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February 2, 2024

In wake of Uxbridge $1.2M lawsuit settlement, Worcester reveals it stopped collecting cannabis impact fees in early 2023

Photo | Timothy Doyle Worcester City Hall

Worcester joined a growing list of municipalities no longer collecting community impact fees from cannabis businesses in January 2023, after collecting nearly $5.2 million in those fees from fiscal 2019 to 2023.

This revelation comes in the wake of the January announcement of a $1.2-million settlement the Town of Uxbridge made to resolve a lawsuit over its community impact fees filed by Caroline’s Cannabis, a cannabis business that operates multiple dispensaries including one in Uxbridge. The settlement spurred the Massachusetts Cannabis Business Association to call for municipalities to stop collecting any excess fees and refund overages to businesses.

“Hopefully this is a cautionary tale for those municipalities that are still resistant to refunding unsubstantiated community impact fees,” Thomas MacMillian, the legal representative for Caroline’s, told WBJ in an email at the time.

The City of Worcester doesn’t have plans to refund any fees to the 15 cannabis businesses operating in the city. However, the City reduced its fees from a six-figure dollar amount reflecting a percentage of cannabis businesses’ revenue to a flat $5,000 in 2022, before doing away with them altogether at the start of 2023.

“Worcester was the only municipality that we dealt with that was proactive,” Alex Mazin, owner of Bud’s Goods, which operates a dispensary on West Boylston Street in Worcester, said of the decision to end the collection of fees.

These fees, which have been the source of persistent controversy since they were codified into law by the Massachusetts Legislature in 2017, intend to cover any unique costs imposed on cities and towns caused by hosting cannabis businesses. 

This legislative action codified into law a practice emerged in the wake of the legalization of medical marijuana in 2012, where cities and towns would mandate prospective cannabis businesses sign a host community agreement that included payments to the municipality in exchange for a letter of non-opposition. Medical dispensaries needed a letter of non-opposition to win approval to open from the Massachusetts Department of Public Health, which at the time were tasked with regulating medical marijuana businesses. 

Business leaders in the cannabis space have long decried these fees as exuberant and unnecessary, claiming cannabis businesses do not impose any unique costs and there has been little accountability for how cities and towns have spent this money. 

In August 2022, the state Legislature passed a cannabis reform law clarifying the rules around host community agreements and required the state regulatory agency Cannabis Control Commission to begin scrutinizing these agreements for compliance. Since the passage of that law, cannabis businesses have gone on the offensive, filing at least two lawsuits against municipalities in an attempt to claw back some of the fees they had been obligated to pay. 

Lawsuits and refunds

Another impact fee-related lawsuit, filed by Haverhill-based dispensary Stem against the City of Haverhill, is working its way through Essex County Superior Court, according to court records. 

A handful of municipalities have stopped collecting fees, with some going as far as to return the fees to the businesses that paid them. 

Amherst and Northampton stopped collecting fees, according to a May 2022 report from the Massachusetts Cannabis Business Association, a Cambridge-based organization advocating on behalf of the cannabis industry. Boston went a step further, returning the fees to businesses in November 2022, according to reporting by the Boston Globe

“Returning unjustly-collected community impact fees is the right thing to do, and other communities need to follow the precedent set in Boston by returning fees to all affected businesses,” David O’Brien, president of MassCBA, said in a release issued following the Uxbridge settlement. “MassCBA will continue to fight against illegal community impact fees until every cannabis business receives their refund check.”

Changes in Worcester

Worcester joined the growing list of cities and towns who have stopped collecting impact fees in January 2023, said Tom Matthews, media and public relations administrator for the City of Worcester. This followed a change to the fee collection practices in 2022, where the city went from collecting a percentage of revenue from businesses to charging a flat rate of $5,000.

This is a significant change from the initial fees tied to host community agreements in Worcester. For example, the first dispensary to consummate one of these agreements – Good Chemistry, which opened in 2019 – 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.

Referencing the original host community agreement that Bud’s Goods signed with the City, Mazin said it was one of the more straightforward agreements he had seen at that point. Bud’s dispensary on West Boylston Street opened in 2020.

“It was one of the most fair and standard host community agreements that I had seen across the state,” Mazin said, “So it felt appropriate to sign.” 

Mazin said a key difference between his interactions with Worcester when compared to other municipalities was the City has its own legal counsel, while other municipalities rely on outside law firms for guidance. Mazin said this allowed the City to be proactive in changing its fee collection policy, allowing Worcester to avoid protracted legal battles with cannabis businesses.

“The majority of towns outsource their legal work,” Mazin said, referencing K.P Law, a Boston-based firm that represents a number of Massachusetts municipalities. “That’s really what triggered this whole domino of originally perceiving a host community agreement in any other way than it was blatantly written [into law].

“If you can’t show us the impact, how can we pay the fee?” he said, referencing the fact that municipalities have collected percentages of cannabis business revenues without establishing what costs are being imposed by the existence of these businesses or what they are spending the funds on.

The City of Worcester outlined a number of costs it said were imposed by the operation of cannabis businesses in the city in a January email to WBJ, including the creation of an RFP process to award licenses, the process of negotiating the host agreements, and the establishment of zoning regulations, ordinances, and special permits to license and regulate cannabis businesses.

While Worcester has stopped collecting community impact fees, it does not appear that the City has any intentions of following Boston’s lead in refunding any of the $5.2 million it has collected from cannabis businesses since fiscal 2019.

“The City of Worcester’s host community agreements contain mutually agreed upon terms and conditions, one of which is the ability to require a community impact fee pursuant to M.G. L. Chapter 94G,” Matthews said via email. “We have continuously worked to amend our local agreements and processes to maintain compliance with the changing law and will continue to do anything necessary to remain compliant.”

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February 3, 2024

So let me get this straight, impact fees were imposed because... they thought cannabis businesses would ruin the town somehow... and now that it's obvious they do not... they now claim the impact is, "the creation of an RFP process to award licenses, the process of negotiating the host agreements, and the establishment of zoning regulations, ordinances, and special permits to license and regulate cannabis businesses". That's just the normal cost of regulating any business. This is BS plain and simple.

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