United States: State House To Consider Bill Amending Language On Host Community Agreements

A bill that would amend the statutory language that defines permissible scope of community impact fees in Host Community Agreements ("HCAs") is making its way through the Massachusetts State House. The bill, H 4367, would also give the Cannabis Control Commission ("CCC") express regulatory authority over HCAs.

The issue the bill addresses is one that has created considerable uncertainty and controversy. Under Massachusetts law, cannabis companies must enter into an HCA with a locality before they can obtain licensure from the CCC and that HCA must stipulate all responsibilities of the parties. Section 3 of Chapter 94G of the General Laws allows HCAs to include a "community impact fee" that the company pays to the host community. The community impact fee must, however, be "reasonably related to the costs imposed upon the municipality by the operation of the marijuana establishment . . . and shall not amount to more than 3 per cent of the gross sales of the marijuana establishment. . . ." G.L. c. 94G § 3(d).

Many municipalities and municipal interests have strongly argued that the statute, while limiting the amount a municipality can assess in this "community impact fee" for the direct costs reasonably attributable to the marijuana business, did not more broadly repeal by implication municipalities' existing authority to enter contracts with private parties to receive voluntary contributions or other contractual payments.

Advocates, entrepreneurs and many cannabis companies argued that 3% means 3%. The CCC was caught in the middle, and determined it did not have authority to resolve the issue or even review HCAs as part of its licensing process.

That all would change under H 4367. The bill would amend Section 3 to clarify that, moving forward, the three percent community impact fee is the only fee or payment that HCAs are allowed to include. The bill states:

The bill would also clarify the permissible duration of a community impact fee. Currently, Chapter 94G, Section 3 declares that a community impact fee cannot be "effective for longer than 5 years." H 4367 clarifies that the five-year period begins on the date the marijuana establishment or medical marijuana treatment center opens for business.

Finally, the bill would give the CCC authority to regulate HCAs. The Commission has expressed doubt as to whether it currently has that authority, and last year it formally requested that the legislature grant it authority to regulate HCAs. The bill would respond to the Commission's request by giving it authority to "review, regulate and enforce all [HCAs]," and to create "requirements and procedures for [HCAs], including without limitation criteria for calculating community impact fees."

The House Ways and Means Committee voted unanimously this morning to advance H 4367 to the full House, where representative are expected to discuss the bill tomorrow. If H 4367 is enacted it would bring clarity to HCA requirements and may result, through CCC regulation, in a uniform set of rules for HCAs.

Our biggest question is whether – if this bill passes – the CCC will retroactively apply it to review HCAs for current provisional or final license holders. If so, a great many current license holders will have to reform their existing agreements. Current license holders and municipalities should monitor the bill closely, as its enactment could mean that the CCC will assess their HCAs during the final licensing process or license renewal process.

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