New Report Questions Accounting in Cannabis Impact Fees by Franklin and Other Towns

A new analysis of ‘community impact fees’ collected by Massachusetts municipal governments from local cannabis business operators reveals that while the state’s municipalities have collected more than $50 million in fees since the legalization of adult-use cannabis retail sales, the fees are plagued by a lack of transparent accounting and little oversight. Indeed, the author even found significant discrepancies in reporting by the Town of Franklin.

The report, which was written by Dr. Jeffrey Moyer of the School of Public Policy and Urban Affairs at Northeastern University in May 2022, reviewed a sampling of 54 cities and towns that each reported the amount of money they have collected in community impact fees, and how the money has been spent or is planned to be spent. The reports were obtained through public records request to 88 municipalities across the Commonwealth and ranged from small towns such as Georgetown and Barre to large communities including Fall River and Brookline. However, several of the Commonwealth’s largest cities, including Boston, Lowell, and Springfield, did not respond to the public records request. 

“Our review of just a sampling of communities found widespread differences in how cities and towns collect, track, and report the spending of fees from cannabis business operators,” said Dr. Jeffrey Moyer. “With no effective oversight over the collection or spending of these fees, it’s up to municipalities to comply with the law that governs them. Our research shows that while some municipalities are following the spirit of the law and striving for real transparency, most are not.”

Out of the 54 towns that responded to the public records request, 3 towns simply did not provide a total amount of impact fees collected nor did they provide an explanation as to why that total amount was not available: Bellingham, Millbury, and Westfield. The remaining 4 towns that did not provide a total amount of fees collected have either stopped collecting impact fees (Amesbury) or have not received any money from their HCA’s (Brewster, Hatfield, and Southbridge).

The remaining 47 towns collected $53,303,559 in total in impact fees since 2018. The average amount was $1,134,118 while the median was $750,000. The towns that collected the most money were Fall River ($5,343,805) followed by Brookline ($4,916,802), while the towns of West Stockbridge and Cheshire collected the least amount of money ($3,404 and $5,000 respectively).

The report also looked at amounts Reported by Town vs. Reported to the CCC.

For example, the second column in the table below shows what Franklin received from impact fees according to their Public Records Request (PRR) responses. The third column is the amount of money that the town has reported to have received under impact fees to the Cannabis Control Commission (CCC). The last column shows the percent difference between how much money the town reported according to the author’s PRR and how much they reported to the CCC.

Similarly, Amherst reported to have received $459,588.52 from HCA impact fees, but according to the CCC this number is only $284,932. Meaning that they have reported 62% of the money that they have received to the CCC. For a town like Brookline, 136.68% can be interpreted as; Brookline reported 36.68% more money to the CCC than was reported through the PRR

A prior report by Dr. Moyer found that the ‘host community agreements’ which govern community impact fees regularly violate state law, which states that “community impact fee[s] shall be reasonably related to the costs imposed upon the municipality by the operation of the marijuana establishment.”

However, there is no indication in the report that the author tried to determine why the numbers differed so much or even whether they were simply mistaken figures.

Out of the 54 towns examined in the new report, only 42 explained where money from impact fees would be going (totaling $38,983,482). The 12 towns that did not explain where the money collected under the HCA’s would go or what it would be used for were: Amesbury, Amherst, Bellingham, Brewster, Bridgewater, Brookline, Fall River, Gloucester, Hatfield, Holyoke, Marlborough and Sheffield.

Out of those 42 towns, 6 towns reported that they have not used nor expended the funds in anyway. 21 stated that they had moved all the money collected under “impact fee payments” into a General Fund. 8 towns used some of the money for infrastructure. 6 moved some of the money into some sort of stabilization fund. 4 allocated some of the money towards police and firefighting needs. 2 allocated some of the money to the public school system. 1 town spent some of the money on administrative tasks.

The author included an appendix with the responses that towns did provide. Franklin’s enlarged upon both the revenue gathering and spending aspects of HCA:

Cannabis Industry Views

“As a business owner, I track every dollar that goes through my business. It’s disturbing that cities and towns in Massachusetts are collecting millions of dollars from hard-working businesses, and can’t even say where the money is going,” said Caroline Pineau, owner of Stem, a retail shop in Haverhill. “We’ve been open for three years now, and in that time, we’ve shown that we’re no different than any other local business. We shouldn’t be treated as a piggy bank that can be raided for local spending that has nothing to do with our business. If Massachusetts is really committed to reversing the harmful effects of cannabis prohibition, it’s time to stop treating cannabis businesses like we’re second-class citizens. And it’s time to stop charging impact fees without demonstrating any actual impacts.”

"It’s clear that because of the Commonwealth’s failure to clearly enforce the law around host community agreements, many municipalities are using community impact fees as a slush fund with zero accountability and little transparency. Nearly four years after legalization, it’s clear that cannabis businesses have no more impact on their municipalities than any other business, but only in this industry is legalized extortion of businesses the norm,” said MassCBA President and CEO David O’Brien. “Cannabis businesses are happy to contribute to the cost of municipal services related to their operation, but they need accountability and transparency. Thankfully, the legislature is on the verge of setting things straight by giving the state’s Cannabis Control Commission clear authority to review and monitor host community agreements.”

Legislation approved by both the House and Senate this session, will soon be deliberated by a legislative conference committee, would reform the host community agreement process by requiring cities and towns to document any impacts and base their fees on those impacts, while instructing the state’s Cannabis Control Commission to reject any agreements that call for excessive payments. The legislation would also require municipalities to consider equity when awarding local marijuana permits and make other changes to level the playing field for businesses owned by those affected by the War on Drugs.

“This report further shows how arbitrary and unequal the Host Community Agreement process has become. It’s a major roadblock for our goal of creating a diverse, equitable, locally owned cannabis industry, and we have to do better,” said Senator Sonia Chang-Díaz, Senate Chair of the Legislature’s Joint Committee on Cannabis Policy. “Many of us, both inside and outside the State House, have put years of sweat equity into improving this law, and I’m thrilled that legislation is close to the finish line this session to reform HCAs and create a more racially equitable industry. I look forward to the day soon when our cannabis marketplace lives up to our values and aspirations.”