Cannabis Culture

The Massachusetts Host Group Settlement

Rearing Its Ugly Head Once more: The Massachusetts Host Group Settlement

Massachusetts Community Host Agreements

 

Silence could be Deafening: If a teacup falls off a shelf when nobody is there to listen to it, can the items be put again collectively?

 

After Hashish Management Fee public conferences had been closed by protesters in December & January, the Fee introduced a January 23rd public listening session to listen to the state’s Social Fairness and Financial Empowerment applicant’s considerations and frustrations with the present software and licensing course of. Two points battled for first place; a scarcity of transparency within the software evaluation course of and challenges securing a coveted Host Group Settlement (HCA). The HCA is step one within the licensing maze. No HCA, no license. No kidding.

Few points have been as universally controversial in Massachusetts municipal authorities because the HCA.  In a current Forbes article that made the rounds two days previous to the general public listening to, Kris Kane of 4Front Ventures[1], an built-in multi-state operator argued that the HCA course of is “maybe Massachusetts’ most deadly mistake” within the license approval scheme:

 “The regulation purposefully made it troublesome for cities to ban hashish companies, requiring a vote of the city’s residents generally. But the HCA requirement has served as a defacto ban, with cities merely refusing to grant them as a way to maintain hashish companies out. When they’re prepared to grant HCAs, municipalities usually go to the best bidder, disadvantaging smaller and mom-and-pop startups.”

 

How we obtained right here

The legislature granted the state’s 294 cities and 57 cities materials management over the native marijuana approval decision-making course of.  Many communities, confronted with the complicated duties of managing day after day municipal authorities, and missing the regulatory data of the state’s Hashish Management Fee, checked out their previous publicity to marijuana licensing; the state’s 2013 medical marijuana program.

In 2013, a pool of roughly 189 potential candidates started a close to 10-month marathon, led by the Division of Public Well being (DPH), to finish the applying course of and safe a license. The method was complicated and aggressive, and license counts had been restricted to a minimal of 1, and a most of 5, per county, and solely 35 statewide. Functions had been required to “be hand-delivered on Thursday, November 21, 2013, to the [DPH], between the hours of 10:00 a.m. and three:00 p.m.” The DPH, like a school professor posting grades, issued all of its choices on January 31, 2014[2], approving solely 20 licenses.

Beneath the medical program, competitors was restricted, licenses had been few, all purposes had been due on the identical day, and it made sense beneath that scheme to safe a location because the preliminary step of the municipal approval course of. Demanding a location earlier than municipal approval beneath the limitless and rolling leisure program makes far much less sense. However with out state steering, most municipalities fell again on what they knew; the 2013 medical course of – location first, municipal approval second.

 

Opposed penalties of driving by the rear-view mirror

“And now my pal, the first-a rule of Italian driving. (tossing rear-view mirror from car) What’s-a behind me is just not essential” The Gumball Rally (1976) Raul Julia

Beneath the present leisure program the place the license rely is limitless (although municipalities might restrict the variety of marijuana stores inside their group), requiring a location first is perhaps counterproductive by inserting precise management within the fingers of profit-seeking landlords versus citizen-focused group leaders.

In a typical group, as soon as zoning is established and the variety of HCAs are introduced, a mad sprint of actual property musical chairs begins.  Aspiring licensees uncover each doable location, and landlords, realizing their signature is the gateway to a municipal software, usually enhance their value and demand non-refundable deposits to situation a letter of intent – that holy grail of a doc wanted to use to the municipal governing physique for an HCA. 

 

Case in Level

The City of Natick, as quickly because it finalizes its bylaws, will possible be the final group to begin accepting marijuana retail purposes. Natick has eight Part 15 retail liquor licenses (alcohol offered to be consumed off-premise) which interprets to 2 marijuana retail shops. Natick has zoned marijuana retail primarily to a number of pockets alongside the favored Rte. 9 retail hall.

By mid-September 2018, 48 events had approached the city’s Financial Improvement Director to specific curiosity in a marijuana retail license. Other than Boston, Cambridge, and Somerville, there are few sizeable communities that haven’t allotted most of their retail marijuana HCAs. There are possible way over 48 events fascinated about these two retail alternatives in the present day. Within the state’s Social Fairness coaching program, 70 individuals have indicated a need to pursue a retail alternative and that class will full this system in April 2020. 

Cruising Rte. 9 a educated eye can see the place the marijuana shops would possibly situate; Child’s Room, a former youngsters’s furnishings retailer subsequent to Ferguson Provide that has been mysteriously vacant for over ten months regardless of the Boca Raton-based property supervisor stating they’ve a tenant; Child-to-Child, a former pre-owned youngsters’s clothes retailer that closed a pair months after its neighbor, and too, has been uncharacteristically vacant. Or the nonetheless vacant Papa Gino’s that closed in February 2019[4]. The dealer for the Papa Gino’s property disclosed final March that whereas the constructing was possible value $1.1 million, the proprietor knew it was within the tightly zoned marijuana overlay district and was asking $1.5 million with out contingencies for receiving native or state license approval); a 38% premium over the property’s market worth. 

Ought to Natick require candidates first safe a location, it will likely be the landlords which have chosen the finalists; candidates with deep pockets that may pay the best hire and year-long carrying charges to maintain different candidates out of the potential applicant pool. The state’s Social Fairness and Financial Empowerment candidates shall be locked out of the Natick software course of earlier than it even begins – one of many resounding complaints on the January 23rd listening session. However this time, it simply would possibly play out in actual time, in entrance of everybody’s eyes.

Like many communities, Natick has been touched by substance abuse. Every August, the First Congregational Church in downtown Natick hosts a sea of purple flags – this 12 months 2,033[5] – to commemorate and remind residents of the lives misplaced in Massachusetts to opioid abuse[6]. The Well being Division leads Natick 180 which brings varied organizational leaders collectively to create group options round prevention and therapy methods (I quietly left a current assembly holding again tears after a screening of the Chris Herren film, “The First Day”). If solely a handful of well-healed candidates could make it previous the owner take a look at, the Natick Choose Board shall be disadvantaged of contemplating candidates that is perhaps extra community-focused, extra situationally conscious, and an total higher match for the group, however finally not as worthwhile a tenant for the landlords.

Easy financial idea of provide and demand dictates that when 48 candidates descend upon six or so landlords, costs will enhance – dramatically, and smaller operators shall be priced out of the market. Ought to communities on this state of affairs first display the candidates (as one western Massachusetts metropolis is now contemplating) earlier than website choice, after which award an HCA, provide and demand come into steadiness. Within the case of Natick, two candidates accredited by the City may choose a location with out the frantic strain of a competitor determined to lock up house to remain within the licensing recreation. Rents will mirror the native market, and never the standard panic pricing related to retail marijuana house.

 

Empty storefronts don’t make use of individuals and people individuals don’t purchase espresso.

 

Empty storefronts aren’t good for a group. Empty storefronts don’t make use of workers; there’s nobody to buy espresso, fuel, lunch, or snacks from native retailers.  When a number of storefronts come off the market whereas they await a neighborhood licensing resolution however solely two shops are accredited, the opposite retailers who sought house through the maintain time possible went elsewhere – not good for the host group. Landlords accumulate hire or maintain charges however the native municipality doesn’t accumulate taxes from an empty enterprise and native residents don’t discover jobs. In Natick, this impression is probably going restricted. There are solely two HCAs to be awarded and few potential places. Overlay this case onto communities like Boston and Cambridge the place zoning is way wider and lots of extra HCAs are in play, and the lock-it-up-and-hold-em technique can have an hostile impression.

 

Landlords are sometimes controlling the method, and laughing all the way in which to the financial institution.

 

Landlord’s can’t be blamed. They’re doing what they need to do; maximizing the earnings worth of their asset. In some cases they’re being granted absolute management.

The City of Webster is a main instance, sitting on the Connecticut border and recognized for music venue Indian Ranch and lake Chaubunagungamaug, Massachusetts’ third-largest water mass. Webster has two personalities; cheap actual property and a typical family earnings about 2/3rds the statewide median (when a nephew couldn’t discover a financially-suitable Three-family in red-hot Worcester, he discovered an reasonably priced fixer-upper in Webster), and million-dollar lake properties. Webster can be residence to Webster Financial institution and Mapfre Insurance coverage. Earlier than we advance additional, let’s take a brief detour from Webster.

 

Visiting the Berkshires

Concept Wellness is a marijuana retailer in Nice Barrington, a quiet western Massachusetts city, simply eight miles from the New York state border. The store opened in 2017 as a medical marijuana dispensary and in accordance with CEO Brandon Pollock, nonetheless serves about 1,000 common medical prospects. As a leisure retailer, Pollock stories[7] that roughly half of their greater than 50,000 prospects journey over the New York border, a reality not misplaced on New York state legislators desirous to legalize leisure marijuana and hold the tax income of their residence state. Nice Barrington’s problem is figuring out tips on how to use the inflow of marijuana tax proceeds; $1 million within the first six months of operations and virtually $775,000 from July via September 2019.

 

Again to Webster

Webster shares a border with Connecticut (which, like New York, nonetheless hasn’t legalized leisure marijuana) and hosts a Four-mile stretch of I-395 that gives direct entry from Connecticut. The city is looking for methods to revitalize its downtown space, create extra foot visitors, carry in additional guests, and enhance its native financial system. Final 12 months, city officers toured downtown Hudson to find out how Hudson staged a exceptional revival of its downtown space. 

Regardless of a direct roadway to gather tax income from Connecticut prospects, the city sought to ban retail marijuana however finally allowed two retail shops (the minimal) when voters rebuked the ban. Regardless of empty buildings and ample obtainable house in a number of plazas, zoning was set for a sleepy retail complicated often called Webster Plaza, and the Webster Industrial Park.

Webster Plaza is an approximate 260,000 SF ailing retail middle close to the Oxford city line. The left facet of the plaza is almost darkish (darkish is seemingly business lingo for when the tenant strikes out and shuts off the lights – for good, as Shaw’s did in 2014). Subsequent to the previous Shaw’s are former Olympia Sports activities, Radio Shack, and GNC. GNC relocated to a extra upbeat location in Webster. What stays is a nail salon, coin-op laundry, and a magnificence provide store. The precise facet of the plaza was anchored by a Okay-Mart (now darkish). Aubuchon Ironmongery store, Hire-A-Heart, and Greenback Tree every moved down the road to livelier places, leaving Greenback Tree because the remaining model title retailer. The plaza is owned by a non-public actual property agency in Lengthy Island which means that every one standard marijuana-zoned retail is owned by a single landlord.

House within the plaza was marketed at $14 to $17 per foot however potential marijuana candidates had been suggested to bid a minimum of $25 to be thought of. The city entertained two candidates for HCAs, one in every of whom had been assured they may apply with out first securing a location. After a evaluation course of, the city introduced it was “impressed that each retailers had the skills to function a secure and profitable marijuana retail retailer in Webster.” The city then “knowledgeable the leasing agent that each retailers had accomplished and handed [the town’s] evaluation course of and [the town] would enter into a bunch settlement with whomever [the leasing agent] wished to lease to.” The leasing agent chosen the excessive bidder. Other than proudly owning the one retail location accredited for retail marijuana, the proprietor’s leasing agent now loved management of the ultimate resolution.

The choice was the native industrial park. The city advised a neighborhood marine dealership positioned on the entrance to the economic park, contact the applicant. The marine retailer was downsizing and the homeowners deliberate to erect a demising wall to separate the house they not wanted. House within the industrial park is marketed at $eight.50 a foot; the marine retailer wished $27 a foot and a $15,000 non-refundable deposit. At $eight.50 a foot, house contains warmth, air con, and a doorway. The marine retailer required the brand new tenant to put in their very own warmth, AC, and a doorway as there was no exit from the house as soon as the demising wall went up. When the applicant balked, the marine retailer properly held agency. The property was leased to a different marijuana applicant desirous to safe the ultimate HCA inside ten days.

The twice-loser reminded the city that they had agreed the applicant may apply with out a location. In October, the city acknowledged and agreed to refund the $500 software charge. Ultimately rely it has been practically 4 months and no verify. 

Twenty minutes north, in Worcester, mom and son group Jennifer and Louis Gaskin had been in search of a location for a hashish cultivation enterprise. Louis is a Social Fairness candidate. They discovered a warehouse and paid the proprietor a $5,000 deposit to take the property off the market. Gaskin paid a further $12,000 towards the primary and final month’s hire however once they sought the owner’s cooperation to use for the HCA, the owner demanded $100,000 to fund property renovations as a situation of helping. “That’s the place the conversations broke down,” Gaskin stated. Gaskin later discovered one other particular person had approached the owner claiming to have $2.Four million within the financial institution. The owner dropped the Gaskins, however saved their cash.

When landlords management the method, the aggressive panorama shifts from what’s good for the group to what’s finest for the owner. Small groups can’t compete.

 

The City of Maynard 

The City of Maynard wrestled with the difficulty of what comes first; the situation or the HCA for six weeks throughout late summer season 2019. After vetting an applicant and establishing consolation with their monetary and operational viability, Maynard accredited the operator, granted an HCA, and allowed them six months to discover a location. It was a novel method introduced on, partially, by city counsel’s willingness to contemplate the social implications of flipping the method round however retaining location management with the city. The applicant can’t apply for a particular use allow till the applicant’s location is accredited by the Choose Board. If a location isn’t recognized in six months, barring an extension, the HCA expires. This bifurcated method allowed the Board to contemplate all candidates and choose the very best operator for the city.

 

Collateral penalties

When Maynard granted their bifurcated HCA and introduced they might wait to see how the at the moment accredited operators carried out earlier than contemplating extra retail HCAs, the competing retail candidates left city and one thing attention-grabbing occurred to actual property costs. A constructing proprietor had purchased a property for $320Okay in February 2018. Simply 18 months later, in August 2019, the proprietor declined a $500Okay provide from competing marijuana operators. When the frantic marijuana rush left city, the proprietor diminished the asking value to $449Okay after which to $399Okay earlier than coming beneath settlement. One other landlord who was thick with potential marijuana retailers shortly discovered his premium charges had been not gaining curiosity with standard renters. Deflating the marijuana bubble helps gasoline non-marijuana exercise..

 

Placing the teacup again collectively earlier than the clock runs out

The present dilemma for Social Fairness and Financial Empowerment candidates is timing. Massachusetts will finally solely host a sure variety of marijuana retail shops. Ask 5 knowledgeable individuals on what that ultimate quantity shall be, and you’ll possible stroll away with a minimum of seven concrete solutions. Whereas nobody can know for sure, some elements are recognized.

As of January 17, 2020, there are 35 shops open and working. Trailing intently behind them 5 shops with a ultimate license, 11 are preparing for a certificates to start operations. Subsequent in line, 75 shops with a provisional license are getting ready for the inspections that may result in a ultimate license. Behind the road, 169 candidates anxiously awaiting a solution or an RFI (request for added info) from fee workers. Finally, all of those shops will clear their hurdles and open and there shall be 284 stores. Add in communities like Boston (with solely eight purposes within the queue however with 55 retail HCAs obtainable), Cambridge with no purposes within the queue and a minimum of 9 retail HCAs obtainable) and Somerville (just one software within the queue with six HCAs obtainable), and there needs to be a further 60-something shops. Massachusetts has quite a few communities that may enable retail shops, however don’t have a big sufficient inhabitants rely to assist one (98 cities enable retail marijuana however have fewer than 5,000 individuals every). Time to seek out appropriate host communities with retail availability is slowly slipping away for Social Fairness and Financial Empowerment candidates.

The Hashish Management Fee proposed a further steering memo for municipalities that addresses host group agreements. The main target of that steering is to quash the extreme charges many communities are extracting from marijuana license candidates that exceed the state restricted three % group impression charge. The steering is loudly silent as to alerting municipalities that they’ve the facility to approve candidates first, and places second – the so-called Maynard method. That is the lynchpin situation that would get lots of the pissed off Social Fairness and Financial Empowerment candidates into the competitors for a municipal HCA.

The fee might ultimately reply to the HCA frustrations expressed on January 23rd. Hopefully, it will likely be earlier than the ultimate HCAs have been awarded. Attorneys prefer to say that justice delayed is justice denied. Fixing an issue when the answer turns into moot, isn’t any answer in any respect. Social Fairness and Financial Empowerment candidates would require a good shot at HCAs in the event that they’re to assemble the items of a license software earlier than it’s too late. Hopefully their voices didn’t fall on deaf ears.

Have you ever had an hostile expertise with landlords or municipalities (or another social gathering enjoying slight of hand video games)? Join with me and let me know. [email protected]


David Rabinovitz

 


[1] https://www.forbes.com/websites/kriskrane/2020/01/21/a-tale-of-two-markets-how-illinois-succeeded-in-rollout-of-adult-use-cannabis-and-why-massachusetts-failed/#5b261cef3188

[2] https://www.metrowestdailynews.com/article/20140131/NEWS/140139161/11553

[3] https://www.bostonglobe.com/information/marijuana/2018/12/03/healey-rejects-several-local-moratoriums-marijuana-businesses/1fqFZzv10PeaYlCMf2cbcM/story.html

[4] https://newbostonpost.com/around-new-england/papa-ginos-closes-seven-restaurants-with-eye-to-expanding/

[5] https://www.wcvb.com/article/sea-of-purple-flags-honor-victims-of-opioid-crisis/28820377

[6] Truthful Disclosure – I don’t like these flags however am glad they’re there. This Massachusetts custom was began by Kathy Leonard (Testa) in honor of her son, Jonathan, a gifted baseball participant and musician. His dad, Ed Testa, and I had been enterprise companions for a few years. I’ve an image of our youngsters collectively throughout a 1998 journey to Disney. Jonathan died from an overdose on December 17, 2014.

[7] https://www.nydailynews.com/information/politics/ny-new-york-legal-weed-massachusetts-lawmakers-recreational-cannabis-20190707-gnmuhbunkza6ppirdhyd5ej7ja-story.html


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