Editorial: Cannabis businesses aren't government piggy banks anymore
Back in 2018 when nascent Massachusetts recreational marijuana dispensaries were vying to become the first cannabis businesses to open east of the Mississippi River and cash in on the newly legalized industry, their potential impact on their host communities was unknown. Fear and anticipation ruled the day, and their yet-to-be-determined effects on traffic, crime, and a host of other potentially deleterious outcomes dictated how local governments treated these startups.
In this environment, municipalities could extract significant community-impact payments from the new cannabis businesses as part of their host community agreements, which were required by regulators in order for any business to open. In Worcester, for example, the first dispensary to consummate one of these agreements – Good Chemistry – agreed to pay the City $450,000 over three years, plus an escalating percentage of gross sales, in addition to donating $10,000 annually to public charities. This was all on top of the 17% in state and 3% in local taxes levied against retail marijuana sales. The Cannabis Control Commission declined to regulate these deals, even though many went beyond what communities could legally ask.
What was discovered in the six years since the first dispensaries opened is marijuana businesses are basically just like any other business, with limited community impacts. Yes, in the beginning, the cannabis craze did have an outsized impact, such as when Leicester dispensary Cultivate in November 2017 became one of the first two dispensaries to open in the state, and the line of cars stretched into residential streets, requiring police overtime to manage the traffic.Those kinds of community impacts were short lived. A new law in 2022 required communities to document any financial impact caused by a cannabis business, and fees should be directly tied to those measurable impacts.
Fast forward to January of this year, when dispensary Caroline’s Cannabis won a $1.2-million settlement from the Town of Uxbridge in a lawsuit over millions collected in community-impact fees, which Caroline’s claimed they didn’t reflect its community impact. The Massachusetts Cannabis Business Association then called on all local governments to refund fees they couldn’t justify keeping, which MassCBA says could be as high as $165 million. Worcester and Boston, the two communities with the most dispensaries, are already ahead of the curve. In November 2022, Boston returned $3 million in fees to nine businesses. After collecting $5.2 million over a four-year period, Worcester stopped collecting the fees altogether in 2023.
The perceived cannabis industry gold rush has come to an end. Businesses now are struggling and closing, as supply has outpaced demand. Not only must excessive fees be stopped, but the state should lower its 17% tax on cannabis retail sales, as it has collected $960 million since 2018. Previously collected fees municipalities cannot justify should be refunded, and any future fees must be tied to measurable impacts. Cannabis firms are like most other businesses and should be freed from excess fees and taxes, in order to be competitive. They shouldn’t have to pay a king’s ransom just to exist.
WBJ Web Partners
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