House revises marijuana law

Clarifies commission can regulate municipal agreements

STATE HOUSE NEWS SERVICE

STATE MARIJUANA REGULATORS would be empowered to “review, regulate, and enforce” the legally-required contracts between marijuana businesses and their host communities under legislation adopted by the House on Wednesday evening.

Taking significant legislative action on marijuana for the first time since the Legislature rewrote the 2016 legalization ballot law in the summer of 2017, the House voted 121-33 to grant the Cannabis Control Commission authority to directly address one of the most vexing issues confronting the still-young legal marijuana industry and the regulators tasked with ensuring equitable access to the sector in Massachusetts. The bill passed after virtually no discussion or debate.

“The Cannabis Control Commission appreciates the steps taken by the Legislature to address concerns raised about host community agreements and to bring some clarity to the Commission’s authority,” a CCC spokesperson said in a statement. “The Commission will continue to monitor future developments regarding this issue.”

Host community agreements (HCAs) have been a persistent thorn in the side of regulators, marijuana entrepreneurs, and advocates almost since the commission began licensing businesses. Business owners, lawyers, and lobbyists have shared stories about cities or towns demanding more from businesses than the state’s laws allow. Others have pointed to the required agreements as one reason for the slower-than-anticipated rollout of the retail market and as a barrier that’s keeping small businesses from establishing themselves in the industry.

“What we heard from some of the folks where there was no clarification as to enforcement, where they could go if they felt that they were wrong and some felt that the legislation as is right now wasn’t clear enough,” House Speaker Robert DeLeo said Wednesday after a caucus of Democrats. “So I think that this today was meant strictly, not so much to reopen the whole discussion or debate relative to, you know, marijuana sales but to clarify the powers that the Cannabis Control Commission has.”

State law requires applicants for marijuana business licenses to enter into an HCA before the Cannabis Control Commission will consider an application. The law stipulates that those agreements cannot run for more than five years and that the community impact fee paid to the municipality by the licensee cannot exceed 3 percent of the establishment’s gross sales.

In addition to giving the commission clear authority to regulate and enforce HCAs, the bill the House approved would give municipalities the ability to waive the requirement to have an HCA, make clear that an HCA may not require any financial obligations beyond the maximum allowed 3 percent of gross sales fee, and clarify that the five-year term of an HCA begins on the day the business opens to customers.

In January 2019, the Cannabis Control Commission voted to formally request that the Legislature grant it “statutory authority to review and regulate” HCAs. The commission had previously voted down a proposal to include a review of HCAs as part of its licensing process, with Chairman Steven Hoffman declaring at the time that the commission lacked the legal authority to intervene or reject an application based on the HCA.

“To be able to take substantive action on these payments we are going to have to, in my opinion, go back to the Legislature,” Commissioner Kay Doyle, who prepared a report on HCAs and drafted the commissin’s  initial legislative recommendations, said a year ago. “We are in a place where our regulatory authority is not very clear. If we are challenged doing this, we would face increased scrutiny by the court and an uphill battle.”

Last March, the commission reviewed more than 50 HCAs submitted by municipalities, applicants, or members of the public and wrote a report detailing the myriad issues facing regulators. In the report that stemmed from that review, the commission said it found municipalities trying to skirt the spirit of the law, but found itself powerless to stop them.

“One municipality opted to initially expressly exceed the maximum percentage of gross sales revenue … by requiring a community impact fee of 4 percent gross sales revenue, but later amended affected agreements. Another municipality set a community impact of 3 percent gross sales revenue and a community benefit payment of an additional 2 percent gross sales revenue. Other municipalities have opted for different or changing percentages up to 3 percent gross sales,” the commission wrote in its report. “Some have opted for a set amount rather than a percentage of gross sales, contending that as long as the set amount does not exceed 3 percent, it is compliant with the law. Some host community agreements require no monetary payment.”

More recently, HCAs and municipal transactions related to the agreements have caught the attention of federal law enforcement.

US Attorney for Massachusetts Andrew Lelling has brought charges against former Fall River Mayor Jasiel Correia, alleging that he solicited bribes from at least four marijuana companies that applied to open in Fall River by telling them he would only issue local approvals needed — a responsibility that only rests with the city’s mayor — if he personally collected hundreds of thousands of dollars.

In November, the Boston Globe reported that a federal grand jury was looking into HCAs and that at least six communities — Great Barrington, Eastham, Leicester, Newton, Northampton, and Uxbridge — had received subpoenas from Lelling’s office seeking details on the communities’ HCAs with marijuana businesses.

In its updated guidance on HCAs issued last month, the commission said municipalities “should be aware that the negotiation of HCAs have been and may be subject to scrutiny by federal and state law enforcement agencies.”

That updated guidance document also noted that a Superior Court judge considering a civil case involving an HCA wrote in a decision that “the court agrees” that the commission “has no role under Chapter 94G in reviewing the contents of HCAs.”

After Correia was arrested in September on bribery charges related to his negotiation of HCAs on behalf of Fall River, Fall River Rep. Carole Fiola announced legislation that would require every municipality across the state to involve its top locally-elected board in the approval process for marijuana businesses.

Fiola’s bill, which remains before the Cannabis Committee, would mandate that retail marijuana companies cannot open unless they secure agreement, support, or non-opposition from a majority vote of a town’s select board.

Fiola filed an amendment seeking to make a similar change in the bill the House passed Wednesday, but she withdrew her amendment without discussion.

Rep. Dave Rogers, the House chair of the Cannabis Policy Committee, said the state’s municipal contracting law already governs how HCAs are negotiated and executed, and that House leaders did not see a need to make any changes in that area.

“We didn’t see a reason, at this point, to change that law. There is obviously an unfortunate situation in Fall River, but it has not been a sweeping traumatic outburst of these sorts of problems and we’re going to have a continuing dialogue about this issue,” Rogers, a Cambridge Democrat, said. “But, at least at this juncture, we didn’t see a reason to change the law because of one unfortunate situation.”

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The bill must now pass the Senate before it could reach Gov. Charlie Baker’s desk. Last year, Senate President Karen Spilka said she and the Senate are open to considering changes to the marijuana laws as recommended by the Cannabis Control Commission.