HAVERHILL — The city’s first pot shop had its day in court, and now other shops in Massachusetts are awaiting the ruling because it could impact their financial futures.
A lawsuit filed by a retail marijuana shop against Haverhill over nearly $400,000 in impact fees went before a judge in Essex Superior Court in Newburyport Monday.
Judge James Lang heard arguments from Attorney Thomas MacMillan, who represented Caroline Pineau, owner of the Stem shop in downtown Haverhill, and Attorney Michele Randazzo, who represented Mayor James Fiorentini and the city.
Pineau is arguing the city should provide detailed documentation of the impacts her shop has on Haverhill before she pays the city nearly $400,000 in fees called for in a Host Community Agreement signed by her and the mayor. The city is arguing that since the agreement calls for payment of the fees, Pineau should pay the money and detailed documentation can come later.
The judge took the arguments under advisement and said he will issue a ruling later. The ruling could eventually become useful to other marijuana shop owners in the state because they all have Host Community Agreements.
During Monday’s hour-long hearing, MacMillan said the Host Community Agreement that Pineau signed with the city two and a half years ago, in advance of her opening the downtown shop in May of last year, noted that both parties had to meet certain obligations.
He called it a “take it or leave it” agreement requiring that Pineau pay the city an impact fee of 3% of sales, in addition to the 3% sales tax Haverhill receives on what her shop sells.
“The HCA (Host Community Agreement) is a two-way street with obligations on both sides and Stem is prepared to meet its obligations, but the city isn’t,” MacMillan said, going on to explain how Pineau says Haverhill is failing to live up to the contract.
MacMillan told the judge that state law requires the city provide detailed documentation of how it will use the impact fee money, and that Pineau requested the documentation in July 2020 then again in January of this year. In response, the city sent her a letter indicating it was gathering the information.
Following Pineau’s attempts to get an impact statement listing associated costs, City Solicitor William Cox provided a letter on Feb. 28 highlighting some of the city’s concerns but failing to list related costs.
In addition to an increased need for police and fire services, Cox’s letter said Haverhill has “seen an increase in need for drug abuse and mental health services, in both our community, and more specifically, our schools, as well as an increase in domestic issues” as a result of Stem and other shops opening in Haverhill.
“We have seen an increase in anxiety, depression and drug use in our schools, including the use of marijuana,” Cox wrote. The increase is so high, he said, that he and other city officials believe a survey needs to be done to gauge students’ addiction levels to arrange for counseling and other services.
MacMillan asked that Pineau be allowed to give the court her first annual impact fee payment of about $356,000, which MacMillan said is due May 26. He suggested the court hold the money until the city provides a detailed explanation of how it would be spent.
“It’s not fair that Stem be required to pay money towards impact fees when the city has done nothing to provide support as to why they should be entitled to the 3 percent,” MacMillan said. “It’s not intended as a windfall and it’s not an additional tax. It’s based on what proof they can show they’ve incurred as additional costs.”
According to Massachusetts General Law governing the local operation of retail cannabis shops, “Any cost to a city or town imposed by the operation of a marijuana establishment or medical marijuana treatment center shall be documented and considered a public record.”
The judge said it was clear to him that some sort of documentation on the part of a host community is envisioned in the law, and that the city has had one year to determine the costs associated with hosting the Stem shop.
“The fee is supposed to be related to actual impacts, existing and anticipated, but when you get documentation and you determine it is insufficient to support the 3 percent fee that was negotiated in the host community agreement, what would be the mechanism for review?” the judge asked.
MacMillan said the issue of impact fees is evolving. He pointed to the state Cannabis Control Commission’s published guidance on Host Community Agreements.
He said the commission’s guidance serves as a road map for how impact fees should be used, noting the Cannabis Control Commission uses examples such as traffic intersection design studies where additional heavy traffic is anticipated, public safety personnel overtime costs during times that higher congestion or crowds are anticipated, and additional substance abuse prevention programming during the first years of operation.
“It’s not like the city was without the information it needed,” MacMillan said. “Even if we did give some benefit of the doubt with respect to not a lot of time having passed since the Stem facility opened, the fact remains they (the city) shouldn’t be insisting on a $400,000 payment with zero proof of what the impact was.”
The judge asked what would happen if Stem didn’t accept the city’s impact fee documentation as being sufficient. Such a situation could open up the possibility of future disputes, the judge said.
“Where do you go?” he asked. “Who decides?”
Randazzo told the judge there is nothing in the Host Community Agreement that requires the city to provide impact fee documentation before an impact fee is paid.
She said the process of calculating costs to the city is something that happens over time, and that marijuana shops need to operate for some period of time before those costs can be determined
Randazzo said the pandemic interfered with the city’s ability to determine the full impact of Stem and related impact costs, while at the same time new methods of collecting the necessary data are being developed. She said it’s reasonable that the city needs more time to compile information about Stem’s impact.
Randazzo concluded her argument by saying the impact fee is not a dollar-for-dollar reimbursement and that impact costs to the city need only be reasonably related.
“As of now, there’s a pretty broad landscape for identifying and looking at all aspects and not just how much did it cost for the city planner to review plans or was there a police detail stationed at Stem,” she said. “It’s much broader than that and it is supported by the CCC’s guidance,” she said.
