3% cannabis impact fee covers costs that don’t exist

IN 2017, Massachusetts lawmakers revised the cannabis legalization ballot measure approved by voters the year before.  They made improvements, such as expanding the Cannabis Control Commission from three members to five, and increasing the local tax option from 2 percent to 3 percent.

They also made mistakes, including mandating host community agreements between municipalities and cannabis operators that allowed towns to collect an additional 3 percent of gross sales.  This stream of funds was meant to offset costs imposed upon the municipality “by the operation of the marijuana establishment.”

After more than two years of legal cannabis sales, it’s hard to make a case that towns have incurred any such costs.  There have been no reported incidents of sales to minors, no reports of increased crime around cannabis stores, no reported increase in cannabis-intoxicated driving arrests, no reported impacts on nearby businesses or neighborhoods, and no reported staffing or budget increases in police, fire, or health departments attributable to cannabis stores.

The most visible town involvement has been police details, most of which have been discontinued and all of which were paid directly by cannabis store operating funds, not through community impact fees.  In short, towns are collecting that extra 3 percent for costs that don’t exist.

Northampton Mayor David Narkewicz made this point when, in January, he announced he wouldn’t collect the impact fees. Cannabis businesses operate like any other businesses, he said, adding, “we haven’t seen the kinds of impacts that I know opponents of legalization were concerned about.”

Those concerns were based on fear fanned by political and municipal leaders.  In a March 2016 Boston Globe anti-legalization op-ed he co-authored, Gov. Charlie Baker warned about “serious and immediate implications for public safety” and “costs to our first responders, our medical system, and our cities and towns” from increased ambulance rides and emergency room visits.

Piling on, Massachusetts Municipal Association CEO and executive director Geoff Beckwith in May 2018 said the new industry could end up costing more than it’s worth, and that “increased costs to communities will clearly be there.”

Baker and Beckwith can rest easy.  Through November 2020, cannabis sales have surpassed $1 billion and have pumped more than $200 million into state and town coffers, not to mention the new jobs and property tax receipts.  As for increased health costs, the budget for the state Department of Public Health in 2020 represented about 1.5 percent of the total state budget, the same that it did in 2017, the year before legal cannabis sales began.

A bill filed last month by state Rep. Andy Vargas of Haverhill would take a smart approach to these questionable impact fees, permitting collection for actual costs—which towns would need to verify through annual reports—while protecting cannabis businesses from making payments beyond what the law allows.

It bears repeating that these businesses are already paying a 3 percent tax to towns based on gross sales.  And, most host community agreements include additional payments by cannabis businesses to local charities.  These “voluntary” payments are necessary to secure local approval.

By comparison, liquor stores pay nothing to towns based on sales, nor do any other retail businesses, save for small hotel room fees and restaurant meal fees collected in certain cities and towns.  Nor are liquor license approvals dependent upon charitable contributions.

Municipal officials like Beckwith have compared the impact fees to payments made to communities by real estate developers.  This is a stretch.  Apartment buildings and housing developments bring new students to schools, new cars to streets, and new users of water, sewage, trash removal and other municipal services.  Nearly all cannabis businesses utilize existing buildings and add little if anything in new service demands.

Legislators and municipal leaders should acknowledge what Northampton’s Narkewicz already has: Health and public safety costs predicted by cannabis legalization opponents have not materialized.  The Massachusetts cannabis industry is closely regulated and heavily taxed as it is.  It’s time to end unfair payments extracted to cover unsubstantiated costs.

James Borghesani is president of Primepoint Media, a firm representing cannabis and non-cannabis clients. He served as communications director for the 2016 cannabis legalization campaign.