HAVERHILL — Caroline Pineau finds herself in the position of suing the city while seeking renewal of the Host Community Agreement (HCA) to operate her cannabis dispensary.
As owner of Stem, a cannabis dispensary in downtown Haverhill, Pineau is gearing up for the next court date against Haverhill concerning disputed community impact fees. Pineau has been locked in this legal battle since 2021, seeking return of $887,000 from the municipality.
Pineau is readying for trial while at the same time trying to negotiate Stem’s upcoming Host Community Agreement (HCA) with Haverhill. Despite the dispensary’s agreement expiring on Dec. 27, the owner said she remains determined to fight the fee in court.
The ongoing legal dispute between Stem and the city is scheduled to resume Nov. 20, with each side presenting expert witnesses in Essex County Superior Court in Newburyport.
Under state law, a marijuana establishment must sign a HCA with its host city to operate. The agreement allows the city to charge a community impact fee to cover costs that are reasonably related to how that business impacts the community.
City officials say facts of the case and legal issues remain unresolved.
“We think it is important to note that this case involves factual questions and legal issues that have not been addressed by Massachusetts courts since marijuana was legalized,” Mayor Melinda Barrett said. “Unfortunately, this has resulted in a protracted dispute with Stem.”
Back in 2018, Pineau signed a HCA with former Mayor Jim Fiorentini, but expressed concerns with the annual fee at the time.
“It’s not supposed to be a tax, it’s supposed to be something that’s reimbursed – something that we reimburse the city, if we cause an impact,” Pineau said.
Stem opened in 2020 with Pineau paying her first community impact fee a year later. Pineau made the payment under protest, saying that the city failed to provide adequate evidence of Stem’s costs on Haverhill.
“They have no documentation to prove why they collected the fees in the first place,” Pineau said.
The Massachusetts Cannabis Control Commission (CCC) requires marijuana establishments to submit the HCA as part of their annual business license renewals. The city, meanwhile, must provide documentation detailing costs reasonably related to Stem for the dispensary to continue its operation.
In February 2021, former City Solicitor William Cox sent Pineau a letter regarding Stem’s negative impacts on Haverhill.
“We do not at this time have specific documentation to provide you with, but are working on compiling such documentation,” said Cox.
The reasons listed for collecting the fees related to the general effects of marijuana legalization rather than any direct correlation to Stem.
Cox said retail marijuana shops have significantly increased costs for several city departments, including fire, police and health services. He cited an increase in the demand for drug abuse and mental health services, both in the community and schools, along with an increase in domestic issues, anxiety, depression, and marijuana use among students.
After receiving Cox’s letter, Pineau threatened to sue the city, asking for proof of how her business contributed to domestic violence and drug use among youth. Due to Haverhill’s failure to respond within a specific timeframe, Pineau filed a lawsuit against Haverhill in the spring of 2021.
Haverhill hired MGT Consulting Group to produce a report to more accurately demonstrate the detrimental effects of Stem on the community, which was submitted in September 2021.
The report said Stem, in its first 16 months of operation, was responsible for nearly $750,000 in extra costs across all city departments, including police, fire and health services.
Stem, along with two of its competitors, CNA Stores and Full Harvest Moonz, cost the Haverhill Police Department just over $884,330, the report said. Pineau’s business was said to be responsible for nearly $430,000 of that sum.
Pineau said the consultant’s reports were filled with inaccuracies and exaggerated claims regarding Stem’s impact on the city.
“They’re really throwing in anything that could stick,” Pineau said. “Anything that could maybe draw a correlation to cannabis.”
The report included a disclaimer above these statistics, indicating that there could be more effective methods to achieve more accurate results.
“In future years, when more information about the specific community impacts from each LME (marijuana establishment) are known, it may be more appropriate to allocate costs using a different methodology than has been employed in this initial calculation,” the report said.
In November 2022, Boston set a precedent by removing impact fees and returning funds collected from pot shops in previous years. The city refunded nearly $3 million to nine cannabis businesses stationed across Boston.
Other cities – Uxbridge Northampton, Amherst and Worcester – followed suit and no longer collect community impact fees.
Pineau said she hopes Haverhill will follow the other communities, as the city is unfairly targeting small operators. While larger companies in her industry have the resources to navigate such challenges, according to Pineau, the fee creates a barrier of entry for cannabis businesses to compete.
“No operator should be shaken down by their community in order to do business,” said Pineau.
As a female dispensary owner, Pineau is a certified economic empowerment licensee in the Massachusetts cannabis industry. Operators with certified economic empowerment priority represent businesses primarily owned and comprised of diverse and disproportionately affected individuals.
{p dir=”ltr”}“She is super well respected across the state because she runs a good operation and because she stood up to the big guy,” said David O’Brien, the president and CEO of the Massachusetts Cannabis Business Association.
The CCC is legally required to support businesses such as Stem in renewing licenses, particularly those that qualify as social equality licensees.
In August 2022, former Gov. Charlie Baker signed “an Act relative to equity in the cannabis industry.” The law strengthens the CCC’s authority between cities and operators negotiating HCAs while Baker said the bill was designed “to increase opportunities for social equity businesses” in the cannabis industry.
“The problem with these unjust impact fees is it creates a barrier of entry for equity operators, independent operators, woman-owned operators, black and brown operators, and the very communities that have been disproportionately harmed by the war on drugs,” Pineau said.
Stem already pays 3% of its annual revenue in excise taxes, generating $384,000 for Haverhill on 2021’s $12.8 million in earnings.
During the Nov. 20 trial, Haverhill will call Sharon Levy, a pediatric nurse, to explain how dispensaries like Stem have adverse health effects on children. Pineau’s team will bring in Dr. Marion McNabb, an expert in public health and cannabis policy.
“It is irresponsible to not look at the real drivers of youth mental health and drug use, which are more linked to fentanyl, opioids, overdoses, and alcohol as drivers of harm and need for intervention – not cannabis,” Dr. McNabb said.
Meanwhile, a pre-trial settlement is still possible, according to Mayor Barrett.
“As the city has previously stated publicly, it remains open to ongoing discussion with Stem on a possible resolution of all outstanding issues between it and the city, including mediation with Stem in the near future,” Barrett said.
Pineau said settling the suit as soon as possible would be the best-case scenario for Stem.