Impact fees are a staple of Community Host Agreements that cities and towns negotiate with marijuana companies that want to do business within their borders.
A city or town can charge up to 3% of a business’ gross annual income to cover “impacts” on the community for up to five years.
Impact fees are separate from the 3% local sales tax communities also receive from the businesses.
Those charges continue as long as the business survives.
As a result, many communities are reaping up to 6% of a marijuana business’ gross annual income which, early on at least, is very significant.
Three percent comes out of that income and the other 3% is paid by the consumer.
But many cities and towns have failed to detail what expenses the community has incurred due to the presence of a marijuana business and how the impact fees were spent to ameliorate those impacts. That includes six of the 10 communities in The Sun Chronicle area that have marijuana businesses.
And some have not detailed how the money has been spent, according to a study performed by Northeastern University from March through May.
Both are required under rules laid out by the state Cannabis Control Commission.
The Northeastern study included public information requests made to 88 communities across the state asking what they took in for impact fees and how it was spent.
Out of the 88 requests, 54 communities responded and out of that number 47 submitted how much money they had collected in impact fees.
Three towns did not provide a reason for not supplying the information. The other four either have stopped collecting the fees or they have yet to receive any fees.
The 47 communities that supplied information to Northeastern reported that more than $53 million has been collected since 2018 — $53,303,559 to be exact.
Only one of the 10 communities in The Sun Chronicle area was asked to submit information and that was Plainville, which, according to Northeastern, was one of the communities that did not respond.
According to the Northeastern study, the average impact fee was $1,134,118 and the median fee was $750,000.
Out of the 54 communities that responded, 42 revealed where the money collected went. And out of those 42 communities, 21 said the money went into the community’s general fund.
Out of the remaining 21, eight used the cash for infrastructure, six put it into “some kind of stabilization account,” four allocated money towards police and fire departments, two put some of the cash into public schools and one spent the money on “administrative tasks.”
The study provides a useful snapshot of how communities are using the impact fees, but it appears not all are linking impact fees to actual costs associated with impacts caused by the marijuana businesses.
Meanwhile, the state Legislature is in the midst of writing reform legislation for the marijuana industry and the topic of impact fees is one that is being looked at, especially in light of the Northeastern study.
According to information provided to The Sun Chronicle by the Cannabis Control Commission, communities must document the impacts and costs of those impacts.
The community impact fee is designed to compensate the municipality for the financial impacts “…reasonably related to the costs imposed upon the municipality by the operation of the marijuana establishment or medical marijuana treatment center[.]
The municipality in turn is obligated to maintain the records documenting these costs. The Commission recommends the municipality maintain these records in a form and manner such that they will be easily producible subject to a public records request for the records.
Any cost to a city or town imposed by the operation of (a marijuana business) must be documented and is considered a public record under Massachusetts Public Records Law.
A marijuana business in Haverhill is suing that city regarding the law.
According to an article in The Boston Globe, a marijuana store called Stem argued that the city of Haverhill has not explained how the payments are related to “impacts.”
In short, the business argued they are not justified.
“I don’t want a brawl with my host community, but it was time for someone to challenge this,” Stem founder Caroline Pineau told the Globe. “We already pay a huge sales tax to the city, and if they want even more, I don’t think it’s unreasonable to ask that they obey the law and authenticate their claims.”
In Attleboro, Blair Fish, chief operating officer at the city’s first marijuana store, Nova Farms, appears to be of the same opinion, although the company has not sued Attleboro.
“I think in the beginning of rolling out dispensaries there were a lot of unknowns. Specifically like what type of impact will a dispensary have on a local community,” Fish said in emailed comments. “I think as we’ve matured in the Massachusetts market, not just in Attleboro, I think we are seeing that there are not many negative impacts on the cities around the state. Specifically to Nova Farm’s impact on the city of Attleboro I do not know of many and would counter that businesses like Nova Farms have stimulated the local economy with tax revenue and many, many jobs. So I think the proper way to answer this question is that these impact fees were probably necessary in the beginning, but as the market matured and we’ve been able to see actual impacts that they’re probably not necessary in the future.”
Michael Kochekian, general manager of Zahara Cannabis on Frank Mossberg Drive in Attleboro, who came to the store after working in Colorado, Oregon and Washington, says he’s not sure he’s been in the area long enough to offer an opinion on Massachusetts communities’ impact fees. But he added, “As long as it goes back to the community to fix potholes, or is put toward the schools, I’m all for it.”
At the newly opened Zahara Cannabis store at 70 Frank Mossberg Drive, which is just around the corner from Nova Farms on Extension Street, General Manager Michael Kochekian seemed less concerned.
Kochekian, who comes from a stint of running marijuana stores in Colorado, Oregon and Washington state, said he’s not sure he’s been here long enough to give an honest opinion, but he took a shot at it anyway.
“As long as it goes back to the community to fix potholes, or is put toward the schools, I’m all for it,” he said.
Neither Mayor Paul Heroux, nor Attleboro Police Chief Kyle Heagney responded to a Sun Chronicle request to detail impacts on the city and the costs associated with those impacts. Neither did officials in other communities.
North Attleboro and Seekonk did not respond to a Sun Chronicle request to reveal the amounts they have received in impact fees.
Meanwhile, the Massachusetts Municipal Association, which represents communities across the state defends the fees.
MMA Executive Director and CEO Geoffrey C. Beckwith argued that the marijuana industry is trying to downplay the impacts and he argued in an MMA publication that many impacts are not yet known.
“There is a significant level of disagreement around how to quantify and recognize community impact fees, exacerbated by the multi-billion-dollar cannabis industry’s campaign to downplay the direct and indirect impact of the industry on municipalities,” Beckwith wrote last month. “While the state is still in the beginning stages of developing the cannabis field, it is problematic to eliminate these fees while we are still uncovering the true costs of this rapidly growing industry.”
“Further, restricting or eliminating the 3% community impact fee would reduce one of the principal incentives for local adoption of recreational cannabis sales.
“Incumbent businesses would have a permanent advantage in the marketplace, and new entrants would face the steeper challenge of competing with fewer new locations across the state. We support the Senate bill’s provisions, which would allow communities to renegotiate the fees in subsequent contracts. The MMA continues to believe the best method of reaching agreement is to allow the parties to do so directly, without state or industry interference.”
The Sun Chronicle requested information from the six communities that host marijuana businesses in its 10-community area. Those communities are Attleboro, North Attleboro, Mansfield, Plainville, Rehoboth and Seekonk.
Only four — Attleboro, Mansfield, Plainville and Rehoboth — have responded to date.
In Attleboro, there are three marijuana businesses: Nova Farms on Extension Street, Terps on Forest Street and the recently opened Zahara, which is celebrating its grand opening July 22, on Frank Mossberg Drive.
Marijuana businesses in Attleboro are restricted to industrial zones.
North Attleboro has one business, Native Sun on South Washington Street, and Mansfield has a business called reLeaf Alternative on School Street.
In Plainville, Apotho Therapeutics is located on Washington Street.
In Rehoboth, Commcan is located on Barney Street and Solar Cannabis Co. is located on Fall River Avenue in Seekonk.
Attleboro, Mansfield, Plainville and Rehoboth have provided information on how much money has been raised in impact fees.
Attleboro has received almost $2 million — $1,713,971 — to date.
Out of that amount $585,814 was received in fiscal year 2021 and $1,128,156 was received in FY 2022.
The $585,814 eventually became part of city surplus funds also known as “free cash” and was used to install gunshot detection systems in the city’s nine schools.
In FY 2022, $636,000 was used to purchase police body cameras, related equipment and software.
Another $160,000 was spent on the “police digitization project” and $1,500 was spent on the purchase of “PO forms.”
The rest, $330,656, is unspent to date.
Mansfield has received $122,215.
Plainville has taken in $361,778 and Rehoboth has collected $40,000.
The $122,215 received by Mansfield was categorized as a “local receipt” and went into the general fund to help fund the budget.
Mansfield also has a “Gift Funding” provision in its HCA and has collected $155,833 under that provision.
That money was used to make improvements downtown and “will eventually be used to fund the town’s annual fall festival.”
The $361,778 collected as an impact fee in Plainville was also considered a “local receipt” and was deposited into the town’s general fund where it was used to “cover operational costs including public safety staff impacted by the facility being in the community.”
The $40,000 collected in Rehoboth was put in the Cannabis Stabilization Fund.
Money in that fund has yet to be allocated to “a project,” according to Interim Town Administrator Deborah Arruda.
“(A)t this time the Board of Selectmen have not applied the funds to a specific project,” she said in an emailed statement.
But she acknowledged that there are “guidelines” communities need to follow.
“There are guidelines from the CCC (Cannabis Control Commission) that towns/cities have to adhere to when it comes to what the funds can be applied to,” Arruda said.
Be the first to comment