Baker signs bill bringing equity to cannabis industry
Also paves way for marijuana cafes
GOV. CHARLIE BAKER on Thursday signed a bill aimed at giving minority cannabis entrepreneurs easier access into the industry, and also paving the way for municipalities to allow marijuana cafes. The bill better regulates host community agreements, creates a state-run loan fund for minority entrepreneurs, lowers taxes for marijuana businesses, and makes it easier to expunge records for old marijuana offenses.
Speaking to reporters moments after the bill was signed, Cannabis Control Commissioner Ava Callender Concepcion said she was “shaking with relief and happiness.”
“This is the most comprehensive piece of legislation on cannabis since the establishment of the Cannabis Control Commission,” Concepcion said.
Baker was an early opponent of cannabis legalization and has pushed unsuccessfully for stronger laws prohibiting drugged driving, but he has said he is committed to implementing the law. He wrote in his signing letter that he supports many of the provisions to improve regulation of the cannabis industry and “to expand opportunities for social equity businesses.”
Sarah Kim, the interim chair of the Cannabis Control Commission, said the commission has been analyzing the legislation. We “will be implementing it in a responsible and thoughtful manner,” she said. “We intend to use the period allotted to us to implement the legislation.” The members of the Cannabis Control Commission have supported and lobbied for the bill.
State law includes a “social equity” mandate, which requires the commission to prioritize helping those disproportionately impacted by prior enforcement of drug laws enter the legal marijuana industry. But practically, that has been difficult. The biggest problems have been trouble getting municipal approval and lack of access to start-up capital in an industry where typical bank loans and other financing are unavailable due to federal prohibition.
As of this month, only 7 percent of businesses with some level of commission license approval were “economic empowerment” enterprises and 18 percent were “social equity” businesses. These are designations given to businesses run by minority entrepreneurs or people disproportionately affected by the war on drugs. Some companies may fit in both categories.
The bill aims to address the financing problem by establishing a Social Equity Trust Fund, paid for with 15 percent of marijuana tax revenues, to give grants and loans to minority entrepreneurs. This will be set up by the Executive Office of Housing and Economic Development, and appointments to a board advising the fund must be named by January 2023.
The crux of the reform bill addresses an area the industry has been complaining about for years – the ability of host communities to demand high fees from marijuana businesses without regulation.
While officially the law caps community impact fees at 3 percent of sales, practically, many communities have charged more than that or included additional “donations.” The Cannabis Control Commission has maintained that it has no authority to regulate host community agreements, beyond making sure a business signs one.
The new law gives the commission oversight and clarifies that communities cannot charge businesses any monetary contribution that is more than 3 percent of sales, and the fees must directly relate to impacts imposed on the community. The bill establishes that no host community agreement can last for more than eight years after a business opens.
Another provision with a major impact is the creation of a voting mechanism by which cities and towns can opt in to allowing cannabis cafes, or “social consumption” sites. While these sites were included in the ballot question legalizing marijuana, regulators delayed launching that part of the industry because a technical fix was needed to set up a way for communities to opt into hosting one.
In 2019, the Cannabis Control Commission laid out their vision for a social consumption pilot program in up to 12 cities and towns that opted in, with places where adult visitors could buy and consume marijuana – similar to a bar. They planned to limit the initial licenses to social equity entrepreneurs. The initial regulations included various safety provisions, like regulating portion sizes and allowing smoking only outdoors.
However, the commission members today are all different than the panel in place in 2019. The new regulators could change the proposal through the regulatory review process, and several commissioners suggested that they planned to do so.
Camargo called existing regulations a “placeholder” and suggested this commission would have more to say. “I think social consumption needs to be revisited,” she said, adding that there needs to be more thought put into “how to make it safe and equitable.”
Commissioner Kimberly Roy added, “We’re not going to hit the ground at 180 miles per hour. We’re going to crawl before we walk and, hopefully, we can analyze the positive and if there are any negatives at each step of the way.”
The new law also makes it easier to get records expunged for old marijuana possession and cultivation charges. It loosens some regulations regarding what criminal convictions would make someone unsuitable to own or work in a marijuana business.
It lets marijuana companies be treated as legal businesses under the state tax code, starting in the 2022 tax year. Currently, because marijuana is federally illegal, marijuana businesses are taxed at a higher rate than other businesses and cannot deduct business expenses.
Sieh Samura, owner and CEO of Yamba Market in Cambridge and a vocal advocate for minority entrepreneurs, said the effective tax rate for legal marijuana businesses can be close to 75 percent. “It makes the barrier to entry higher and presents a lot of obstacles for entrepreneurs, especially for those with less resources,” he said.
Samura said the new law will have a huge impact by making taxes fairer, providing oversight to what is now a cutthroat competition for host community agreements, and giving additional money to help minority entrepreneurs enter the business. “We’ve got to see the money start flowing, and the earlier it starts flowing, the earlier we’ll see an effect in the bigger market on how many equity businesses there are, how much diversity there is,” Samura said.Baker vetoed one section, which would have established a commission to explore whether pediatric medical marijuana patients can be given medical marijuana in school. Baker said the language was too “prescriptive,” requiring the study to come up with ways to make marijuana available in schools rather than determining if it should be allowed. The marijuana legalization ballot questions and initial legislation, Baker said, both made clear that marijuana must be kept away from school grounds.