The cannabis industry in Massachusetts is facing significant hurdles due to issues surrounding Host Community Agreements (HCAs). With a growing number of businesses caught between municipal demands and state regulations, let’s explore the ongoing challenges and potential solutions shaping the future of cannabis operations in the state.
Why Host Community Agreements Are a Major Roadblock
Massachusetts cannabis businesses are increasingly struggling with HCA compliance. Town officials aim to maximize fee collections, while the Cannabis Control Commission (CCC) enforces strict regulations. As these two sides clash, licensees find themselves in an uncertain landscape.
Bountiful Farms: A Case Study in Compliance Struggles
Bountiful Farms of Natick is a prime example of these challenges. Their license renewal was denied due to additional costs imposed by the town beyond the authorized community impact fee. Natick’s actions breached a 2022 law limiting fees to 3% of gross annual sales unless directly related to the business’s impact. With restricted legal options, the farm’s future remains uncertain.
Statewide Impact: Non-Compliant HCAs Stall Growth
Bountiful Farms is not alone. In 2023, the CCC rejected nearly 75% of submitted HCAs—461 out of 615—citing noncompliance. Without valid HCAs, businesses face operational shutdowns and financial strain from legal and rental expenses.
The ‘Wild West’ of Cannabis Negotiations
Commissioner Kimberly Roy labeled HCA negotiations as the ‘wild west,’ highlighting how municipalities hold excessive bargaining power. Despite recreational cannabis legalization in 2016, ambiguous legislation allowed towns to impose fees surpassing the 3% limit, worsening industry instability.
Legal Battles and the Fight for Fair Agreements
The industry has seen several lawsuits over illegal fees:
- Caroline’s Cannabis (Uxbridge): Successfully sued and recovered $1.2 million.
- Caroline Pineau (Haverhill): Settled for 70% reimbursement of paid fees.
- Newton: Facing potential lawsuits from three cannabis stores seeking refunds, although the mayor insists previous agreements will remain unchanged.
CCC’s Role and Recent Efforts
In December, the CCC released new guidelines clarifying which expenses qualify as impact fees. Bountiful Farms used these guidelines in their renegotiation attempt with Natick. Although the CCC supports operators through letters for lawsuits, enforcement remains limited.
Calls for Legislative Reform
Michael Ross of Prince Lobel’s Cannabis Practice Group suggests legislative intervention is critical. The CCC’s lack of enforcement power hampers progress, while industry leaders like O’Brien argue that the guidelines came too late and lack enforceability.
Deadline Extensions Offer Breathing Room
To prevent immediate shutdowns, the CCC extended the compliance deadline by 600 days. Commissioner Roy emphasized the importance of this extension, noting the need for better municipal understanding of legal requirements.
The Future of HCAs in Massachusetts
Ross questions the necessity of HCAs, pointing out that obtaining these agreements remains expensive and time-consuming amid declining cannabis prices and federal banking restrictions. He challenges policymakers to reconsider the practical value of HCAs for both businesses and municipalities.