HAVERHILL — A state official said Friday he has concerns about the relevance of impact fees being charged to retail marijuana shops by communities across the state, including in Haverhill.
Nearly six months after the owner’s of Haverhill’s Stem — a retail cannabis shop — filed a lawsuit against the city and Mayor James Fiorentini requesting documentation of costs the city has incurred because of hosting the business, the city has provided a report listing $1.3 million in expenses.
The report, which was provided to Stem along with pot shops Full Harvest Moonz and CNA Stores on Sept. 10, outlines both existing costs and annual expenses city officials say Haverhill will incur due to retail marijuana.
The documents costs per city department, with police accounting for the highest portion of the total — including six new police officers and two new cruisers — with an annual cost of $866,930.
Although he cannot comment on Haverhill’s report specifically because Stem and the city are still in litigation, Steven Hoffman, chairman of the Massachusetts Cannabis Control Commission, says he’s reviewed the document.
“We built a big industry but it’s not a new industry as it’s replacing an illicit industry that has existed for decades,” Hoffman said. “So things like training police on DUI and drug education has been going on for a long time and has nothing to do with the introduction of a legal business replacing an illegal business, therefore, a lot of the incremental expenses cities and towns are saying they are incurring — I just don’t buy.”
State laws governing retail cannabis shops state, “The community impact fee shall be reasonably related to the costs imposed upon the municipality by the operation of the marijuana establishment … and shall not amount to more than 3% of the gross sales of the marijuana establishment.”
Additionally, impact fees that can be part of host community agreements can be in effect for no longer than five years.
“One of the issues is that we do not have jurisdiction over the contents of host community agreements so there’s no way for us to police what’s in these documents,” Hoffman said. “We have asked the Legislature to give the CCC explicit jurisdiction over the content of HCAs and mitigation fees. It’s in committee and we’re hopeful it will become law.”
Hoffman said when the state’s first two retail cannabis shops opened in November of 2018 there were concerns about increases in crime, increases in drug overdoses, increases in youth consumption and increases in DUI cases.
“Now we’re nearly three years into the industry and it has rolled out remarkably smoothly,” he said. “There haven’t been increases in youth consumption or crime or hospital admissions. The best evidence for that is Northampton, which is no longer asking for mitigation fees because they recognized there really aren’t any incremental expenses they’ve incurred. I applaud them for recognizing that.”
With 168 retailers in operation in the state, even issues such as traffic and crowd control are nonexistent, he said.
The retail cannabis industry in Massachusetts has already generated about $1.5 billion in sales this year and more than $300 million in tax revenue, Hoffman said.
“I think there are some real issues with how host community agreements have been negotiated as they relate to how mitigation fees are determined,” he said. “There are 351 cities and towns in Massachusetts and (potentially) 351 different ways they are responding to the legislation, and that’s obviously a problem.”
Details of report on impact fees
The Haverhill report states the city needed six additional police officers on day and early night shifts to cover the cannabis shops and additional instances of driving while impaired due to marijuana use; two additional police cruisers for the additional officers, as well as uniforms, weapons, holsters and other equipment; the creation of a behavioral response unit to better deal with situations where drug impairment may be an issue, and training six officers to recognize marijuana impairment. The one-time cost for police is listed as $17,400 and the annual cost is pegged at $866,930.
The School Department accounted for the next highest reported annual cost, $288,219, which included items such as adding health teachers to six elementary schools, 33% of which is related to the impact of marijuana legalization, availability and use, and the addition of one substance abuse counselor in the high school and one in middle schools, 33% of which is related to the impact of marijuana legalization, availability and use, according to the report. School one-time cost is listed as $225.
Legal expenses came in at a total one-time cost of $113,981.
The mayor’s office listed a one-time cost of $12,519 and an annual cost of $62,656, which includes the price of responding to requests for information about the impact of retail cannabis shops, drafting host community agreements, and hosting marijuana advisory committee meetings.
The Public Health Department shows a one-time cost of $282 and an annual cost of $28,243. Other departments reported smaller amounts.
Of the $1.3 million total, the city’s report says Stem accounts for $747,658, CNA Stores accounts for $424,296 and Full Harvest Moonz accounts for $297,112 in annual expenses.
Lawsuit expected to move forward
A Newburyport Superior Court judge partially rejected a request by the city to have the lawsuit brought by Stem against the city and the mayor dismissed.
In a suit filed in Essex Superior Court in March, Stem alleged the city violated both state law regulating the cannabis industry, as well as the terms of its host community agreement by failing to provide documentation of costs the city incurs because of the operation of the business.
The city subsequently asked for the dismissal of the suit, arguing that because the cannabis industry is so new, that ways of determining the impact of a cannabis dispensary are still being developed and that it needed more time.
The city’s motion for dismissal was heard in July by Newburyport Superior Court Judge Janice Howe, who on Sept. 16 issued a decision in which she agreed to the city’s request to dismiss counts 1 and 2 of the suit on procedural grounds, but rejected the city’s request to dismiss counts 3, 4 and 5. The case is expected to move forward based on those three counts, with Stem seeking to invalidate the city’s impact fee because of what it says are inadequate documentation and evidence.
The city’s lawyer, Michele Randazzo, said in light of the subsequent provision of the community impact fee analysis to Stem — and other marijuana retailers in Haverhill— she expects that counts 3 through 5 of the complaint “are effectively rendered moot.”
“I can’t speak to Stem’s intentions moving forward, but I will note that we’ve offered to meet with each established marijuana retailer to conduct the anual review allowed for under each host community agreement. To my knowledge, we have not heard back from Stem in this regard to date,” Randazzo said.
The suit has captured the attention of the state’s cannabis industry, as well as communities where cannabis shops opened, as the decision could set new standards on if and how communities can collect impact fees.
Hoffman illuminated the statewide importance of Stem’s case against the city and its potential to alter how communities move forward with their own agreements.
“What I’m hoping for is it will provide some clarity as to what is allowable and reasonable in terms of mitigation,” Hoffman said. “If the litigation does go through to judgement, there will be clarity and specificity of what is allowable and what is not allowable and I think that would be beneficial to everybody and if it does, it will set precedence and will reduce ambiguity and increase clarity and specificity.”
Stem spokesman James Borghesani said he is thankful the case is moving forward and that Stem will have the opportunity to compare costs listed in the report to any costs Stem might agree are legitimate.
“It is important to note that the law allows for costs imposed upon the city, not costs invented by the city,” he said.
In addition to paying the city $358,000 in impact fees, with the first payment made on May 26 of this year, Stem also paid the city $365,796 in taxes in June for its first year of operation and has distributed more than $87,000 to local charitable causes, along with providing the city more than 500 hours of community service, according to documents provided by Stem owner Caroline Pineau.
Stem also paid $13,667 to the city in property taxes for its downtown location at 124 Washington St.