claim pot shops are responsible for through increased traffic, parking and policing, and called for the Cannabis Control Commission – the state’s marijuana regulatory agency – to have oversight of host community agreements.

In addition to impact fees, some local governments demand other payments from Cannabis business hopefuls, including donations and reimbursements. 

According to a new study, local governments in Massachusetts have collected nearly $2.5 million more than allowed by law through host community agreements.

The study, conducted by the University of Massachusetts in Boston, highlights the need for legislation that establishes standards and oversight to avoid corruption.

The committee hearing took place as former Fall River mayor Jasiel Correia stood trial for extorting money from would-be pot businesses. However, the UMass study makes it clear that the system encourages local governments to squeeze cash out of pot businesses.

In 2019, a Massachusetts law firm found that nearly four out of five host community agreements were illegal. That same year the FBI began looking into corruption in the Massachusetts pot industry.

Currently, nine separate bills take up the issue of host community agreements. All nine received a committee hearing. Hopefully one of them can end the insidious pay for play model established by the state’s marijuana law.

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