Office of the City Solicitor
795 Massachusetts Avenue
Cambridge, Massachusetts 02139

April 29, 2019

Re: Response to Council Order No. 0 -10 of 4/22/19 Re: Questions Regarding the Draft Cannabis Business Permitting Ordinance; and Re: Responses to Questions Related to the Draft Cannabis Business Permitting Ordinance Posed in Communications and Reports from Other City Officers No. 2 of 4/22/19

Dear Mr. DePasquale:

This is submitted in response to City Council Order No. O-10 of 4/22/19, which asks for legal guidance on several questions related to the draft Cannabis Business Permitting Ordinance. The questions arose out of the Ordinance Committee meeting of April 11, 2019. The Council Order requests responses to a list of several questions raised at the meeting, and for a response to the thirteen questions listed by Councilor Kelley in his "Communication and Report from Other City Officers No. 2" submitted for the 4/22/19 meeting. While the list of questions in the Council Order and in Communication and Report No.2 of 4/22/19 are not worded identically, the substance of them appears to be substantially the same, except that there appears to be one additional question included in Council Order No. O-10, which we have added to the list of thirteen questions set forth in Communication and Report No. 2 of 4/22/19 as question number fourteen . Set forth below are the fourteen questions, immediately followed by our detailed responses to those questions.

1. Altering the proposed 2-year license limitation of .040(b) or even eliminating it completely.

The state law does not provide clear guidance about how long an exclusive priority review period for cannabis permitting eligibility may last. Neither the state law nor the state regulations refer to a specific period. The only reference to the possible length for an exclusivity period for applicant eligibility is in the CCC's "Guidance on Equitable Cannabis Policies for Municipalities," p.S, which states that the CCC recommends that municipalities prioritize review for economic empowerment applicants at the local level, and provides: "For example, a municipality may consider only economic empowerment applicants and applicants who are local residents for the first six months." Somerville's local licensing ordinance, for example, establishes a two-year exclusivity period for a local permit for certain "Priority Applicants." One of the purposes of the state law is to use the licensing process to address issues of equity and to give a leg up to certain applicants.

The counterbalancing legal consideration is that an exclusivity period that is too long or that is endless could be challenged as excluding applicants even if the factual circumstances in the future would warrant approving additional applicants. For example, the City must allow a certain minimum number of retail cannabis businesses in the City pursuant to G.L.c.94G, §3(a), unless there is a city-wide referendum to lower that number. If an overly long or endless exclusivity period results in fewer cannabis establishments than that minimum number, a court could find the exclusivity period to be unlawful for being in conflict with the state law.

2. Can we legally require non-equity retail stores to provide shelf or floor space for permitted equity/empowerment applicants?

The short answer appears to be yes, as long as such a requirement does not go to the extent of making the applicant's business "unreasonably impracticable." G.L.c.94G, §3.

In its regulations and guidance documents, the CCC has promulgated many requirements and programs to foster diversity and equity in the new adult use cannabis industry. One of the guidance documents issued by the CCC is entitled "Guidance on Required Positive Impact Plans and Diversity Plans." In it (p.l), the CCC states that every applicant must include in its application packet to the CCC:
(1) a plan to positively impact areas of disproportionate impact; and
(2) a diversity plan "to promote equity among minorities, women, veterans, people with disabilities, and people of all gender identities and sexual orientation."

This guidance document provides a list of things the positive impact plan may include, such as (p.3):

Providing mentoring, professional, and technical services for individuals and businesses facing systemic barriers, and Incubator or accelerator programs that seek to aid start-up companies owned by disproportionately harmed communities, including but not limited to:
... c. Cultivation, manufacturing, or retail space ....

Therefore, it appears that because the CCC itself has endorsed the idea that cannabis business permit applicants may offer shelf or floor space to benefit others, and so long as it does not make the applicant's business "unreasonably impracticable", the City could require cannabis permit applicants to offer floor or shelf space to benefit others. The Guidance documents define the populations who fall within its definition of "areas of disproportionate impact" to include not only the specific geographical areas identified as such areas (none of which are in Cambridge), but also (p.2):
2. Commission-designated Economic Empowerment Priority applicants;
3. Commission-designated Social Equity Program participants;
4. Massachusetts residents who have past drug convictions; and
5. Massachusetts residents with parents or spouses who have drug convictions.

3. Can we use any fees generated from cannabis sales in a targeted way to assist equity/empowerment applicants in areas such as:

a. Subsidized loans

b. Business training

c. Legal assistance

The community impact fee that is limited at 3% of annual retail sales is something that we anticipate will be included in Host Community Agreements entered into by the City. The fee is intended to reimburse the City for the costs incurred by the City for hosting the cannabis business in the City. Such costs may include local inspection fees, extra public safety costs, traffic studies, environmental impact costs, and additional substance abuse prevention programming. These sample costs are listed in the CCC's Guidance on Host Community Agreements (pp. 4-5). To be a legally permissible fee, the fee must be related to the City's documented costs associated with or resulting from the permitting or operation of the cannabis establishment. The fees cannot be imposed in order to provide funding for the City's discretionary spending on things not related to the impacts caused by the cannabis establishment such as subsidized loans, business training or legal assistance to others.

4. Pertaining to Host Community Agreements, which were a choke point in the process noted during public comment:

a. How much discretion does the Manager have in approving/denying them

b. Can we/should we put specifics about how they are issued in this ordinance

In order to be licensed by the CCC, an applicant must have executed a Host Community Agreement ("HCA") with the City. The HCA is essentially a contract between the City and the applicant. HCAs are provided for by G.L.c.94G, §3(d) and must contain the responsibilities between the host community and the cannabis establishment, as well as the community impact fee, if any. As with other City contracts, the City Manager has the authority to enter into an HCA on behalf of the City. There are not specific limits on the City Manager's discretion on whether to enter into an HCA with any particular applicant, but overall, the City Manager could not impose conditions that would make it "unreasonably impracticable" for the minimum number of establishments required by law to open in the City, nor could he arbitrarily refuse to sign an HCA. It is anticipated, because the CCC requires an executed HCA before it will even consider an applicant's application to be complete, that the City Manager will execute a number of HCAs at an early stage of the application process with the City Council's guidance in mind, as manifested by the Council's passage of the zoning amendment related to cannabis establishments and the anticipated Cannabis Business Permitting Ordinance. The Council could include specific requirements about the contents of HCAs in the Cannabis Business Permitting Ordinance, but if the contents of all HCAs were too narrowly drawn in the Ordinance, that could inadvertently restrict the City Manager's ability to adapt HCA provisions to individual circumstances.

5. If we do not allow all currently permitted RMDs to become adult use retail, how do we pick which ones do

a. Lottery?

b. Only ones in operation as of a certain date (such as date of ordination)

c. Other?

The state law with regard to the conversion of RMDs (medical marijuana dispensaries) to retail use provides, at G.L.c.94G, §3(a)(1), that a municipality shall not by local law "prevent the conversion of a medical marijuana treatment center licensed or registered not later than July 1, 2017 engaged in the cultivation, manufacture or sale of marijuana or marijuana products to a marijuana establishment engaged in the same type of activity under this chapter." Therefore, there is not local discretion to prevent such conversions, although the City may regulate them. Also, the converting RMDs are required to enter into an HCA with the City and obtain a Planning Board special permit under current laws.

6. Should we redefine our "Group A" and "Group B" terminology to

a. Set income limits for qualification

b. Set residential requirements to Neighborhood Revitalization Strategy Areas.

c. Set criteria for membership in these groups so that if the criteria is not met, the permit would not be granted (somewhat along the lines of setting out percentage requirements under .050)

We understand this question to be referring to the priority applicant categories in the existing draft Cannabis Business Permitting Ordinance, asking whether the City could require the owners of such businesses to meet certain income or residential requirements in order to fall within the Group A or Group B priority categories. At the Ordinance Committee meeting on April 11l, 2019, the City's Director of Economic Development of the Community Development Department suggested that one way to identify lower income City residents was to confirm that they lived in one of the City's designated Neighborhood Revitalization Strategy Areas. To the extent imposing such limits would have the effect of preventing conversion of a qualifying RMD to retail use, it would be in conflict with state law. Otherwise, as long as any proposed qualification requirements such as income limits or residential requirements did not make cannabis businesses "unreasonably impracticable" in the City, in my opinion, they would be allowed.

7. Can we drop the number of illegal sales to 1 rather than three prior to allowing for revocation of a license?

Yes, with some qualifications. It is illegal under the state law to sell adult-use cannabis to a person under 21 years of age. G.L.c.94G, §13(i) provides: "Whoever furnishes marijuana, marijuana products or marijuana accessories to a person less than 21 years of age, either for the person's own use or for the use of the person's parent or another person shall be punished by a fine of not more than $2,000 or by imprisonment for not more than 1 year or both such fine and imprisonment. For the purposes of this subsection, "furnish" shall mean to knowingly or intentionally supply, give or provide to or allow a person less than 21 years of age, except for the children and grandchildren of the person being charged, to possess marijuana, marijuana products or marijuana accessories on premises or property owned or controlled by the person charged." The crime requires that the person is "knowingly" or "intentionally" supplying marijuana, marijuana products or marijuana accessories to a person under 21 years of age.

G.Lc.94G, §9(b) provides that if a cannabis establishment employee reasonably relies on various forms of official identification when selling to a person under 21 years of age, the employee "shall be presumed to have exercised due care in making such delivery or sale of marijuana or marijuana products to a person under 21 years of age."

If the Council were to include a provision that license revocations would occur based on a single unintentional sale to a minor, that could be determined to be in conflict with state law if it were found to make cannabis businesses "unreasonably impracticable" in the City. However, revoking a license based on the crime of intentionally or knowingly selling to a person under 21 years of age would appear to be allowable.

8. Pertaining to the percentage requirements for employees and board members under .050(a)2 and 3:

a. Is this legal in any way?

b. If it is legal, can we phase in percentage changes over time to allow the makeup to morph from what exists now in some companies

c. Are convicted felons excluded from participating and, if so, can we insert language that changes that constraint

In my opinion, the requirements in the draft Cannabis Business Permitting Ordinance at §§5.50.050(a)(2) and (3) are allowable because they are not in conflict with state law, so long as they do not make a retail cannabis business "unreasonably impracticable." G.L.c.94G, §3(a). Section 5.50.050(a)(2) of the draft Cannabis Business Permitting Ordinance would require all applicants for a local cannabis business permit to hire at least 51% of minority, women and/or veterans as employees. Section §5.50.050(a)(3) of the draft Ordinance would require all applicants that have a board of directors to have the board makeup be at least 51% minority, women and/or veterans. Both of these provisions as currently drafted say that applicants must certify that they "will" comply with these requirements, so a phase-in period is consistent with the language currently drafted. This phase-in period could be specified in a regulation implementing the Ordinance once enacted and does not need to be stated in the Ordinance itself. Another possibility is that if the Council would prefer to maintain these requirements but allow them to be waived if they pose an undue hardship on particular applicants, the Council could add a waiver application process for those requirements in the Ordinance.

With regard to convicted felons, the state law already contains many provisions dealing with which felons may be allowed to operate, own or be employed by a cannabis business, and which may not. For example, G.L.c.94G, §5(b)(4) states: "The commission shall approve a marijuana establishment license application and issue a license if: .. . an individual who will be a controlling person of the proposed marijuana establishment has not been convicted of a felony or convicted of an offense in another state that would be a felony in the commonwealth, except a prior conviction solely for a marijuana offense or solely for a violation of section 34 of chapter 94C of the General Laws, unless the offense involved distribution of a controlled substance, including marijuana, to a minor." It would not be permissible to allow convicted felons who are prohibited by state laws and regulations from owning, operating, or being employed by a cannabis establishment to do so under our local laws. This is so because the convicted felon must be allowed by both state and local law (if any) to own, operate or be employed at a cannabis business establishment; simply allowing it under local law would not make it possible for the convicted felon to work in the cannabis establishment due to provision of any states law that that are applicable. The City's local laws in this area may supplement the state laws but cannot act completely independently of them.

9. Given that the state has set ownership limits, can we further limit how many establishments, and of what type, any one owner has in Cambridge?

G.L.c.94G, §16 states that: "No licensee shall be granted more than 3 marijuana retailer licenses, 3 medical marijuana treatment center licenses, 3 marijuana product manufacturer licenses or 3 marijuana cultivator licenses; provided, however, that a licensee may hold 3 marijuana retailer licenses, 3 medical marijuana treatment center license, 3 marijuana product manufacturer licenses and 3 marijuana cultivator licenses." This statute does not state that applicants must be allowed to hold its licenses in the same municipality. In my opinion, a local limit on ownership would not conflict with this state statute unless the City went above the limits and granted 4 or more licenses to an individual owner.

10. Would the ordinance be the proper place to put in information about timelines, points of contact and so forth or would we have a separate guidance document for that?

A separate guidance document or local regulation would allow for greater flexibility regarding timelines, points of contact, and the like, which could change as the local licensing process begins and matures.

11. Can we use this Ordinance to set up a process to keep equity/empowerment applicants from setting up shop virtually, or even literally, next door to each other? There was some concern expressed that, absent such a limitation, places like Central Square may only have one non-equity cannabis facility but may have a huge number of equity shops.

The buffer zone between cannabis retail locations was considered in the context of the zoning amendment that was recently passed, at Cambridge Zoning Ordinance, Section 11.803. Cannabis retail stores are only allowed in the zones designated in that section, and must be 1,800 feet apart, unless the applicants are Economic Empowerment or Social Equity applicants. If they are, there is no spacing requirement specified, except that Section 11.803.3 of the Zoning Ordinance provides a 300 feet distance requirement from schools and playgrounds unless that distance is reduced by the Planning Board. In Valley Green Grow, Inc. v. Town of Charlton, 2019 WL 1087930, a recent Land Court case, the judge held that the Town of Charlton could not alter a previously adopted cannabis zoning bylaw that was adopted after a two-thirds vote in favor by enacting a general bylaw of the Town for which a two-thirds vote was not required. Therefore, if the Council wishes to impose further location requirements, a further amendment to the provisions of the Zoning Ordinance that already speak to that issue would be required.

12. How can we make sure that Equity and Empowerment applicants are not pitted against each other? Is that something we should worry about?

Any group of applicants the City prioritizes equally will probably be competing for a limited number of opportunities in the City. If the City Council chooses in the draft Cannabis Business Permitting Ordinance to avoid the competition by prioritizing either Economic Empowerment or Social Equity applicants over each other, that would likely be deemed consistent with state law.

13. How would we go about reviewing how successful our attempts at providing an equitable program actually turn out to be? Can we put relevant language in the Ordinance?

Language could be added to the draft Cannabis Business Permitting Ordinance concerning an annual (or some other) reporting requirement to the Council from the City Manager. However, it would also be an option for the Council to simply request information about the program through the City Manager by way of a Council Order at any time it chooses.

14. What happens if the Cannabis Business Permitting Ordinance is not passed?

The City is not obligated by state law to pass a local cannabis business permitting ordinance. Without it, cannabis businesses in Cambridge will be regulated by the Commonwealth Cannabis Control Commission. Also, the City has already enacted an amendment to the Zoning Ordinance (Section 11.800) that requires each new cannabis business to obtain a special permit from the Planning Board. In addition, the City has the right in the state-mandated Host Community Agreements to impose a community impact fee and other contractual responsibilities on every new cannabis business in the City. The City has also already accepted the statute so that a local cannabis retail sales tax will be imposed. However, as stated in the Purpose section of the draft Cannabis Business Permitting Ordinance (§5.50.010), such an Ordinance would empower the City to require applicants to certify compliance with certain conditions in the public interest prior to being permitted to operate in the City and would give the City local authority to give permitting preferences for cannabis business permits to defined groups of priority applicants.

Very truly yours,
Nancy E. Glowa,
City Solicitor