This story is part one of a two-part series about host community agreements in Massachusetts. Read part two here.
When Massachusetts approved legal recreational marijuana, Hans Doherty saw an opportunity to make money while also giving back to New Bedford, the city where he grew up.
Doherty began the process of setting up a pot shop. In 2018, he began renting a building, applied for a license, and started to work out negotiations with New Bedford city officials in order to be awarded a host community agreement, or HCA.
An HCA is a deal between marijuana businesses and the towns that plan to host them. These contracts contain a couple of common fees the communities charge the businesses: a 3 percent fee to pay for costs associated with hosting the marijuana shop, and an optional local sales tax. According to state law, neither of these standard fees are allowed to exceed 3 percent.
But Doherty’s contract with New Bedford contains a few additional requirements, including a mandatory $25,000 payment from Doherty’s company on the first day the shop opens, and a donation of $50,000 per year to local charities. If the company hits certain profit milestones, additional charity payments are required.
Doherty says he knows the contract asks for a lot more than the standard fees, but he felt pressured by New Bedford city officials to make the extra payments. New Bedford officials did not respond to requests for comment.
“We've asked again and again, ‘Are you sure you want these additional demands?’ And the response has been, ‘Yes.’ The municipality does want those additional demands and that's part of the contract,” Doherty said. “Right now, we just have to play ball.”
A WGBH News review of recreational marijuana host community agreements across the state shows that Doherty’s arrangement is not unusual.
Out of the nearly 500 contracts reviewed by WGBH News, 314 — that’s roughly two thirds — ask for more than the standard fees from marijuana applicants.
Hundreds of incentives are written into agreements across the state, requiring businesses to contribute extra costs and labor, from charitable donations to community service pledges. The extra sums range from a few thousand dollars to six figures in extra payments.
In Chelsea, one agreement calls for a one-time $100,000 donation to local drug and substance abuse programs and an annual $25,000 donation to local youth sports leagues. City officials told WGBH News that the fees were volunteered by the applicant as a way to give back to the community.
In Athol, the majority of marijuana shops have paid between $2,000 and $20,000 for legal and other fees. Athol's town manager said in a statement that the costs were suggested by the town, but mutually agreed to — without objection — by the applicant.
In some cases, the suggestion to pay more than the standard fee seems to come from the cities and towns themselves. In other cases, bigger companies volunteer these payments, which makes their applications more competitive.
Mark Zatyrka is the CEO of INSA, a multi-state marijuana business with agreements in communities across the state, and one of the larger marijuana companies competing in Massachusetts.
In INSA’s contract with Springfield, the company agreed to pay the standard fees, plus an annual $20,000 to Springfield public schools and $20,000 per year to beautify a local park. That’s in addition to financing a police detail outside the shop.
Speaking to a scrum of reporters about his Springfield contract last September, Zatyrka didn't seem to have a problem with extra payments.
“We're happy to work with the city and provide as much back to the city as we can,” he said, “which we would have done anyways.”
Springfield officials did not immediately respond to a request for comment.
Cannabis Control Commissioner Shaleen Title says communities began this process with good intentions, but somewhere along the way, strict rules went out the window.
“What [the process] has turned into is essentially a shakedown where not only are [communities] charging for their own costs, but they're charging more,” Title said. “They looked at the law. They decided that 3 percent tax wasn't enough, and just started designing absurd schemes to extract more.”
The KP Law firm represents many of these towns and cities, including New Bedford. In a statement to WGBH News, the firm says the agreements do not violate the law. They say the majority of marijuana businesses that communities work with are "large corporations and entities" that have "willingly and voluntarily offered generous benefits to municipalities."
KP Law says these types of “community benefits" are needed to help convince local residents to accept marijuana businesses in their neighborhoods.
But Massachusetts-based attorney Blake Mensing, who represents marijuana companies, has a different name for it.
“It’s extortion, straight up,” Mensing said. “If it is charity, it should not be present in a legally binding contract. When someone is requiring that you give a specified dollar amount to a specified entity, that is no longer charity.”
Mensing compared these financial exchanges to federal corruption charges brought against former Fall River Mayor Jasiel Correia. Correia is accused of extorting more than $600,000 from marijuana businesses between 2016 and 2018. U.S. Attorney for Massachusetts Andrew Lelling said Correia demanded large sums of cash from marijuana shops hoping to do business in Fall River.
“Mayor Correia arranged for money that would have gone to the city of Fall River under the host community agreement, to instead go to his pocket,” Lelling said at a press conference last fall.
Correia has denied all of the allegations of criminal behavior made against him, and his trial his currently pending.
“The only difference from what happened there and what's happening throughout the rest of the commonwealth is that [the alleged misconduct by Correia] happened in the alley behind City Hall,” Mensing said. “The extortion that is going on through HCAs just happens to be in the documents and inside the halls.”
Last November, Lelling issued subpoenas to dozens of cities and towns in Massachusetts. WGBH News confirmed that at least 37 communities were subpoenaed by Lelling.
By asking the towns for copies of their agreements, Lelling waded into the murky pond of marijuana licensing, even requesting copies of agreements from some towns with a demonstrated history of following the rules.
Holyoke Planning Director Marcos Marrero said his city has a no-frills process, and no extra fees. “[Applicants] can’t believe it,” Marrero said in a phone call. “Because usually what happens is that communities, they seem to be using this as a barrier to entry.”
While Lelling investigates, the question remains: Who in the state is responsible for ensuring that these agreements stay within the boundaries of the law? Commissioner Title said it's still unclear. “That confusion has led to a situation where now, essentially nobody's enforcing these agreements,” Title said.
The Cannabis Control Commission has repeatedly taken up the issue and concluded that the way the recreational marijuana law is written, the Commission does not have the authority to oversee these agreements.
Last March, the Commission sent a report to the state legislature stating that a review of a couple dozen agreements found that many were requiring applicants to pay more than the 3 percent community impact fee. The commissioners maintained they still didn’t have the authority to review the agreements and asked the State House for guidance.
That same month, Essex County Superior Court Judge Timothy Q. Feeley ruled that the Commission doesn’t hold the power to review the agreements.
At a CCC meeting last month, Commission Chair Steven Hoffman told reporters he is also seeking answers about who has the power to enforce the rules around these contracts. "We've asked the legislation for clarity there,” he said. “I personally believe that the attorney general does.”
In a statement to WGBH News, Massachusetts Attorney General Maura Healey’s office said she doesn’t have the power to enforce the rules around HCAs, either.
In response to requests from the commission, members of the state legislature have introduced bills that would allow the commission to crack down on contracts that demand more than the standard fee in an HCA.
State Sen. Julian Cyr co-sponsored one of these bills. “The hurdles to get into this industry are higher than some expected,” Cyr said. “And I think it’s important that we’ve got a fair, even playing field on that. The ability to leverage resources, particularly financial resources, to municipalities needs to be reined in. Otherwise, we’re going to have a very unfair market.”
While the CCC waits for more information from the legislature, entrepreneurs like Hans Doherty continue to wait — and pay hefty fees.
Doherty said he knows he could take his shop somewhere else, but he grew up in New Bedford and wants to start his business there.
“We know that what we are bringing to New Bedford is something that the community’s been asking for for over three years,” said Doherty. “We’re trying to just play the channel as delicately as we can to make our way to the finish line and right now, that’s in question.”
