Almost three years ago, state lawmakers decided to end “community impact fees” on cannabis businesses. The charge of up to 3 percent of sales collected by cities and towns was intended to address the side effects some feared would follow new dispensaries and grow facilities, such as traffic congestion, crime, and rampant substance abuse.
When those impacts did not arise, policymakersruled that the fees were unnecessary and instead required towns to provide a breakdown of how the money would be spent beforebusinesses have to pay up.
But the reforms have changed little: Dozens of communities across Massachusetts are still demanding impact fees from marijuana companies amounting to thousands of dollars each year, while some decline to return the funds they’ve already collected — at least $50 million in allsince 2018.Officials have spent the money on new police cruisers, six-figure nonprofit donations, or simply, to grow their general budget.
Now a flurry of litigation is underway, as cannabis entrepreneurs fight to block the fees from being spent on things they say have nothing to do with cannabis. Many believe that the prolonged battle over the money is yet another drag on the emerging industry, suffering from plummeting consumer prices and an oversaturated market. Pot businesses, strangled by high federal taxes and persistent issues with investment and credit lines, are already closing rapidly across the state.
“At first, a lot of municipalities thought it was a windfall. They thought they got the 3 percent [fees] and got to run with it — no questions asked,” said Thomas Macmillan, a lawyer representing a half dozen or so cannabis entrepreneurs who are renegotiating the “host community agreements” thatset impact fees. “But the dominoes are starting to fall.”
Under the new law, fees can only be charged for expenses that towns can prove are a direct result of a company’s behavior, though attorneys representing municipalities argue that officials are not obligated to rewrite the contracts that oversee the fees until the prior version expires — or at all. Some say that the agreements signed before the law changed are simply not subject to the alterations.
A handful of communities, including Boston and Northampton, voluntarily returned millions in impact funds when the reforms were first introduced. But by this January, state data show, less than half of Massachusetts municipalities that house marijuana businesses had removed the impact fees and brought all their cannabis community agreements up to code.
Meanwhile, retailers in Hanover and Great Barrington are suingtheir respective towns to recoup $7 million in impact fees they believe were taken unfairly, drawing inspiration from successful lawsuits last year in Pittsfield and Haverhill. In Uxbridge, Caroline’s Cannabis landed a landmark $1.2 million settlement in January 2024, a refund of 80 percent of the fees collected.
After the lawsuit, Uxbridge town manager Steven Sette said officials hold “a renewed interest in working together” on future agreements concerning the fees.
A spokesperson for the Cannabis Control Commission said the agency “is committed to pursuing all legal avenues within its authority to ensure licensees and municipalities comply with regulatory reforms.”
In the interim, some marijuana businesses in communities that refuse to comply with the new standards have stopped paying impact fees on principle, risking their relationship with town officials. Others hope the fees will be eliminated before they open their doors.
Nairoby Sanchez, for example,has spent years planning a marijuana delivery warehouse/consumption lounge called La Bodeguita, which would be the only cannabis business in Lowell founded by a woman of color. City officials have repeatedly demanded she agree to pay a 3 percent fee on all sales once her business launches. She has pushed back, to no avail. It feels like yet another barrier to success, she said.
“The use of [host community agreements] as a tool for discrimination — a tool to keep out cannabis businesses and charge us unfairly — is unfortunately succeeding,” Sanchez said.
These agreements were originally conceived — and signed by marijuana businesses — to convince municipalities and wary neighbors that having a dispensary in town would not be a drag on public safety budgets. Though research on the impacts of pot businesses is scant, recent studies show few negative consequences. If anything, researchers found, a legal marijuana market can lead to lower crime, reduced opioid consumption, and rising housing values.
Some municipal officials are now coming around to those arguments. Launching more cannabis businesses, they say, could bolster commercial districts and spur economic development.
Lowell City Councilor Corey Robinson saidthe city is squandering a “golden opportunity” by asking Sanchez for impact fees, rather than signing an agreement that fits the new regulations and sets her up for success.
Other city officials in Lowell declined to comment on Sanchez’s situation.
“Why they’re targeting one industry like this doesn’t make sense to me,” Robinson said. “We need to find a way to show them that we’re welcoming of those endeavors.”
But other communities have dug in their heels.
Newton Mayor Ruthanne Fuller recently responded to threats of litigation from three cannabis businesses in a citywide email that skewered the companies for “breach of contract.”
“The Newton Law Department will vigorously defend the legality of our signed agreements,” she added.
In some municipalities, KP Law, a Boston firm that represents several towns in community agreement negotiations, has argued that future fees are warranted to address impacts to come, including intoxicated driving, odor from cannabis cultivation facilities, and an increase in marijuana use among teenagers.
That is the case in Great Barrington. There, a complaint from three cannabis dispensaries cites written excerpts from town officials who said they experienced “zero impacts” from marijuana licensees that were still charged the 3-percent fees.
The CCC is poised to intervene in that suit with a letter of support for the dispensaries “forced to tender to the town millions of dollars in unlawful” fees, legal payments, and reimbursements.
In Great Barrington,that includes hundreds of thousands in citycontributions to the Railroad Youth Project, which supports young adults in the Berkshires; $15,000 to help restore a 19th-century church; and $182,000 to add a mental health responder to the town’s police force.
Public records show that in Rockland, cannabis impact fees funded street paving, CPR devices, and two electric vehicles for the inspectional department. In Northampton, they helped pay for the design of an accessible bus station. Other towns used the money to pad public school budgets, asserting that the fees supported positions that mitigated substance use among their students.
Around 60 cannabis licensees across the state that received license extensions from regulators to negotiate an acceptable agreement ahead of the renewal will hit their deadlines in April.
Should they and their towns fail to reach an agreement, it’s not clear what the cannabis commission will do.
If they can’t reach a deal by then, revoking theirbusinesslicense would amount to a lose-lose, said Phil Silverman, a partner in law firm Vicente LLP who represents cannabis companies. The business would have to shut down, and towns would relinquish thousands in sales taxes and real estate revenue from cultivators and dispensaries.
“The operator is stuck in the middle here,” Silverman said. “The CCC does not want to reward these towns for refusing to get to a compliant [agreement] by terminating their license.”
As part of their negotiations, some towns are trying to get cannabis businesses to waive their right to recoup impact fees that have already been paid,according to lawyers representing cannabis businesses.
Peter Most, a commercial litigation lawyer in Great Barrington who has written extensively about towns’ shortcomings on host community agreements, said that amounts to “abuse.”
“You can’t charge a fee without also having an invoice of some sort, and that is exactly what towns did for years,” Most said. “They should not be automatically entitled to keeping that money forever.”
It is of utmost concern to small cannabis companies, which are often barely profitable, said Donna Norman, chief executive of the dispensary Calyx Berkshire. She is behind the second Great Barrington lawsuit,suing for almost $400,000 in impact fees paid since 2020.
She said having Great Barrington take that money as she does her part in the community — by purchasing her own building, cosponsoring a local music festival in town, and helping construct workforce housing, among other moves — feels like an exploitative transaction and a lack of responsible stewardship.
“It leaves such a bad taste in your mouth when you see all these other towns giving their money back,” she said. “They know and have always known that this is not how this should go down.”
Diti Kohli can be reached at diti.kohli@globe.com. Follow her @ditikohli_.
Dozens of communities are demanding marijuana businesses pay up thousands of dollars annually, years after legislators did away with them. Read More
