City councilors in Springfield are asking why a local marijuana company, which aims to do retail business in the city, is planning to spend $200,000 over a five-year period on a school environmental program and improvements to a local city park.
The scrutiny over the mayor's office's negotiations with the marijuana company comes as more cities and town across the commonwealth are being accused of taking advantage of cannabis companies looking to set up shop.
“We need to do our due diligence as a city council to make sure our government is transparent,” said Springfield City Council President Justin Hurst. “Springfield residents want to believe their government is doing the right thing, and that the government is not doing the wrong thing just to get a few extra dollars.”
In Springfield, the mayor's office negotiates Host Community Agreements (HCAs) with marijuana companies looking to open there, and the city council must approve them.
Accusations of bribery or shakedowns in cities and towns range from thousands of dollars in donations, to the purchase of snowplows and fire trucks, to — in one case — outright extortion. Fall River Mayor Jasiel Correia is charged with extorting hundreds of thousands of dollars from marijuana shop owners in exchange for his office’s seal of approval.
In their HCA with Springfield, the company under scrutiny, I.N.S.A. Inc., is offering to pay $20,000 a year for five years to the Environmental Center for Our Schools (ECOS), an environmental education program in the city’s Forest Park, as well as $20,000 a year for five years for maintenance and repairs at Riverfront Park, which is adjacent to the proposed dispensary.
At a committee meeting convened Thursday to discuss the agreements, Hurst said he was not against the donations, he just didn’t understand the process by which the agreement was reached.
“You have citizens who might feel as though this money could be better spent,” said Hurst. Hurst also said he has suspicions that the money was coerced by the mayor’s office.
At the meeting, representatives from I.N.S.A. Inc. said the donations were not coerced or suggested by the mayor’s office. Three of the four owners of I.N.S.A. Inc. participated in the ECOS program when they were students, and it inspired their interest in horticulture and plant science, said the company’s lawyer, Melinda Phelps.
"They feel very passionately and strongly about that program and wanted to give back," she said.
Donations to Forest Park were motivated by its direct proximity to the company’s proposed location on West Columbus Avenue, said Phelps.
“[The donations] were strictly voluntary,” Mark Zatyrka, CEO of I.N.S.A. Inc., told WGBH News. “We’re happy to provide as much back to the city as we can.”
I.N.S.A. Inc. already operates a medicinal marijuana facility in Springfield, which is currently the city’s sole dispensary. They are hoping to expand their business to include a recreational shop.
The other three companies negotiating HCAs with Springfield are not offering any similar donations to city programs, although they did offer support for local public health education programs that deal with the effects of marijuana consumption.
The size of I.N.S.A. Inc.’s donations also raises questions about how much cannabis companies should be allowed — or forced — to pay municipalities in order to operate.
When Zatyrka was asked if he thought the approval of his company’s HCA was contingent on the sizable donation, he said he did not think so.
“It’s just something we wanted to do,” he said.
The agreement was negotiated with the Springfield mayor’s office by city attorney Tasheena Davis. Davis said the company's large donation outlined in the agreement is legal but added that the issue is murky, due to a state law that caps the contributions of marijuana companies to municipalities in HCAs.
Massachusetts law says cities and towns are only allowed to tax 3 percent of marijuana sales, as well as request “community impact fees” that correspond with the local impacts of the cannabis businesses operations. The law says the impact fees should be “reasonably related to costs imposed upon the municipality” and must be lower than 3 percent of the company’s revenue.
The murkiness described by Davis refers to the subjective nature of the law, as well as whether a donation suggested by a company can exceed the cap.
“[The company] suggested a monetary donation to the city,” said Davis. “We are not asking them to give us money. Letting [the company] select where they’d like to give the money is safer than us telling them where we want to money to go.”
In I.N.S.A. Inc.’s HCA with Easthampton, where they operate another shop, the company agreed to pay the municipality $10,000, exceeding the 3 percent cap, with no apparent justification.
The law's ambiguity creates vague legal territory and the potential for abuse of power, said Peter Bernard, executive director of the Massachusetts Growers Advocacy Council, which represents small-scale cultivators. Bernard said he’s happy to see more scrutiny over the agreements.
“Big contributions can be interpreted by some people as bribes,” he said. Bernard also says this dynamic can disadvantage smaller companies with less access to capital.
“When a company makes too big of a donation, and a smaller company comes along, it can turn into a bidding war,” said Bernard. “But it shouldn’t be a bidding war, it’s a licensing process. [Municipalities] are not supposed to be looking for the highest bidder.”
Davis said she believes the HCA negotiation process in Springfield was fair, and each business under consideration developed an HCA based on their own financial situation. Davis also said she understands why councilors have questions.
“[The councilors] want to make sure that [the donation] came from a genuine place and that it wasn’t anyone in the city telling them, ‘Hey, put the money here, put the money there,’” said Davis. “I think if they weren’t interested in transparency, they wouldn’t be doing their jobs.”
The city council will vote Monday night on whether to approve the HCA with I.N.S.A. Inc. or whether to send it back to committee.
Bernard said his organization is pushing for more transparency across the board when it comes to how municipalities are spending the money they receive from cannabis companies.
“You should be able to go to any town website that has a cannabis business and look at what they’re doing with [the money],” said Bernard.
Bernard also said he supports a law that would give the Cannabis Control Commission the power to enforce the state law that caps the amount of contributions a municipality can receive from companies. The language of the proposed law clears up some ambiguity of the current law and gives mechanisms for enforcement that don’t currently exist.
Cannabis Control Commission Chair Steve Hoffman said he supports the proposed legislation and he thinks his agency should have the authority to intervene if agreements between municipalities and companies are illegal or exploitative.
“I certainly want to make sure that there is authority for us to deal with the most egregious offenses that have happened," said Hoffman. "Minor irregularities that are inconsistent with our regulations need to be addressed as well."
Hoffman said he’s optimistic that a change in the law would encourage more consistent and fair agreements. His sentiments were echoed by Cannabis Control Commissioner Shaleen Title.
“We need reasonable limits on local control,” said Title. “When there is unchecked power at the municipal level and no check on municipal overreach, that creates an environment that is ripe for corruption.”
Update Sept. 17, 2019:
The Springfield City Council approved all four proposed host community agreements with cannabis companies on Monday night, including the company, I.N.S.A. Inc.
I.N.S.A.’s agreement was nearly unanimously approved, with a 10-1 vote. City Council President Justin Hurst cast the lone vote against the agreement. After the vote, Hurst told WGBH News that he has unanswered questions about why the company is planning to donate $200,000 over five years to the city.
“It doesn’t add up to me, and I supported my gut,” he said. In response to Hurst’s allegations, Springfield Mayor Domenic Sarno released a statement saying the HCA process was fair and transparent, and he is personally offended by allegations of corruption.
“For City Councilors … to insinuate that there was anything inappropriate or questionable is absolutely disingenuous,” the statement said. “I take this as a personal affront and demand on behalf of myself and all involved in this process an apology.”
