In April 2022, Caroline’s Cannabis sued the town of Uxbridge, Mass. seeking return of all Community Impact Fees (CIF) the dispensary had paid to the town. After nearly two years of litigation, Uxbridge settled the claim late last month, agreeing to return $1.17 million, about 80 percent of the impact fees then paid. The substantial settlement suggests Uxbridge’s attorneys—KP Law, P.C., the same firm that Great Barrington employs—advised Uxbridge that its odds of success in the pending litigation were essentially nil. Since Uxbridge may not simply give away public funds rightfully in its possession, we can only conclude, as KP Law concluded, that Uxbridge had no viable alternative.
Uxbridge wasn’t the first to return impact fees to a cannabis dispensary, just the latest. Boston returned $2.86 million in November 2022, and stopped collecting CIF thereafter. In 2021, Lee waived Canna Provisions’ $1.08 million CIF, determining that was the appropriate course because no taxpayer dollars had been spent as a result of cannabis sales. Several towns, including Amesbury, Lee, Northhampton, and Pittsfield, have also agreed to stop collecting CIF.
It was reasonable to surmise when cannabis sales were first contemplated in 2016 that Massachusetts towns would incur some costs associated with the distribution of a recently illegal substance. Unlikely anyone thought there would be a need for increased mortuary services, but Gov. Charlie Baker warned of “serious and immediate implications for public safety” and “costs to our first responders, our medical system, and our cities and towns” from increased ambulance rides and emergency room visits. Due to such (unfounded) fears, the Commonwealth’s cannabis distribution legislation provided that each town’s Host Community Agreement (HCA) with dispensaries could include a CIF of up to three percent of gross sales for reimbursement of costs “reasonably related” to cannabis sales.
The question raised by Caroline’s Cannabis’ lawsuit as well as other lawsuits currently pending (including Bloom Brothers’ lawsuit against Pittsfield) is simply this: What if a town cannot document any “reasonably related” costs arising from cannabis distribution? May the town use its collected CIF for the public good or, as Boston and Lee determined, only if there is a documented impact to taxpayers? Moreover, if KP Law advised one of its 125 Massachusetts municipal clients to return its CIF funds, will it be advising Great Barrington and its other 123 town clients to do the same? Last, if you are a town sitting on a nice CIF fund (think Great Barrington), is the precedent of Uxbridge settling Caroline’s Cannabis claim sufficient to cause towns to reconsider current distribution plans? (Spoiler alert: absolutely.)
As of February 6, 2024, Great Barrington had just under $5 million sitting in its “free cash” account from collected impact fees. The state has certified these funds as “free cash,” but maybe they are less “free” following recent developments than previously thought. Call it “free cash” with an asterisk perhaps?
In January 2023, Great Barrington Town Counsel David J. Doneski, of KP Law, advised the town that it could continue to distribute CIF. Town Meeting approved the distribution. But now, consistent with Mr. Doneski’s firm’s advice to Uxbridge, one wonders if the advice previously provided to Great Barrington should be reconsidered before our 2024 Town Meeting.
Great Barrington has distributed $1.4 million of the nearly $6.4 million CIF collected to very worthy causes—Construct, Volunteers in Medicine, Railroad Street Youth Project, Berkshire Hills Regional School District, Rural Recovery Resources, and the Berkshire South Regional Community Center. The town’s recently proposed 2025 fiscal year budget indicates the town will seek approval at Town Meeting to distribute an additional $515,000. While no one can question the worth of these terrific nonprofits, one can question whether Great Barrington should distribute additional impact funds at this time.
Theory Wellness, Rebelle, and other local dispensaries have either asked for the return of CIF paid to date or requested the town stop collecting the fee. Likely the high note of their day, Great Barrington’s six cannabis dispensaries must have been popping Champagne—or whatever the cannabis equivalent is—upon learning of the Uxbridge settlement. It must have been party hats and horns all around, as the settlement suggested they are each one step closer to getting back funds that they believe never should have been collected to begin with.
Theory Wellness has paid Great Barrington impact fees in excess of $4.1 million. Fair to say the dispensary’s litigation attorneys are mapping a strategy to get back no less than 80 percent of that sum, about $3.25 million. Theory Wellness and Great Barrington have to work together for years to come, so presumably filing a lawsuit is not any party’s preferred course. And for the town, incurring attorneys’ fees and costs and then agreeing to return 80 percent would be throwing good money after bad. In the exercise of its fiduciary duties to shareholders, Theory Wellness’ Board of Directors cannot walk away from a potential $3.25 million to $4.1 million payment. Recognizing this, the best case here is for the town to negotiate amicable resolutions with Theory Wellness and each of the town’s other dispensaries. Worst case: The town and dispensaries end up in an expensive litigation mess.
When questioned regarding the Bloom Brothers lawsuit, Pittsfield’s former mayor stated that Pittsfield wasn’t in a position to return Bloom Brothers’ impact fees; Pittsfield had already spent the money “on municipal operating expenses.” Keeping in mind that when you find yourself in a hole, you should stop digging, wouldn’t it be wise for Great Barrington to cease distribution of any additional impact funds until it is established as a matter of law to whom the funds belong?
Let’s agree spending the dispensaries’ remaining $5 million now and determining that the impact fees will need to be paid back later should be avoided. While the causes are worthy, the town may regret writing checks on other people’s accounts. On the other hand, seeking approval at some later date to refund $5 million to the dispensaries would certainly make for a lively Town Meeting.
Towns that are fighting litigation argue that their HCAs provide for payment of the three percent CIF, and a deal is a deal. But CIF was a fee to reimburse costs arising from cannabis distribution, not a tax to be used at a town’s sole discretion. The Massachusetts statute has been amended to make this clear, and, accordingly, the Cannabis Control Commission (CCC) has been working for about a year on revised regulations. The CCC’s newly drafted form HCA provides that CIF must be reasonably related to costs arising from dispensaries—there must be an actual link between the municipality costs and cannabis distribution—and municipalities will be required to provide annual itemized invoices of the costs reasonably related to dispensary operations. Likely few or none will be able to do so, which explains the recent trend to stop CIF collection.
On occasion, we may each find ourselves at the intersection of “do the right thing” and “do I really have to?” Given change for a $20 when you paid with a $10, integrity and honor cause you to return the excess change without a thought. Great Barrington now finds itself at this intersection and must understand the ethical course is to return its CIF. However, if due to the evolving legal landscape Great Barrington is not convinced that giving the money back now is the right thing to do, the town should at least cease further distributions until current CIF challenges are resolved. Giving the money away and then having to pay it back should be the least favored option.
