Massachusetts regulators are struggling to crack down on exorbitant fees local governments charge cannabis businesses to open shop — three years after a new law was supposed to address the problem.
Why it matters: Cannabis business owners describe some local governments’ terms as “shakedowns” that squeeze them before they have a chance to turn a profit.
- These issues persist as a growing number of mom-and-pop cannabis shops sell to multi-state corporations or close altogether, leaving customers with fewer options.
Driving the news: A new audit of the Cannabis Control Commission shed light on the problem with host community agreements, which businesses must obtain from a local government to get a CCC license.
- It’s one of several oversight challenges the Massachusetts Auditor’s Office says plagued the CCC between July 2022 and June 2024.
How it works: Under state law, a host community may charge a “community impact fee” of up to 3% of the business’s gross annual sales.
- It can also make a business get a paid police detail to manage traffic during peak hours, among other requirements.
Yes, but: Municipalities soon were imposing additional fees, such as lump-sum payments to cities and towns or donations to local charities.
- And the law didn’t explicitly give state regulators the power to intervene.
State of play: The 2022 cannabis reform law was supposed to empower the agency to inspect the agreements, but the audit says the CCC failed to conduct timely reviews.
- The CCC said it has faced major hurdles reviewing existing agreements for cannabis businesses seeking to renew their licenses.
- Several municipalities argue the 2022 law shouldn’t apply to existing agreements. Last year, an Essex County Superior Court judge agreed.
By the numbers: The auditor’s office reviewed a sample of 26 agreements and found that 18 violated the 2022 law, imposing excessive fees, mandatory donations or indefinite terms.
- In Brookline, the audit says, one dispensary had to donate $975,000, while other businesses had no such requirement.
Threat level: The auditor’s report says the lack of oversight into the agreements “creates an environment in which only the largest businesses, often multi-state operators, can thrive.”…