Massachusetts HCAs & Community (Excessive) Impact Fees

On February 3, 2021, the Massachusetts Supreme Judicial Court (SJC) heard a case that raised questions to a grievance cannabis operators in the Commonwealth have been grueling over for years. In the case of Mederi Inc. v. City of Salem, Mederi Inc. was denied a host community agreement (HCA) by the city of Salem after applications for the city’s five adult-use recreational marijuana retailer licenses were slotted. As a part of the Superior Court’s (Feeley, J.) ruling, the court found that the Massachusetts legislature did not intend for the Cannabis Control Commission (CCC) to have the authority to review the contents of HCAs under G. L. c.94G (the Statute).

Marijuana applicants are not only required to enter into HCAs with a host community as directed by the Statute but also are required by the CCC’s regulations in order to be accepted for licensure. During oral arguments, the justices of the SJC raised several questions against the regulatory scheme conducted by municipalities across Massachusetts, charging operators fees disguised such as “charitable donations” and “traffic enhancement fee[s]” that force such businesses to make annual obligations well over the maximum 3% community impact fee allowed by the Statute.

The panel highlighted the unfortunate reality as a result of such municipalities’ lucrative trend – that the purpose of the Statute and CCC’s regulations to benefit applications of economic empowerment and areas of disproportionate impact harmed by the War on Drugs, is thwarted by HCA fees where potential, qualified entrants who do not have the luxury of “deep pockets” to accept such excessive fees and therefore, are not getting the requisite approval at the local level. Associate Justice Scott Kafker commented to Mederi’s counsel, “I am as bewildered as you that the CCC doesn’t think it can enforce its economic empowerment priority. To me, those seem like what the CCC is best capable of doing.”

As we await the SJC’s decision on the open issues presented, the query continues to prowl on the CCC’s authority to review HCAs and the excessive fees required by host communities.

In taking to the language of the Statute itself, there are some indications the CCC may have more authority than the Superior Court has lead on:

  1. For starters, the CCC regulations itself acknowledge its authority in 935 CMR 500.000, stating: “The Commission has authority to implement the state marijuana laws, which include, but are not limited to, St. 2016, c. 334 as amended by St. 2017, c. 55, M.G.L. c. 94G, and 935 CMR 500.000.”
  2. Second, Section 4 of the Statute states that the CCC “shall have all the powers necessary or convenient to carry out and effectuate its purposes
  3. Such powers of the CCC noted in the Statute include, but are not limited to:
    • The authority to “approve or disapprove any such application or other transactions, events and processes as provided” under the Statute
    • The power to “conduct adjudicatory proceedings and promulgate regulations in accordance with chapter 30A;”
  4. Further, the Statute explicitly directs that the CCC shall only approve a marijuana applicant “if … the applicant is in compliance with [the Statute] and the regulations made by the [CCC].”

One would think that an HCA submitted by an applicant with excessive fees well over the 3% community impact fee ceiling would trigger the CCC’s inability to approve such an application.

However, there may be glimpses of potential for a trend at the local levels to combat these onerous fees above the statutory limit, where municipalities such as Northhamptom have done away with the 3% community impact fee altogether.

Unfortunately, time will only be the true revealer of whether there’s hope for change in the Massachusetts cannabis market, with nearly 173 pending applications and 246 final licenses issued by the CCC, each inclusive of an executed HCA with a host town or city and many requiring several annual dues in exchange for accommodating operations.