Great Barrington’s cannabis quandary: What to do with that pot revenue?
Great Barrington — For once, we have a quandary that politicians and taxpayers don’t mind facing. In other words, it’s a nice problem to have: what to do with all that money coming into town from the sale of marijuana and cannabis-related products?
In a town such as Great Barrington, for example, the needs are high but the resources are limited, if not scarce. The town has barely 7,000 full-time residents, but this fiscal year’s budget stands at just under $28.3 million, with $16.7 million of that funding the town’s share of what it costs to run the Berkshire Hills Regional School District.
This year’s capital budget is about $8.6 million, a rise of 182% from the previous year. Much of the increase came from the need for a major repair or replacement of the Division Street bridge, which is one of three spanning the Housatonic River that will need extensive work to the tune of approximately $11 million over the coming years.
Some of the cost of the bridgework is being covered by the state. Meanwhile, the town is in the finishing stages of an expensive (and state-mandated) $25 million sewer system upgrade.
Looming over the horizon is the need for a new Monument Mountain Regional High School or a possible merger with the Southern Berkshire Regional School District, or both. Estimates for the cost of a replacement for the aging Monument range from $69 million to $100 million.
The town’s residential and commercial tax rate of $15.75 per thousand of assessed value is slightly higher than the state median of $15.48, but well higher than surrounding South County towns such as Alford ($5.07), Monterey ($7.40), Stockbridge ($10.13) and Mount Washington ($4.57).
So the town’s fiscal challenges, currently and in the out years, are well established. So, what about the revenue from the marijuana stores that came rolling earlier this year? Can’t that help pay for some of the town’s many expenses?
Yes and no. More on that later.
There are two separate taxes that provide a source of revenue for municipalities that host so-called adult-use cannabis stores: a 3% local sales tax added to the state excise and sales taxes; and a community impact fee that is typically 3% of a store’s gross sales. The latter is a point of negotiation between town and applicant as part of a host community agreement, as required by the state Cannabis Control Commission.
The revenues from the community impact fee are supposed to be used only to mitigate the financial impacts of the stores, including increased traffic, safety, substance abuse and the like. It is also important to note that CCC regulations specifically state that those costs to the municipalities must be publicly documented and the fee shall not “be effective for longer than five years.”
Here are the revenue numbers from last fiscal year (July 2018 to end of June 2019) from Theory Wellness, the town’s only recreational marijuana store.
As reported by the Edge in July, combined revenues to the town from the first six months of Theory’s sales after it opened on Jan. 11, amounted to nearly $1 million. Click here to read the full breakdown of those numbers.
See video below of town finance director Susan Carmel explaining revenue numbers from Theory Wellness for the last two quarters of fiscal year 2019, and when they can be spent, at a selectboard meeting Nov. 13, 2019:
Figures from the three months following (July, August, September — or the first quarter of fiscal year 2020) have just been obtained by The Edge from town finance director Sue Carmel.
Local option sales tax receipts brought in $357,274.39 and the community impact fee generated $414,374.51. That brings the total first quarter revenues to the town to $771,648.90 for only three months.
This is where it gets confusing. As Carmel has explained, none of the revenues have been spent yet because residents have yet to vote on it at the town meeting that will be held in May.
Revenues from January to June of this calendar year — the aforementioned $1 million — will be placed in an unrestricted fund for non-recurring expenses, known in Massachusetts as “free cash.”
Proposals for how to use that money will be discussed by the selectboard and the finance committee in the upcoming deliberations for next year’s budget, with voters having the final say on how to spend free cash at the annual town meeting in May.
As for the most recent revenues from Theory Wellness, totaling almost $775,000 from July to September, those will become part of the fiscal year 2022 budget and will be available for allocation at the May 2021 annual town meeting.
Complicating matters is that a second store, Community Growth Partners, plans to open a retail cannabis operation at 783 South Main St., in the former Wild Birds building. CGP received its provisional license from the Cannabis Control Commission Nov. 8. Several other cannabis entrepreneurs have announced their intention to open stores, including Highminded, which plans to open a shop in the former Dempsey physical therapy building on Main Street. Highminded has a public hearing for a special permit Dec. 9 before the selectboard.
Got that? Now, back to the topic of how to spend the money. The board plans to put the topic, along with the subject of whether to limit the number of stores, on the agenda for its Monday, Dec. 16, meeting. In advance of that meeting, The Edge surveyed, via email and phone, a number of public officials and other Great Barrington residents asking what they think the priorities should be.
Instead of spending the money, some have suggested the town use it for tax relief.
“There is no question that the revenue from pot should be applied in whatever way possible to reduce the tax rate in GB,” said businessman Bobby Houston. “It is a longstanding injustice that the town is surrounded by tax havens — Stockbridge, Alford, Egremont — where the wealthy find second homes and use Barrington services basically for free.”
“Great Barrington taxes are quite high,” added Gary Leveille, a local historian and Edge contributor. “Let’s use some of the money to lower taxes.”
Houston said that if he could “dream,” he would like to see some of the money spent on creating a “true Central Park” or “expansive community green” on the “unsubscribed portion” of the 100 Bridge Street property.
“The CDC has been looking for a tenant or buyer for this land for nearly forever,” Houston said, referring to a portion of the formerly polluted property that is being developed by the Community Development Corporation of South Berkshire as a senior housing complex. “I think the Town of GB should be that buyer.”
Karen Smith, a member of the Community Preservation Committee and former chair of the town housing authority, told The Edge she would like to see the town hire a professional grant writer or an economic development director.
“We should use [the revenues] to make money,” Smith said. “You cannot make money unless you spend it.”
In addition, Smith insisted that the revenue would not be sufficient to pay for a new school or a new bridge, two pressing needs for the town.
Smith also cautioned that this windfall will only be around for “two or three years” because of competition as more stores open in neighboring towns and the anticipated legalization of adult-use cannabis in the neighboring states of New York and Connecticut. And over the summer, Canna Provisions opened in Lee, which also provided revenues for that town.
Selectboard Vice Chairman Ed Abrahams said he could support the idea of a grant writer if it could be demonstrated that there was a need for one. He did note that the town’s economic development committee, of which he is a member, had recommended the hiring of a grant writer.
“If it makes sense, we’ll hire one,” said Abrahams, adding that town planner and assistant town manager Chris Rembold currently writes most of the town’s grant applications. “We’ll have to see whether there are grants out there we’re not getting.”
At any rate, Abrahams said he “initially had a fantasy” to use the unrestricted portion of the revenue to offset the costs of building a new high school to replace Monument. Proposals of more than $50 million were defeated in 2013 and a year later because tax-weary Barringtonians refused to approve an override of Proposition 2½, a longstanding state ballot initiative that limits increases in property-tax levies. Abrahams said he would also like to see the funds used to stave off future tax increases or at least hold them in check.
But now that the town is increasingly struggling with its infrastructure, Abrahams is having second thoughts. He is very concerned about the recent closings of the town-owned Division Street and Cottage Street bridges.
The former will be paid for entirely by the town and the latter will be covered by a state grant that has been delayed. Taft Farms owner Dan Tawczynski has said his business has suffered a 38% decline in volume on weekdays because of the closure, which went into effect the second week of September. Tawczynski guesses he will go out of business if something isn’t done.
Voters approved a $4 million bond at the 2019 annual town meeting to fund significant repairs or a complete replacement of the Division Street bridge, an aging steel-truss structure, which was originally constructed in 1950. Because of permitting and engineering work, it could take at least two or three years before the bridge can be reopened, department of public works director Sean VanDeusen has said.
“It’s a million dollars we would not otherwise have,” Abrahams said.
Downtown businessman Richard Stanley agrees about the Division Street bridge and the possibility of using some of the funds to defray the costs of reconstruction or hasten its finish. But like Smith, Stanley cautioned against becoming addicted to pot revenue.
“It needs to be said that this gravy train is going to be over in one to two years,” Stanley told The Edge. “The minute New York state legalizes pot, probably next year, and then another year for the shops to open. Almost all of the plates I see in front of the store are from New York and Connecticut.”
Selectboard member Leigh Davis told The Edge in an email her preliminary thoughts “revolve around investment in essential services and infrastructure which could be leveraged for additional funding and bring long-term economic benefits to the community.”
Davis added that some of the funds could be used “to expedite work on the Division Street and Brown bridges and money for the stabilization fund.” In addition, she said, the revenues could make possible “the establishment of a fund that would serve as a backstop for new businesses and those struggling at risk of closing.”
Town moderator and zoning board of appeals member Michael Wise told The Edge he agrees with Abrahams that it would be best not to launch a new, continuing program that would be dependent on these funds, because we don’t know how long they will be coming in at this rate.”
Wise added that his initial thought was that “the tax part of these revenues should be treated as a schools-and-bridges fund. That could be accomplished by depositing them directly into the town’s just-established capital stabilization fund.”
Planning board member Jonathan Hankin has been immersed in the issue of affordable housing as a member of the town’s affordable housing trust. Hankin said a significant barrier to expanding the town’s affordable housing stock is the hook-up fee for connecting to the town sewer system. The fee is $1,650 per bedroom, with no cap. Marijuana revenue could be used to control or eliminate these costs for those seeking to build affordable housing.
“The impact this fee has on affordable housing is huge when you are trying to build a modest small new abode, or possibly Accessory Dwelling Unit,” Hankin said. “The fee is effectively asking new users to subsidize the required infrastructure improvements that all the existing users have been able to take full advantage of for years and into the future, apparently.”
All of this begs the question of what other towns in similar circumstances are doing with their cannabis revenues. A quick check of other Massachusetts municipalities that have been hosting pot shops longer than Great Barrington provides some guidance.
The Worcester County town of Leicester is home to Cultivate, which operates as both a medical marijuana dispensary and an adult-use shop, and opened Nov. 20, 2018, the same day as New England Treatment Access in Northampton.
Leicester town administrator David A. Genereux told The Edge in an email that his town is “being very cautious with our revenue, as it will reduce over time.” Leicester has thus far received $510,256.03 in sales tax receipts and $300,000 in host community fees.
The town is going to use $50,000 toward economic development, with the rest of the funds for capital purchases, transfers into the town’s stabilization fund and an ongoing effort to pay down Leicester’s OPEB liability. OPEB is an acronym for “other post-employment benefits,” those nonpension-related benefits such as lifetime health care given to town employees who qualify.
“We believe that this money should be treated as one-time funding, so we are keeping it out of the general fund budget,” Genereux said.
In an Edge interview, Northampton Mayor David Narkewicz said it is important to distinguish between the 3% local-option sales tax, the revenues of which are unrestricted, and the 3% community impact fee, which must be used to mitigate the expenses a municipality is confronted with when a new store opens.
In the last two quarters of fiscal year 2019 (January to the end of June), Northampton collected $1.2 million in sales tax revenue alone and approximately the same amount from the community impact fee.
Of the sales tax revenue, Narkowicz said, “We are using that revenue to support our city and schools.” Most of that will go toward capital projects because of the uncertainty and “the challenge of estimating revenues.”
“Right now, we’re in a rarefied situation,” Narkowicz said of Northampton’s position as the host of a cannabis retailer. “We’re one of only 33 communities in the commonwealth, with well over 100 in the queue waiting to get a license.”
Narkowicz said Northampton has used some of the restricted community impact fees to make sidewalk, crosswalk and road improvements in and around where NETA is located on Conz Street.
Narkowicz added that, according to CCC rules, the community impact fee will be sunsetted after five years, so towns should not count on those revenues for very long.
The cultivation, sale and use of recreational cannabis-related products was legalized in Massachusetts through a 2016 ballot initiative. The measure passed by almost 7.5 percentage points statewide, by almost 30 points in Great Barrington and by almost 24 points in Sheffield. Implementation of the new law was left to the hastily created state Cannabis Control Commission. Preceding that law, medical marijuana was legalized in Massachusetts in 2012 through the same process.