Recreational cannabis use and sale has been legal in Massachusetts for five years, but many people have been shut out of the industry because they were impacted by past anti-cannabis law enforcement in some way.
The House on Wednesday advanced a Senate bill, with House amendments, regarding social equity in the cannabis industry, to level playing fields and correct past wrongs caused by prohibition.
In Massachusetts, a social equity cannabis business is one at least 51% owned by Massachusetts residents who have lived at least a year in a community disproportionately impacted by anti-cannabis laws, or Massachusetts residents who have, or have a family member, with a criminal conviction for cannabis.
The cost of doing business
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Rep. Daniel Donahue, D-Worcester, chair of the Joint Committee on Cannabis Policy, noted the time-consuming process of getting licenses to open cannabis businesses, combined with difficulty in securing loans due to federal prohibition, leaves many would-be businesses open to “predatory financial deals.”
“The truth is, licensing a cannabis business in Massachusetts is expensive,” Donahue said Wednesday on the House floor
“As of this January, out of 346 businesses that have commenced operations statewide, only 20—just 20—have been social equity program or economic empowerment entrepreneurs, which is a mere 5.7% of the licenses,” Donahue said.
Here are five important elements of the social equity bill:
Revenue transfer
Wednesday’s move by the legislature adds language to have 1% of a social equity business’s revenue collected by the state and distributed to the community in which that business is located, instead of having the money put into the Massachusetts Regulation 9 Fund.
That means when the state collects the 1% of revenue from cannabis businesses for social equity businesses, that money will go back to their city or town.
Host agreement clarity
When a cannabis business applies for permits and licensing, it needs an agreement with the community in which it will be operating. Often, these host community agreements include payments to the municipality to offset any increase in services anticipated, including police patrols, substance abuse education for schools and more.
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Under the state’s cannabis law, those payments requested by cities and towns—not to exceed 3% of the business’s gross sales—are expected to be “reasonably related” to the increased costs.
The bill advanced on Wednesday further clarifies what boundaries a host community agreement must stay within— it must show payments are related to the business’s operation, it can’t go above 3% of the cannabis business’s gross sales, and can’t be longer than a single five-year term—as stated in the initial 2017 cannabis law.
Since the birth of the cannabis industry in Massachusetts, communities have drifted beyond those guidelines.
“When a municipal official is overprotective of their community and asks for more than is reasonably related to the operation of an establishment, they create demands and erect barriers which many small businesses and local entrepreneurs cannot overcome or fairly compete amongst,” Donahue said.
The bill also gives the Cannabis Control Commission enhanced power to review and rule on legality of host agreements with these parameters in mind.
Social Equity Trust Fund
The bill also creates a Cannabis Social Equity Trust Fund to promote more industry participation by those qualifying for social equity status. The money in that fund would be used for grants, no-interest loans and more. Under the legislation, 15% of licensing revenue collected by the state would go to this new fund.
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The Social Equity Trust fund would be overseen by the Executive Office of Housing and Economic Development with guidance from a new social equity cannabis advisory board whose members would be appointed from communities disproportionately impacted by cannabis prohibition.
Expungement of previous offenses
The bill offers a chance for people previously convicted of cannabis-related crimes under prohibition to have those convictions wiped off their criminal records, offering many a fresh start.
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“It is only fair that those who were punished for past actions, the same actions which so many now profit handsomely from in a regulated and legal setting today, do not continue to suffer under the burden of prior convictions,” Donahue said.
Cannabis cafes for on-site consumption
The 2017 law legalizing cannabis sales also allows for on-site consumption businesses, known as cannabis cafes. But there was no set process to make that happen.
The new bill allows cities and towns to vote (with local referendum or local government body vote) to allow on-site consumption.
“The Cannabis Control Commission has asked for this clarity and has already developed thorough regulations along with an existing pilot program for social consumption,” Donahue said.
For the first two years, the CCC’s pilot program would only be open to social equity applicants in 12 designated municipalities. So it could come to be that a person once convicted of smoking marijuana in a town gets first dibs on opening a cannabis café in that same town.
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