Cannabis Host Community Agreement in the Commonwealth
When recreational cannabis use was legalized in 2018, Massachusetts had developed regulatory processes to help municipalities and applicants obtain a license to sell cannabis products. Currently, to obtain a license for a Marijuana Establishment or Medical Marijuana Treatment Center, the applicant must obtain a Host Community Agreement (HCA) with the municipality. A Host Community Agreement is defined as a contract negotiated between a municipality and marijuana establishment to operate within the municipality. Other industries that could require HCA’s include gaming (casinos), and liquor stores.
The HCA must be agreed upon by the applicant and municipality following any local, state, and other laws. While municipalities are expected to be fair among all types and sizes of businesses, there are many ways to create unique HCA’s for each business. The applicant and municipality must uphold the agreements stated on the HCA to obtain a license.
The required terms of an Host Community Agreement are quite standard among all types of businesses in Massachusetts. The terms include the following: zoning bylaws, positive hiring practices, paid police detail for crowd and traffic control, security plans, etc. These terms have made for successful ME’s and MTC’s thus far.
There are many optional additions to the HCA as well that have started to ruffle the feathers of many applicants. The first optional addition is local excise tax, which can only be applied to retail purchases, has become quite common. The more unfavorable addition is the Community Impact Fee. While the premise of this is quite good, there is potential for an abuse of power. The current boundaries of the CIF is that it cannot amount to more than 3% of the gross annual sales, must be related to the costs imposed on the municipality, and can only be for 5 years. However, within that, can be a risk of creating unreasonable barriers for some businesses. Some municipalities have tried to demand higher impact fees, and there have even been cases of embezzlement. With the loose definitions of Community Impact Fees, the ME’s and MTC’s with the highest funding have had the best success in negotiating and obtaining HCAs.
Required by the state, municipalities are able to, at minimum, give Host Community Agreements at a 20% rate of liquor stores. For example, if a municipality has 10 liquor stores, they are able to provide 2 HCAs at minimum. Currently out of the 351 municipalities, there are 239 with zoning for HCAs (either currently or in the near future) in place. There are about 1400 liquor stores currently holding active licenses. Using the same ratio of active municipalities (~65%), this means that within the 239 municipalities there are 910 liquor stores. Once we then apply the 20% law, there are 182 HCA’s up for grabs. However, if all municipalities were opened for zoning, there would be at least 280 retail HCA’s available.
While Host Community Agreements have been put in place to help facilitate placement for the licensees, it is important to note that these 280 HCA’s are only for Retail Licensees. Other licenses, including manufacturing and cultivation, have less restrictions because they are not customer facing. They do not deal with typical HCA issues such as traffic flow and parking. A great example of the difference in zoning is that in Uxbridge two cultivation sites, Cultivate and Gibby’s Garden, are close to each other, but two retail businesses would not be able to do that. While Uxbridge has done a great job being open to cannabis, there is potential for improving equity in the market as well. They are not impacted by the War on Drugs, but could open the capacity for more equity businesses.
With the almost 100 HCA opportunities in the near future, it is imperative that they are done both ethically and equitably. Municipalities should be excited for what the marijuana industry could do for their communities, and help to add value to a HCA. They should minimize any hoops Although these large MSO’s can provide potentially larger CIF’s, municipalities can benefit from helping equity businesses. While municipalities and the Cannabis Control Commission have not yet set a precedent on the ratio of adult-use to equity to medical licensees, Boston has done a great job in paving the way for more municipalities to value equity businesses.
Many other municipalities have also begun to change the name of cannabis by incorporating more equity businesses into the market. Worcester has chosen 20% of their retail businesses to be from the state’s Economic Empowerment program. Cambridge also has begun its fight for equity, but has had some bumps in the road. In September 2019, Cambridge City Council passed an ordinance allowing for only Economic Empowerment businesses to obtain HCA’s, thus allowing EE candidates the ability to apply and obtain a retail license. Many large Medical Marijuana Treatment Centers in Cambridge were mad about this ruling, saying it could cause large financial losses, and began suing the municipality. However, the ordinance has helped bring awareness to the barriers of entry that many equity businesses have faced.