As Aug. 11 marks the third anniversary of the adoption of the newest state rules regulating community impact fees on cannabis businesses, municipalities across Franklin County are left wondering what they can reasonably do with the thousands that have been collected amid a hazy future for the funding.
Before then-Gov. Charlie Baker signed Chapter 180 on Aug. 11, 2022, cities and towns with marijuana businesses could impose a community impact fee of up to 3% on gross sales, designed to offset marijuana establishments’ impact on their host community, on top of what was collected for state and federal taxes.
However, the 2022 regulations tightened the reins, removing the 3% impact fee option, while also reinforcing parameters of what fees could be “reasonably related” to the impact of the cannabis business on the municipality. These impact fee regulations were clarified by the Cannabis Control Commission and enforcement changed in March 2024.
In Franklin County, officials in Gill, Greenfield, Montague, Whately, Bernardston and Orange say their towns have all stopped collecting community impact fees that, in some cases, had produced hundreds of thousands of dollars, and updated their existing host community agreements to reflect the regulatory changes.
Companies filing lawsuits to claw back fees
With what fees could be “reasonably related” to a cannabis business’ impact on a community being questioned, some companies have filed lawsuits in hopes of regaining money lost to community impact fees.
In western Massachusetts, iBerkshires.com reported in May 2024 that Pittsfield agreed to pay $786,000 back to three businesses. The dispensaries believed the community impact fees were “not reasonably related to the costs imposed upon the city or incurred by the city” as a result of their operations. In April of this year, Holyoke 420 owner James Jaron sued the city of Holyoke for $291,000 to get back impact fees.
Northampton took a different approach before the Chapter 180 changes went into effect by stopping the collection of impact fees in 2021, after finding little negative impact on the city from cannabis sellers.
‘Just sort of in limbo’
In Gill, the only operating cannabis business is Leaf Joy LLC, a dispensary that opened in August 2023 at 1 Main Road. The retailer entered into a host community agreement with Gill in February 2022 that originally included an impact fee, resulting in the collection of $14,129 between Nov. 19, 2023, and Jan. 11, 2024, from sales between Aug. 1, 2023, and Dec. 31, 2023.
Gill Town Administrator Ray Purington explained that because of the new impact fee regulations, the town updated its host community agreement to be compliant with Chapter 180 and agreed to stop charging the fees. The $14,129 collected is allowed to stay within the town’s possession and can be spent, though Gill has not used it, Purington said.
Initially, the thought behind implementing a community impact fee in Gill was that traffic congestion around the Leaf Joy building would increase due to vehicles or pedestrians on the busy roadways around Route 2 (French King Highway) and Main Road. However, Gill never incurred expenses related to the Leaf Joy operations, according to Purington.
To use an impact fee per the Chapter 180 regulations, town officials say it can be difficult to ascertain what could be considered “reasonably related” to the marijuana business and what the Cannabis Control Commission would allow.
In Montague, the town collected impact fees from 253 Farmacy, which opened its doors in 2018, prior to the new regulations. Town Administrator Walter Ramsey confirmed $178,252 remains in the town’s possession in the Cannabis Impact Fee Stabilization Account from impact fees collected. In August 2022, after the legislative changes, there was a pause on the collection.
The most recent authorized use of impact fees, $60,000, was approved during Annual Town Meeting in May for a bus stop at Industrial Boulevard and Millers Falls Road, near where 253 Farmacy is located.
Montague Selectboard Chair Matt Lord explained that the town was able to collect these fees for use, but now, much of the money remains untouched.
“Right now, I think we’re just sort of in limbo in terms of, we’re not quite sure what we can use this money for at this point in time,” Lord said, “and [we’re] really not in a huge rush to make any mistakes with it, and looking to see how the landscape develops.”
Greenfield, which has the largest number of cannabis businesses in Franklin County, also did away with its impact fees on the two retailers — Patriot Care on Legion Avenue and Green River Cannabis Co. on Deerfield Street — whose contracts contained those fees before the 2022 regulatory changes.
According to Director of Finance Stephen Nembirkow, the city had collected $750,082 in fees from Patriot Care and Green River Cannabis Co. since fiscal year 2019.
“The new changes to the law made it almost impossible to collect impact fees,” Greenfield Planning Director Eric Twarog said about the changes. “So why do all that effort when it’s almost impossible to collect impact fees?”
This difficulty, Twarog said, comes from the necessity of proving the fees are related to the incurred expenses the host community is seeking to use them on. This means the expense on the town must be directly related to the business itself under the new regulations.
“You have to show that there is an impact, and in many of these communities, they were collecting fees and not showing any impact,” Twarog said.
With the change of regulations, Massachusetts Cannabis Businesses Association President and CEO David O’Brien said the fees were “erroneously collected” from the outset, due to the money not being used for related impacts, how they were collected and the difficulty in tracking the fees.
“It’s a fee that’s erroneously collected because you’re collecting a fee and then playing ‘hide the ball,'” he said. That is, “until someone does a [Freedom of Information Act] request.”
Money owed?
In Bernardston, the only business with a host community agreement that contained a previous community impact fee was The Heirloom Collective, which opened in 2018 as a grow facility, then added a dispensary in 2022.
When the retail store opened, the town and The Heirloom Collective had an agreed-upon impact fee of $687,500, with charges over five years in the first host community agreement. Heirloom Collective CEO Jason Newell said in his view, the company understood the contract would come with these fees.
“They collected their fees for the first two or three years, and that was a fair deal that we both entered into — the town and The Heirloom Collective,” Newell said of the agreement. “It was expensive, but that was the deal. That was the lay of the land.”
As previously reported in December 2021, the host community agreement set the fee collection schedule to be $112,500 for the first year, $137,500 the second year, then $162,500 for the third and fourth year, and $112,500 for the fifth year. The updated agreement was signed on April 17, 2024, with the town to use $117,000 in the collected fees through October 2027.
Bernardston Selectboard Chair Brian Keir, who was involved with the initial negotiating of the host community agreement, said the town would like to use the fees for road repairs on Bald Mountain Road, which abuts Interstate 91 northbound, as the bridges over the highway are closed for repairs and people may use Bald Mountain Road instead for traveling to The Heirloom Collective.
As the town and The Heirloom Collective negotiated their host community agreement in good faith, Keir said, the regulatory changes around impact fees came as a “shock.” After a few years of payments, a new agreement was reached that removed the fee.
Keir said he was concerned that, under the changes, the town may need to return the money that has already been collected.
“That’s a huge impact on a little town,” Keir said, noting that the town and The Heirloom Collective have a good relationship and have discussed the potential for future changes impacting the collected fees.
As lawsuits continue, O’Brien said that while he’s not a lawyer, he anticipates that if any of the pending cases are decided in favor of the businesses, it could mean community impact fees would need to be returned.
“All the lawyers I’ve spoken to, who are representing the licensees across the state over … eight years,” O’Brien said, “everybody hopes a lawsuit is decided fully in court, because then it’ll be case law, and if that’s the case, everybody else is going to open up their old lawsuits, or file suit, and say, ‘Hey, you owe me money.'”
