August 28, 2018 MJ Shareholders
As the Massachusetts Cannabis Control Commission continues to develop the state’s adult-use market, one thing that it will not be doing is regulating local municipalities’ contracts with prospective businesses. The commission voted 4-1 last week against a proposal to actively review those contracts and to hold municipalities to a cap on local “community impact fees” at 3 percent of total revenue.
Commissioner Shaleen Title brought the debate to the floor at the CCC’s Aug. 23 meeting. Her concern is that municipalities are overreaching and gouging those businesses for more money, sometimes in the form of apparently voluntary donations or payment toward the cost of an ambulance. Title told her fellow commissioners that this leaves open the possibility for an uneven playing field, for well-heeled businesses to stamp out local competition.
“I believe this decision over reviewing host community agreements is possibly the most significant decision that we’re going to make, in terms of how we affect what happens with this industry,” Title said.
For now, the CCC only requires certification that a host community agreement has been signed. But beyond that, the CCC has no statutory authority to keep the state’s 351 cities and towns from drawing up different variations on the mandatory host community agreement paperwork; rather, several commissioners argued that the only tool in their toolbelt is to refuse to approve business applications on an individual basis. (The commission has published guidance on how municipal leaders may engage cannabis businesses.)
Title said that it’s a slippery slope in these early days of adult-use licensing: Granting a license to a business that had signed an agreement with exorbitant local fees would legitimize the practice, she argued. “If we issue licenses to business that have, in my opinion, non-compliant contracts,” Title said, “then what will our basis be when we see one that is truly egregious?”
As a hypothetical, she suggested that big cannabis businesses could theoretically add another $1 million to their local payment, thus setting themselves up for likelier success in the local permitting process.
Much of the CCC debate revolved around how long it would take to go in and thoroughly inspect those host community agreements, and whether the commission would be in position to defend itself against potential lawsuits from license applicants or municipalities.
“I don’t live my life trying not to get sued,” Chairman Steven Hoffman said, “but we will get sued.” He added that the commission has looked to the state legislature for a fix, but so far, no answer has emerged.
Shawn Collins, executive director of the commission, said that a review of local contracts would add about an hour of work to each application that lands in the state’s licensing system. To get there, the state would need to train investigators in what to look for and what to extract.
“We would have to flesh that process out carefully, and I’m not sure we’re in a position to do that now,” Hoffman said.
At other times, before the vote was cast, commissioners argued against the proposal in the name of timeliness.
“I believe that in making that choice we are taking on a delay with no certainty,” Commissioner Britte McBride said. “I would implore us to move forward [and] establish a responsible industry that we said we were going to establish.”
Indeed, headlines have swirled around Massachusetts’ delay in adult-use sales. The anticipated July 1 state date came and went, and still, dispensaries have not been able to sell cannabis to adult-use consumers. Much of the holdup revolved around independent testing labs; the commission approved the first two independent testing lab licenses for the adult-use market at the Aug. 23 meetings—after the debate about host community agreements.
There’s still no formal timeline for sales, but the lab licenses bring the market one step closer to reality. As of late August, the CCC had approved 24 provisional licenses for the adult-use market.
As the delay in sales continues, the commission will work out its approach to the regulatory framework that will guide this market.
Title summed up her proposal by insisting that small businesses have found difficulties in working with local governments to get to the CCC’s state-level licensing process. As the gatekeepers of the industry, businesses must first receive approval from their local municipality, which often entails navigating strict zoning laws and establishing rapport with local residents and nearby businesses.
“The local approval process is the mother of all barriers to entry,” Title said.
Top photo courtesy of Adobe Stock
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