Recreational marijuana became legal in Massachusetts in 2016, but implementation of a regulated market has resulted in conflict between municipalities and the state government.

In Massachusetts, an adult-use business must first obtain an agreement with the relevant local government before the state will grant the business a license. From the point of view of businesses and some state legislators, this has resulted in excessive demands from municipalities. One sign of the difficulty that businesses have had in getting approval is that the state granted its first license only lately, in June.

Local Government Complaints

A letter from the President and CEO of Greater Boston Chamber of Commerce to two leaders of the state government’s Joint Committee on Marijuana Policy offers insight into the conflict. The letter asks for an increase in the tax rate on recreational marijuana sales and for additional local control of marijuana businesses. Another letter from the Massachusetts Municipal Association reiterates those concerns and adds two more: “unregulated ‘home grow’ provisions that could foster a new black market,” and “inadequate independence of the regulatory structure.” The letter goes on to claim:

Here it is clear that the marijuana industry lobbyists learned a lesson from Colorado, the first state to legalize recreational use. The Colorado law allows local governing bodies to ban retail sales in their communities–and 70 percent of their cities and towns have enacted such a ban. [The state law] makes it impossible for selectmen, mayors, councils or Town Meetings to make this decision.

One news article offers one way to interpret these concerns, listing what some have called the “extravagant demands by municipalities.” Since the law allows a relatively low local tax of no higher than 3 percent, some local governments have asked for additional up-front payments. For example, the story cites one request for $263,000 to buy the local fire department some equipment. Another local government simply asked for $500,000 over five years, without specifying how the money would be spent.

Since businesses must obtain a contract with the relevant municipality before they can get a state license, they are forced to choose between agreeing to whatever demands the local government may make and starting over in a new municipality. It also seems clear that some local governments simply do not want marijuana businesses and are using exorbitant demands as a way of exercising veto power. Local governments have also claimed that the marijuana industry’s lobbyists in the state capital are responsible for the 3-percent local tax rate, which from the point of view of the local governments is too low.

As the letter from the Greater Boston Chamber of Commerce puts it:

The successful regulation of this new industry depends upon a tax rate that raises sufficient revenue to support the work of the Cannabis Control Commission, our local and State Police, and our health care and education providers. It is important that enough revenue is generated from this new industry to invest in additional substance abuse prevention and treatment programs. To that end, the effective tax rate should be well above what is called for in the [law].

A review of the comments on one article published by a local news source offers a citizen’s-eye view of these concerns. One comment says the local governments have their “hands out” and are asking for as much as possible from the new industry. Another says that more wealthy and influential local governments will win their arm-wrestling match with the state government, with the result that wealthier areas will not have marijuana retailers or grows, unless they are owned by the well-connected, while poorer areas will be more willing to make deals with the industry. The result could be situations like that of the alcohol market, where poor neighborhoods abound in liquor stores, while well-off neighborhoods have few, and those few have more restrictions and more expensive inventory.

State Lawmakers Frustrated

The actions of local governments have prompted state legislators to express their frustration publicly. Two have reportedly asked the state regulatory body, the Cannabis Control Commission (CCC), to “crack down” on municipalities that are “creating obstacles” to the implementation of the will of voters. The CCC has responded with a letter of its own that expresses concern and asks municipalities to comply with the letter and the spirit of the law. The letter asks municipalities to “take particular note of any agreements which include mitigation fees or contributions,” which should be “reasonably related” to the costs of the marijuana establishment “and do not equal, in total, to more than” the 3-percent tax limit.

For now, however, it remains to be seen whether local governments in Massachusetts will be successful in sending the state government back to the drawing board to draft new laws, or the state government will find ways to induce local governments to accept adult-use marijuana business. Until the issue is resolved, few licenses are being granted.

What do you think? Will Massachusetts find ways to allow a new industry to operate within its borders? Leave a comment below.

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