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Legalization 2.0: Massachusetts Senate approves overhaul of marijuana laws

By Dan Adams | Apr 07, 2022

The Massachusetts Senate on Thursday unanimously approved the most significant changes to the state’s marijuana laws since legalization was implemented in 2017.

The package of reforms would crack down on excessive fees charged by municipalities to licensed marijuana operators, clear the way for cities and towns to approve cannabis cafes, and put more muscle behind policies meant to make the licensed pot industry equitable after decades of racially disproportionate drug arrests.

“With this bill, Massachusetts will reclaim our leadership role, carving a path to make equity a reality in the cannabis industry,” said Senator Sonia Chang-Diaz, a Democrat, who championed the legislation as co-chair of the Legislature’s Joint Committee on Cannabis Policy. “Lowering entry costs and opening up new avenues to capital will put this multibillion-dollar industry within reach for many talented equity entrepreneurs.”

Thursday’s 39-0 vote came two years after state senators declined to act on a more limited cannabis bill, reflecting newfound political momentum around tweaking marijuana laws on Beacon Hill. House Speaker Ron Mariano has already vowed to pass a similar measure in his chamber, likely setting up compromise negotiations later this spring before a final bill is sent to Governor Charlie Baker’s desk.

In a brief statement Thursday, a spokesman for Mariano said the speaker “remains committed” to passing cannabis reforms in the House, and will “carefully review the Senate’s approach to addressing this shared priority.”

If signed into law, the package of changes approved by the Senate would eventually allow licensed cannabis cafes to open in a handful of volunteer communities, a concept that was envisioned by the voter-approved legalization initiative but never implemented because of an error in the statute.

Advocates, patients, and consumers have long complained that the lack of such facilities, along with a ban on smoking pot in public, leaves renters and tourists with nowhere to legally consume a legal drug.

The Senate bill would also grant the Cannabis Control Commission authority to approve or reject host community agreements, the contracts prospective pot operators must sign with their host city or town in order to apply for a state license.

Nearly all such deals require marijuana companies to pay steep fees to offset their presumed negative effect on the local community. But most municipalities simply collect the maximum amount allowed by law (3 percent of each firm’s revenue) without identifying any specific impacts caused by the business.

Industry groups have long complained the practice amounts to a shakedown. They cheered the passage of the Senate proposal, which would also allow cannabis operators to sue their host communities if local leaders charge them fees without properly documenting how the firm cost the municipality money.

“Today’s vote is a positive step to rein in the lack of transparency and blatant overreach by municipalities who have padded their budgets by collecting outrageous ‘impact fees,’ ” said David O’Brien, president of the Massachusetts Cannabis Business Association. “The time has come for every municipality to provide receipts for how they are spending the money they have collected.”

While municipalities have acknowledged a need for clearer limits around the contracts, they have resisted proposals to award the commission oversight — a change the agency has requested — deriding those efforts as an industry-backed attempt to maximize profits at the expense of local communities.

Geoff Beckwith, the executive director of the Massachusetts Municipal Association, told senators in a letter this week that cities and towns still have “serious reservations” about giving the commission the power to “micromanage” the deals.

“Placing host community agreements in the hands of a regulatory agency would hinder the development of the industry, thwarting the goal of propelling it forward,” Beckwith wrote. “Overregulation would create an uncertain landscape for cities and towns that are working to successfully navigate the emergence of the cannabis industry. ...The best method of reaching agreement is to allow the parties to do so directly, without state or industry interference.”

Beckwith said his group supported an alternative proposal that would let municipalities charge a flat 3 percent fee, an idea that the Senate did not adopt Thursday. However, the municipal association did applaud lawmakers for removing a provision that would have explicitly applied the new limits on fees to existing host community agreements in addition to newly negotiated contracts.

Another section of the legislation advanced by the Senate would divert 10 percent of the state’s 10.75 percent excise tax on recreational pot purchases into a fund that would issue grants and low- or no-interest loans to commission-designated “social equity” and “economic empowerment” applicants, mostly people from communities hit hardest by the war on drugs.

Such entrepreneurs have struggled to gain a foothold in the industry, thanks in part to federal banking restrictions that make it hard to obtain the needed up-front capital without access to wealthy private investors. Advocates, along with the commission, have repeatedly urged the state to help close the gap using some of the spoils from the regulated pot market it now oversees — an approach now being adopted by New York and other states that legalized marijuana after Massachusetts.

If projections hold for this fiscal year, which ends in June, a 10 percent cut of the state’s marijuana excise tax revenue would amount to just over $15 million. That’s less than progressives and advocates sought, but proponents expect the fund will be bolstered by donations from larger dispensary firms and other private sources.

Equitable Opportunities Now, an advocacy group that successfully lobbied the Legislature in 2017 to strengthen the equity provisions of the legalization law, said it hoped the forthcoming House version of the legislation would increase the amount of pot tax revenue that is steered to the loan fund.

“We are excited and thankful to the Senate for pushing this bill forward, but disappointed by the low allocation to the equity fund,” said Shanel Lindsay, the group’s cofounder. “We’re going to be looking to the members of the House to ... support social equity and economic empowerment businesses by dedicating at least 25 percent of cannabis taxes to the fund and increasing incentives for cities and towns to finally put equity first.”

The local approval process has been another major barrier for economic empowerment and social equity applicants, in part because cities and towns don’t share the state’s legal obligation to implement justice-minded licensing policies.

The Senate bill would change that, requiring every community that allows pot facilities to implement an approval process that takes equity into account. It would also encourage municipalities to give preference to equity applicants by offering them the equivalent of an extra 1 percent impact fee when they approve those businesses, with the money coming from state pot tax coffers. Conversely, communities that fail to license any businesses owned by equity or economic empowerment applicants before July 2023 would lose the ability to charge any impacts at all.

Senators on Thursday adopted several relatively minor amendments to the initial draft of the bill, including new provisions setting a 120-day window after submission for the commission to rule on proposed host community agreements and giving cities and towns the ability to waive the requirement such contracts altogether if they wish.

Other last-minute changes approved by the Senate would make it easier for people with criminal convictions to obtain employment at licensed marijuana operations and to wipe away old marijuana possession charges.

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