In January, Caroline Frankel, owner of Caroline’s Cannabis, won a $1.2 million in a settlement from the town of Uxbridge, after the town couldn’t prove how it had spent community impact fees her business had paid.
That win sent a wave of hope throughout the cannabis industry, which has long complained that community impact fees exploit their businesses. Now a number of cannabis companies are suing the municipalities in which they’re based in an attempt to get their money back.
What are community impact fees?
Before opening, a cannabis business is required to sign a Host Community Agreement, a contract with the municipality where it hopes to do business. One part of those agreements is the community impact fee, a 3% additional tax originally intended to offset possible negative effects or additional costs from being a cannabis business, such as a town needing to provide more law enforcement or security. Over time, dispensaries began complaining about the fees, claiming that cities and towns were taking their money without showing how the funds were being used.
Cannabis is already a heavily taxed at 20%, including CIFs. As businesses are struggling to stay afloat, that 3% off the top is only making it more difficult. In her lawsuit in Worcester Superior Court, Frankel cited language in her contract with Uxbridge that said she was required to pay 3% of the company’s annual gross revenue to the town “as long as the fee is reasonably related to the costs imposed upon the town by the operation of the marijuana establishment.”
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But she said the town never told her how it was spending that money.
“Unfortunately, it took litigation for the town to recognize there are no negative impacts and to resolve the case. This case should help other operators and municipalities to work out an agreement,” Frankel said at the time.
A sweeping cannabis bill in 2022 put the Cannabis Control Commission in charge of reviewing HCAs, and the state agency replaced new regulations in March, including changes to community impact fees. The changes require invoices of claimed impact and prevent cities and towns from collecting fees after nine years. But the new guidelines also waive the licensees ability to dispute whether the impact fees are used by the municipality reasonably related to the costs imposed on their operations. The companies already in business, though, want their money back.
Here is a list of cannabis business that have sued for their community-impact fees back:
The Massachusetts Cannabis Business Association, a cannabis industry group, has called on communities across the state to follow suit and return community impact fees to businesses.
“For years, communities have been treating cannabis community impact fees as piggy banks, with zero accountability and little transparency,” said MassCBA President and CEO David O’Brien in a statement.
MassCBA previously conducted a study of 54 cities and towns and found that municipalities collected more than $50 million in 2022. Some cities and towns have already stopped taking CIFs, like Amherst, Northampton and Amesbury. Boston has already returned $2.86 million to nine cannabis businesses.
“The Legislature has repeatedly made it clear that municipalities cannot legally collect fees that are not spent on reasonably-related municipal costs, but cities and towns are holding on to millions of dollars that were unjustly collected over the past few years,” O’Brien said.
