The Massachusetts Cannabis Control Commission has begun reviewing existing host community agreements (HCA) after approving new requirements intended to prevent municipalities from taking advantage of cannabis operators.
New rules for agreement review took effect on March 1, just one day after the commission voted to approve a model HCA in the hopes of streamlining the review process.
Cannabis companies have been required to enter in HCAs and obtain a letter of non-opposition from local governments before they receive a final license. Although those agreements were not supposed to include payments in excess of 3% of gross annual sales, often they did include additional payments, sometimes in the form of mandatory charitable donations or commitments to finance community improvement projects.
“We know we have a lot of municipalities that have taken advantage of operators, that have asked for things that are unreasonable and have not caused an impact in their city or town. Yet cities and towns see this as an opportunity to strong arm or shake down, or whatever you want to call it, some of these operators,” said Commissioner Nurys Camargo during the CCC’s Feb. 29 meeting.
CCC Director of Licensing Kyle Potvin explained that the HCA review process would be conducted in a way that encourages businesses and towns to come into compliance rather than being strictly punitive. He also said regulators would immediately start reviewing agreements on March 1.
“If we see something that’s not compliant, we’re going to issue either a request for information or a notice of deficiency, not only to the applicant but also to the municipality, so that both parties that are subject to these agreements are on notice,” said Potvin.
Most HCAs contained improper payments
A week later, Potvin reported that most of the HCAs that the agency had reviewed as part of the licensing and renewal process contained improper payments.
“Just from my preliminary review, I have not seen a single compliant HCA,” he said during the March 7 meeting of the CCC.
For years, companies have complained of abuse and even extortion from local governments, but now adjustments have been put in place to prevent towns from taking advantage of local cannabis businesses.
Last year, the commission adopted new regulatory guidelines for HCAs, while also taking on the responsibility of overseeing those agreements, as part of rule changes stemming from a 2022 cannabis bill passed by the Massachusetts legislature.
Obtaining an HCA or waiving one entirely is required for final licensure and annual renewals, but now the CCC will be directly reviewing and approving those agreements The new rules also set a standard for terms and conditions to better ensure that the language used in HCAs is more consistent between different towns and cities.
If the municipality opts to apply a community impact fee, it is required to provide an itemized invoice of community impact costs that are related to the operations of the cannabis business. Those fees are capped at 3% gross sales, and cities and towns are not allowed to charge community impact fees after nine years.
Some cities and towns have already changed their practices with host agreements, including the town of Uxbridge, which agreed to return about $1.2 million in community impact fees to Caroline’s Cannabis — one of the state’s first legal adult-use dispensaries.
Infamously, former Fall River Mayor Jasiel Correia attempted to use his town’s HCAs to extort payments from cannabis operators. Correia was indicted in 2018 for defrauding investors in his startup app company. He was indicted again a year later for his cannabis operator payment scheme. Correia was found guilty and sentenced to six years in prison in 2021.
