Cannabis Regulators Plug Holes In Host Community Agreement Language

(From our collaborative partnership with the good people from Talking Joints Memo)

Two weeks ago, multiple cannabis industry stakeholders testified before members of the Massachusetts Cannabis Control Commission about the potential pitfalls around changes to the Host Community Agreement (HCA) process. Whereas the agency is drafting rule updates (required by a state law passed last year) to ostensibly prevent municipalities from extorting canna companies in their borders via excessive unjustified fees and other questionable practices, business owners pleaded with CCC members to not open the door to new kinds of abuse. 

“You’re going to allow a host community to end relations with a marijuana establishment just because they don’t want to comply with the new law?” Alissa Nowak of Lucky Green Ladies suggested adjustments that would shift more of the HCA burden onto the towns and away from applicants: “What about cannabis operators, especially Social Equity and Economic Empowerment operators, who spent their entire life savings on this endeavor? If there is a failure to submit a compliant HCA, there should be a penalty to the host community until they do submit a compliant HCA.”

In describing the agency’s efforts to address such concerns in authoring these adjustments, CCC Director of Licensing Kyle Potvin said the new language “is not to promote the idea of municipalities and marijuana establishments to dissolve their relationships.” Rather, “It’s there to basically be included [so] if this happens, [businesses will] know [they] have equitable relief options … from the commission.”

Included in the new language: “If a Host Community discontinues relations with a Marijuana Establishment, then a Marijuana Establishment may submit a request for equitable relief to the Commission.” Also, “A Marijuana Establishment’s request for equitable relief must identify facts, information, and any documentation to support why a Marijuana Establishment should be considered for equitable remedies.” And, after the “Commission conduct[s] a paper review of the petition and make[s] a recommendation to the Commission,” “The Commission may exercise its discretion to grant one or more of the following equitable remedies to a Marijuana Establishment: (i) Extension of a License expiration date without incurring additional prorated fees; (ii) Waiver of a Change of Location fee; (iii) Other equitable relief as determined by the Commission.”

Considering the proposed rewrites, Commissioner Bruce Stebbins said, “What I was envisioning and I think what we wanted to see was some documentation around the demonstration of good faith and fair dealing. The way that this reads now is, Host community, if you decide to discontinue a relationship with a marijuana establishment, you must demonstrate good faith and fair dealing. But who are [cities and towns] reporting that effort to?”

To which the body’s acting chair, Commissioner Ava Callender Concepcion, said, “That does seem to be a key component.” After which enforcement counsel Rebecca Lopez noted, “From an implementation standpoint, introducing a burden of good faith will complicate this. … In terms of enforcing accountability with this policy objective, it would be easier to ferret out bad faith than good faith. You can get a sense of bad faith from the conduct, from the actions, the correspondence, but good faith is just a little more challenging.”

Lopez then proposed new language: “A host community shall notify a marijuana establishment if it no longer intends to continue as a host community for a marijuana establishment. A host community shall not discontinue relations with a marijuana establishment in bad faith. On receipt of a notice of discontinuance … from a host community, a marijuana establishment shall notify the commission, [or] may submit a request for equitable relief from the commission.”

Commissioner Kimberly Roy said she thought the phrase “bad faith” does not go far enough, but Lopez explained that it’s the CCC which will determine the definition. Roy said a lot of business owners have told her their biggest concern is a reluctance by municipalities to return to the table and renew HCAs that have already been in place for several years, particularly as a result of the new compliance parameters put in place under these new rules. Lopez said such a reluctance could indeed be considered bad faith though, spurring the group to reach consensus on that rewrite.

As for how the CCC will handle recalcitrant municipalities, per additions, “Failure by a Host Community to correct the noncompliant conduct may result in one or more of the following”:

  • Issuance of sanctions pursuant to [state law];
  • Loss of a Host Community’s good compliance standing;
  • Abstaining from consideration of any new license applications affiliated with a Host Community until a Host Community’s good compliance standing is restored; 
  • Publication of a Host Community lack of good compliance standing in a form and manner determined by the Commission

Regarding the latter, Commissioners Nurys Camargo and Stebbins questioned the publication of such a list, with the former saying, “It’s good to know who are the good players out there and what municipalities are not acting in good faith.” But asking, “Are we going to bring a naughty list to the commission every month?” In order to reach a consensus, commissioners replaced the word “publication” with “identification.”

In addition to those specific discussions, CCC members have spent more than 14 hours this week so far hammering out new rules around HCAs. Among them, the agency polished language around prohibited municipal practices such as:

  • A Host Community shall not attempt to collect impact fees relating to any operations occurring prior to the date a Marijuana Establishment is granted a final license by the Commission;
  • A Host Community shall not attempt to collect impact fees from any Marijuana Establishment that has held a final license for more than nine years;
  • In circumstances where the licensed Premises is the site of multiple final licenses, no Host Community may amplify its assessment of alleged impact fee(s) by assigning the same impact fee(s) to each final license operating from the licensed Premises without regard to the distinct operations of each licensed entity;
  • No Host Community may include additional payments or obligations in its invoice of alleged impact fees, including but not limited to monetary payments, in-kind contributions and charitable contributions by a Marijuana Establishment to a Host Community or any other organization;
  • A Host Community shall not include any legal costs incurred by a Host Community to defend against a lawsuit brought by a Marijuana Establishment in its invoice of alleged impact fees.

Some of that language and other phrasing noted herein may still change as a result of this week’s work by the commission. They are scheduled to meet again to finish rewrites on Wednesday. Final versions of the new regulations need to be filed with the Secretary of the Commonwealth no later than Oct. 13, with the aim of promulgation by Nov. 9, in compliance with Chapter 180. You can read the draft legislation in its latest form here.

“The goal tomorrow will be to conclude Host Community Agreements,” Concepcion said.

At a media availability Following Tuesday’s meeting, the chair noted that her personal goal for the process was “to look at the law, look at the prior law, and look at the legislature’s intention.” She added that she hopes the rewrites will add an overdue HCA framework, saying, “Is it more equitable for licensees? Yes, it should be. But also for municipalities, it helps with providing some clarity.”