After Massachusetts’ governor recently signed sweeping legislation focused on promoting diversity and equity in the state’s $2 billion marijuana industry, Ava Callender Concepcion of the Cannabis Control Commission told reporters she was “shaking with relief and happiness.”
The marijuana-focused law covers a broad range of issues, from creating a Social Equity Trust Fund to help entrepreneurs raise capital to keeping a lid on the controversial fees levied by municipalities on local cannabis businesses.
The reform package also allows municipalities to pass bylaws or to vote on whether to allow cannabis consumption lounges as well as permitting businesses to open such venues in localities previously approved through a pilot program.
“This is the most comprehensive piece of legislation on cannabis since the establishment of the Cannabis Control Commission,” Concepcion said.
But some of the state’s industry executives argue that the new law could have gone further in providing business opportunities to those impacted by the war on drugs.
Social Equity Trust Fund
Massachusetts was the first state to implement a social equity program for its cannabis industry as part of the state’s new adult-use market in 2018, according to the 2022 Equity Report issued by the Minority Cannabis Business Association (MCBA).
Today, 14 other states have implemented or are planning their own programs.
The first social equity iteration in Massachusetts focused on providing delivery, courier and consumption-site licenses exclusively to “minorities and other marginalized communities,” the MCBA noted.
The program also helped entrepreneurs navigate the license applications and lowered or eliminated certain fees.
The new law builds on those steps.
Now, 15% of cannabis taxes and fees will be allocated for Massachusetts’ new Social Equity Trust Fund, which will disperse grants and loans to entrepreneurs harmed by the war on drugs.
The fund will be sizable: The state’s 2023 budget allocated $196,198,415 from the Marijuana Regulation Fund to various programs and initiatives. In fiscal year 2022, the fund collected $156,669,255.
So far, it’s unclear how that money will be spread out among entrepreneurs, said Ulysses Youngblood, the president of Worcester-based marijuana retailer Major Bloom.
In 2007, Youngblood said he was expelled from Assumption University in Worcester after authorities suspected he possessed marijuana.
Four months later, on his 20th birthday, he said he endured police brutality while being arrested at a house party he hosted after a noise complaint. He was charged with possessing alcohol as a minor and keeping a noisy and disorderly home. The case was dismissed.
When Youngblood decided to start a cannabis business, he qualified for the CCC’s economic empowerment program, which granted him an exclusive delivery license and expedited the process to acquire manufacturing and retail licenses.
But he still took on about $60,000 in personal debt and raised an additional $1.2 million to get the businesses operational, which includes a 6,000-square-foot manufacturing facility.
He said that the new fund is a good first step to help entrepreneurs get started.
But he’s skeptical there will be enough money to go around to all those deserving of the assistance.
Youngblood estimated that even nonmanufacturing companies require $20,000-$100,000 in startup costs.
”It’s just that we’re talking about generations of oppression,” he said. “Generations. A state fund is great, but it’s just not going to be enough.
“We’re dealing with systemic issues for hundreds of years. So, 10 or 15, or a handful of businesses (receiving funds) looks great on paper. However, there needs to be a bigger impact.”
Exclusive licensing
A case in point: Delivery services – which have been set aside exclusively for social equity licenses in Massachusetts – have very slim margins, Youngblood said.
Operators also complain that they are overregulated by costly requirements such as having two employees per vehicle – another issue that many say must be addressed to keep current social equity businesses afloat.
“If you want an equitable license, you can’t just carve out one license type,” Youngblood said.
“You have to look at all license types to make it fair, because you still have those MSOs (multistate operators) at the top producing and controlling pricing.
“But just speaking off the history and my own experience being in an equity program, it’s not enough,” he added. “You need more cultivators and producers.”
Host community agreements
The new legislation also gives the CCC more oversight over so-called host community agreements (HCAs), which are negotiated between municipalities and local cannabis businesses.
While the CCC has until November 2023 to plan how it will oversee the contracts, so-called community impact fee payments will be limited to 3% of a company’s sales.
In a 2021 analysis, cannabis policy researcher Jeffrey Moyer found:
- There was a lack of consistency among these agreements.
- The highly competitive cannabis industry was at risk of being exploited by municipal governments that far exceeded the 3% recommendation and couldn’t always account for where the money went.
In September 2021, for example, a former mayor of Fall River was sentenced to six years in prison after being convicted of extorting hundreds of thousands of dollars from hopeful marijuana entrepreneurs.
But if or how the new law will impact existing HCAs is unknown, according to Steve Smirti, the communications director for the Medford mayor’s office.
“The city signed its final retail HCA earlier this month and we do not foresee having to renegotiate the terms of the contracts absent a clear determination by a court or other legal authority that it is required to do so,” he told MJBizDaily via email in August.
Under that agreement, signed with retailer Victory Gardens, Medford will collect 3% of the company’s gross sales each quarter.
Victory Gardens also agreed to donate $50,000 annually to groups that support local veterans.
In addition, the company agreed to renovate an existing Veterans of Foreign Wars facility to house its new retail shop and a space for local veterans.
The five-year agreement is the city’s third HCA with a marijuana retailer.
“It would seem counterproductive to have legislation impact previously signed agreements, as those were negotiated and signed in good faith under the laws in existence at the time with both involved parties,” Smirti wrote.
Is it too late?
Shaleen Title, a former Massachusetts cannabis commissioner and the founder of drug policy think tank Parabola Center, celebrated the achievement.
“Passing the new legislation was a massive four-year effort by a broad coalition,” she told MJBizDaily via email. “The effort was led by social equity entrepreneurs themselves.
“It took time, but eventually the changes were supported by all of the state cannabis regulators and many influential equity-focused organizations.”
But Youngblood and Kobie Evans, a co-owner of Boston-based marijuana retailer Pure Oasis, wondered if that four-year process means that it’s too late for the new legislative efforts to have a meaningful impact on equity entrepreneurs in Massachusetts.
“The hard part is that it’s 2022,” Evans said. “We opened two years ago, so we’re kind of far out in terms of the life cycle of cannabis.
“Most of the people who were going to get into it have already gone through the application process.”
But he said the efforts might have more far-reaching impact and could influence federal policy or other state legalization efforts in the future.
“I think it is valuable though on a national level,” he added. “It is valuable for other cities and states to look at what’s possible.”
