State urged to form equity fund to address cannabis industry access

Boston Statehouse

FILE – In this Aug. 15, 2019, file photo, marijuana grows at an indoor cannabis farm in Gardena, Calif. With nine research grants announced Thursday, Sept. 19, 2019, the U.S. government will spend $3 million to find out if marijuana can relieve pain, but none of the money will be used to study the part of the plant that gets people high. (AP Photo/Richard Vogel, File)

BOSTON (SHNS) – Nearly five years after Massachusetts voters legalized cannabis through a ballot law that emphasized making the newly legal industry accessible to people and communities harmed by the War on Drugs, major barriers to entry still remain for many, one of the state’s marijuana regulators said Tuesday.

Nurys Camargo, who serves on the Cannabis Control Commission, testified Tuesday before the Joint Committee on Cannabis Policy during a hearing focused primarily on bills to establish some type of state-managed loan or grant fund to promote social equity and economic empowerment in the world of cannabis.

She reminded lawmakers that Massachusetts was the first state in the country to mandate that equity and inclusion be part of its legal cannabis framework and was the first to launch programs specifically designed to assist entrepreneurs and businesses from communities disproportionately harmed by the decades of marijuana prohibition. So far, she said, the CCC has provided technical or other assistance to 500 applicants.

“I will say that the data tells a different story, or tells a story, and it’s one that I’m not shy to share with you today. Only 10 equity program participant licenses have opened for business. Nineteen certified women-, minority-, veteran-owned businesses have commenced operation. While these numbers improve every month, they’re not where they need to be. Too many individuals still face extensive barriers to taking part in the industry and deserve access to it,” Camargo, who noted that she was speaking in her personal capacity, said. “As we know, many aspiring applicants have indicated a major barrier to entering this licensed industry is access to capital … and due to federal prohibition, these applicants often do not have the ability to get [a loan] from their bank, something that almost every other business in the commonwealth is able to do.”

Camargo did not throw her support behind any particular bill, but said equity applicants “need access to a state-administered fund that can offer capital to get businesses off the ground.” The committee’s docket Tuesday included four bills related to social equity loan funds — H 158/S 63 from Rep. Dan Hunt and Sen. Nick Collins, H 166 filed by Rep. Hannah Kane, H 177 from Rep. Dave Rogers and H 178 filed by Rep. Jon Santiago.

“Soup to nuts, to really open a retail cannabis dispensary — and it can vary, of course, depending on what market, what part of the state — but it’s about a million dollars,” Rogers said. He added, “So communities of color, women, others who have not historically had as much access to capital really need help, and that’s been a barrier to entry.”

Though some people who spoke during Tuesday’s hearing preferred one bill over the others, many said they supported the general concept of a loan or grant fund and implored the committee to assemble a new bill using specific parts of the various proposals heard Tuesday.

“Because we don’t have traditional funding, we are at the mercy of predatory lenders and allowing new ways of funding will increase the competition in the lending arena. Right now, we’re kind of bait for these folks so a new way of funding that’s regulated … is crucial,” Jonathan Batres, chairman of the Massachusetts Cannabis Reform Coalition and a member of the second cohort of the CCC’s social equity program, said.

One difference among the bills that emerged as a point of debate during the hearing was the funding source.

The Kane bill (H 166) does not include a dedicated funding source. While the Hunt/Collins bill (H 158/S 63) would provide funding for a loan program by matching private funds received with up to 25 percent of the state’s marijuana excise tax revenue, the Rogers bill (H 177) would require that host community agreements dedicate 1 percent to a social equity loan fund.

“While I think the intention behind H 177 is great, I think it’s missing a couple of points based on the HCA context … You can’t pull off money from a host community or community impact fee and give it to the state, in my opinion, under the statute as drafted because it’s for impacts that are reasonably related to that community,” Blake Mensing, an attorney working with cannabis businesses in Massachusetts, said. “So I don’t understand at all the desire to take from the community when that HCA community impact fee is meant to be a net zero. No one should make a dollar off a community impact fee. Period.”

Host community agreements have been one of the trickiest issues for marijuana regulators and lawmakers to deal with in the almost five years since legalization. An HCA, which marijuana businesses are required to enter into before the CCC will consider an application, can include a community impact fee of up to 3 percent of a marijuana business’s gross sales.

That fee is supposed to be “reasonably related to the costs imposed upon the municipality by the operation of the marijuana establishment,” but a study released last month found cannabis companies have paid at least $2.46 million more than required under law, and that communities often have no plan for how to spend the money they collect.

The CCC voted in January 2019 to formally request that the Legislature grant it “statutory authority to review and regulate” HCAs and the House attempted to tackle the issue last February before the coronavirus pandemic put most things on hold on Beacon Hill. The Cannabis Policy Committee held a hearing in May to accept testimony on HCA-related bills.

The committee will continue to accept written testimony on the social equity loan fund bills it heard Tuesday as well as on a Sen. Jason Lewis bill (S 73) related to the expungement of convictions for marijuana possession until 4:12 p.m. on June 29, the committee said.

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