Host Community Agreements Slow Massachusetts Dispensary Openings

The rollout of Massachusetts' adult use dispensaries leaves room for improvement, according to some state operators. The slow rollout is frequently blamed on host community agreements, or HCAs. 

Under state law, Massachusetts municipalities are allowed to impose up to a 3% tax on hopeful cannabis ventures. The charge represents a fee the city believes it needs to offset the costs of having a marijuana business in town.

HCAs are considered by many to be a fair idea on paper. However, the application leaves many adult use dispensaries in limbo — for years in some cases, while applicants must also address additional fees and bureaucratic hurdles along the way.

What's The Hold Up?

"Host community agreements have essentially served as a de facto ban in many cases, artificially limiting the number of stores [in a municipality]," said Kris Krane, the co-founder and president of 4Front Ventures Corp FFNTF.

Krane, who helped author the 2016 adult use ballot initiative in the state, said the final law gave municipalities a way to ban sales in their town even if voters supported the measure.

"These host community agreements effectively give them the ability to ban without enacting a ban," the cannabis exec said.

Krane points to Boston as a prime example. The city of 685,000 citizens saw its first adult use store open in March 2020 after statewide sales launched in November 2018.

A series of changes to the city's HCA process halted progress while creating confusion among applicants, Krane said, with a shifting of the grant process from the city council to the mayor's office to blame. 

After the switch, the city granted zero HCAs for the better part of a year.

"They just sat on it," Krane said of applications made during that time.

Others have alleged further ulterior motives from officials regarding HCAs.

In March 2020, Massachusetts Cannabis Commissioner Shaleen Title told Politico's Natalie Fertig: "I think the HCA process has turned into a barrier and a tool of inequality that it was never meant to be."

Title said too much control on the municipal level was a critical issue.

Corruption is an issue in Massachusetts as well. 

In the fall of 2019, Fall River Mayor Jasiel Correia was charged with alleged extortion of four cannabis businesses, totaling more than $600,000 in bribes.

A few months later, in November 2020, six communities were contacted by a federal grand jury hoping to look into each's host community agreement and licensing process. No charges have been filed.

4Front's Krane said the examples above aren't representative of most HCAs.

"I'm not really willing to say that it's causing widespread corruption, but it is causing lots of other problems that are still really problematic."

One Dispensary Owner's Experiences With Municipal HCAs

Erik Williams, the co-founder of dispensary brand Canna Provisions, has gone through the HCA process with stores in Lee and a soon-to-open dispensary in Holyoke.

In the current regulatory structure, Williams told Benzinga that it's vital applicants avoid towns where they aren't wanted. 

Williams said the best way to determine if a town wants business is to read its HCA.

"If a town needs to be essentially 'bribed' with an agreement that has the business paying more than what the state allows, that is not a community you should be doing business in to begin with," he said. 

The Canna Provisions co-founder said one-third of the towns have HCAs that he considers fair for businesses, but added that many aren't aggressive in helping applicants through the process.

Holyoke has a model HCA agreement, and does not require that applicants rent a location before applying, he said.

This helps businesses, Williams said. 

"This lowers the barriers to entry and is a key component in ensuring that social equity and others have a fair shot at navigating the lengthy licensing process and not going bankrupt." 

Regular communication with local officials is vital as well, he said.

"The town of Lee understood our fees would not go into a general fund," Williams said. 

"It would be proactively spent on initiatives on which our business has had some impact — things like affordable housing, roads, sidewalks and lighting, digital infrastructure and environmental protection."

What's Next For Massachusetts

State regulators may soon shift HCA responsibilities from the cities to the Massachusetts Cannabis Control Commission.

After a 121-33 vote in early February, the bill now must pass the Senate and be signed off Gov. Charlie Baker before it can become law.

Related Links:

A Snapshot Of America's Medical Marijuana Markets: Massachusetts  

Cannabis Companies Sue Massachusetts Governor Over Halt In Dispensary Operations