One more Massachusetts cannabis company challenged the validity of required community impact fees as dispensary Happy Valley filed suit against the City of Gloucester in November, making it the latest cannabis company to legally challenge its host city agreement.
“The community impact fees assessed and to be assessed by the City of Gloucester against HVV [Happy Valley Ventures] are contrary to Massachusetts law,” said the company’s 53-page complaint filed in Essex Superior Court.
Massachusetts regulation requires prospective adult-use cannabis facilities to obtain a Host Community Agreement with their local municipality before applying for a state license. As part of that agreement, towns and cities are allowed to assess a mandatory community impact fee, intended to cover the cost of increased financial burdens associated with hosting a cannabis facility.
“The legislation was quite clear about what permissible fees can be charged. Capping them at 3% was very clear,” said Howard Cooper, attorney from Todd and Weld, who is representing Happy Valley in court. .
Cooper noted that state regulations require towns and cities to provide documented proof to justify their proposed community impact fees. Despite multiple records quests, Cooper said that Gloucester failed to produce any evidence.
“As it turns out, we’re seeing the host communities have made no effort to do that,” he said. “The one thing I can tell you is that we tried twice with Gloucester to get any public records that would show any actual impact costs. We had nothing produced to us on that topic.”
When reached for comment, a spokesperson in the Gloucester mayor’s office said that any response would have to come through e-mail.
Happy Valley is seeking a declaratory judgment invalidating Gloucester’s community impact fee assessment. While the case is not directly attacking the concept of community impact fees, a victory from Happy Valley would likely provide ammunition for the efforts to end impact fees.
Cooper added that he would not be surprised if additional lawsuits over host community impact fees are filed in coming months.
It will likely be 2022 before further action takes place in the suit against Gloucester since court requirements allow 90 days from Nov. 24 to file a response to the complaint.
Another case to negate impact fees, between a proposed adult-use dispensary named Stem and its host town, Haverhill, was filed last spring and is already well underway. That case will likely provide precedent before the Happy Valley v. Gloucester case is resolved.
Happy Valley opened its Gloucester dispensary to adult-use in mid-2020. Before that the company operated a vertically-integrated medical cannabis site, with cultivation and production at the same location.
The company has paid over $491,000 to the City of Gloucester in impact fees since first negotiating its host community agreement in 2019, which became a requirement when voters legalized adult-use, according to the 53-page lawsuit filed Thanksgiving week, in Essex Superior Court.
The separate HCAs require a $100,000 impact fee for the cultivation license, with an additional promised $25,000 charitable contribution, $50,000 for the manufacturing license and a $25,000 charitable contribution for the retail license. This is in addition to the required 3% of all sales that the dispensary is required to pay in excise tax.
The Happy Valley lawsuit also argues that the city’s 5% late fee on impact fee payments violates the state rules on those payments, because they cause fees to further exceed the limit of 3% of gross sales.
The issue of host community agreements as a vehicle for municipal gouging emerged in the daylight when former Fall River mayor Jasiel Correia was convicted in May 2021 of using inflated community impact fees to extort cannabis companies that wanted to move into his city.
Correia, whose convictions also included counts for defrauding investors in a smartphone app, is expected to report for a six year sentence on Jan. 10.
Back in October, the Town of Lee’s Select Board waived a $1 million community impact fee from local dispensary Canna Provisions. The community will still pay a 3% municipal excise tax, but no additional fees will be added for the year.
“During the 2020 fiscal year the Town of Lee did not incur any fiscal impacts arising from Canna Provisions,” wrote Interim Town Administrator Christopher Brittain in a letter presented before the Oct. 5 meeting of Lee’s Select Board.