Why Mass. struggles to rein in local fees for cannabis businesses
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Massachusetts regulators are struggling to crack down on exorbitant fees local governments charge cannabis businesses to open shop — three years after a new law was supposed to address the problem.
Why it matters: Cannabis business owners describe some local governments' terms as "shakedowns" that squeeze them before they have a chance to turn a profit.
- These issues persist as a growing number of mom-and-pop cannabis shops sell to multi-state corporations or close altogether, leaving customers with fewer options.
Driving the news: A new audit of the Cannabis Control Commission shed light on the problem with host community agreements, which businesses must obtain from a local government to get a CCC license.
- It's one of several oversight challenges the Massachusetts Auditor's Office says plagued the CCC between July 2022 and June 2024.
How it works: Under state law, a host community may charge a "community impact fee" of up to 3% of the business's gross annual sales.
- It can also make a business get a paid police detail to manage traffic during peak hours, among other requirements.
Yes, but: Municipalities soon were imposing additional fees, such as lump-sum payments to cities and towns or donations to local charities.
- And the law didn't explicitly give state regulators the power to intervene.
State of play: The 2022 cannabis reform law was supposed to empower the agency to inspect the agreements, but the audit says the CCC failed to conduct timely reviews.
- The CCC said it has faced major hurdles reviewing existing agreements for cannabis businesses seeking to renew their licenses.
- Several municipalities argue the 2022 law shouldn't apply to existing agreements. Last year, an Essex County Superior Court judge agreed.
By the numbers: The auditor's office reviewed a sample of 26 agreements and found that 18 violated the 2022 law, imposing excessive fees, mandatory donations or indefinite terms.
- In Brookline, the audit says, one dispensary had to donate $975,000, while other businesses had no such requirement.
Threat level: The auditor's report says the lack of oversight into the agreements "creates an environment in which only the largest businesses, often multi-state operators, can thrive."
The other side: State regulators have said they want to rein in existing agreements, but recent legal battles have tied their hands.
- At least a dozen municipalities are involved in cases raising questions about the CCC's authority to review existing agreements, even though the agency isn't part of those cases, general counsel Kajal Chattopadhyay said.
The bottom line: "This issue has put a number of our licensees in a legal limbo as they try to negotiate and get their licenses renewed," he said.