Supporting Small Licensed Producers and Home Growth
The Massachusetts Growers Advocacy Council (MGAC)
The Massachusetts Growers Advocacy Council (MGAC) is working to advocate for sensible regulation and legislation surrounding the cultivation and manufacture of cannabis products in Massachusetts. The organization aims to build and foster a sense of community within the state’s cannabis industry.
The council was established in 2015 when the legislation for adult use was first placed on a ballot in Massachusetts. The founders were dissatisfied with the way the state’s department of public health rolled out the earlier medical marijuana legislation and wanted to be proactive in lobbying for practical rules for adult use. After more than three years, the organization has become a successful lobbying group with more than two dozen individuals and two dozen businesses in its membership.
One of the key issues is improving the regulatory requirements for small-scale growers in the state. The organization has identified a disparity between the numbers of small-scale versus large-scale growers being licensed in the state. “Small businesses are finding a lot of barriers to entry into the industry. The vast majority of the players are well funded, and none of the local folks who have applied for licenses have managed to get one yet,” says MGAC Executive Director Peter Bernard.
In Massachusetts, in order to be licensed to grow cannabis, a company must sign a host community agreement: a contract that is negotiated between a cannabis business and the community where it wants to operate and contains all the terms that must be met by the business to operate within the community. Until an agreement has been signed both by the operator of the business and representatives of the municipality, a license cannot be issued.
Despite rules designed to be fair, the application of these agreements has been problematic. In practice, these agreements can be expensive, and the MGAC has seen that host community agreements tend to favor businesses with extensive funding.
For example, Happy Valley Ventures in Amherst agreed to pay a three percent community impact fee totaling no less than $75,000 in its first year, no less than $60,000 per quarter after its third year, and $15,000 to charities. Central Avenue Compassion Care in Ayer agreed to pay $30,000 to the Ayer Youth Works Program, $6,500 to DARE, $1,500 to the Student Awareness of Fire Safety Education program, $2,500 to charities, and $12,000 for a new town sign. In East Hampton, Apical agreed to pay at least $75,000 in community impact fees in year one and three percent in years two and three.
In many cases, the demands of the host community agreement keep licensing beyond the reach of small-scale growers. “There are supposed to be limits on what a town can ask for, but those limits are not enforced, and towns are asking for a lot of money in order to grant licensing. In Littleton, a large company with deep pockets went in and offered the moon and the stars to get licensed, then a smaller 5,000-square-foot company came along with just enough money to get their business off the ground, but they were expected to make the same kind of agreement,” says Bernard.
Bernard explains that there is legislation in place that is meant to limit the amount of money a municipality can demand to a maximum three percent community impact fee. The problem is that no one has been put in charge of reviewing these agreements to make sure they do not exceed this limitation. “Nobody in the state feels like they have the authority to enforce it. It’s one of the highest barriers of entry for the smaller folks.” The MGAC is lobbying for equal licensing opportunities for businesses of all sizes.
To improve the situation for smaller companies, the Massachusetts Cannabis Control Commission has developed a pilot program to prioritize economic empowerment applicants when licensing social consumption lounges. These applicants are members of a community who have been disproportionately affected by the failed war on drugs and the criminalization of cannabis in the past. This program is being rolled out across a dozen towns throughout the state.
While the MGAC wants to improve legislation and regulation throughout Massachusetts, this commitment to small business has helped it grow. Most of the organization’s members are either individuals or small businesses, and as members of the council, they receive opportunities for cross-promotion and networking and the opportunity to participate in regulatory roundtables. Before the MGAC brings a regulatory or legislative issue before the state, it first consults its membership. It hopes to carry the concerns of the public with it, and its members act as representatives of the community.
As a result of the council’s lobbying efforts, several changes have been achieved. Personal possession regulations were amended to allow additional home cultivation. MGAC submitted the draft regulation that eventually became the basis for cannabis business licensing. Currently, the organization is awaiting initial draft regulations related to event licensing and social consumption at those events. These are due to be released by June 30 of this year “We’ve actually submitted some draft regulations for the mechanics around event licensing. For concerts, music festivals, trade shows, things of that nature, where you could have open social use as well as legal vending,” says Bernard.
The MGAC believes that event licensing is an important issue because of the limitations in marketing for cannabis companies. Any cannabis related marketing within the state of Massachusetts must ensure that eighty-five percent of its audience is over the age of twenty-one. This vastly reduces the number of promotional venues that can be accessed as billboards, television and radio spots, and newspaper advertisements are all off the table. In-store signs are significantly limited to one nondescript sign.
Cannabis companies are highly dependent on word of mouth advertising. The MGAC holds events to help introduce the general public to these companies, and it believes that social use and event licensing would go a long way toward solving these problems.
Another challenge for businesses in the cannabis industry is the lack of banks willing to work with them. “We’re making a bit of progress. There is a credit union that has started taking them under a safe harbor program, but you have to be licensed, and there’s a vetting process. But you can get a bank account,” says Bernard. Prior to this, many banks outright refused to do business with cannabis companies. Even ancillary companies like the MGAC that have nothing to do with the production of cannabis have had accounts closed due to association with the industry.
Despite these challenges, the industry is growing faster than ever. All cannabis products are legal in Massachusetts, and this has led to some innovation in the edibles’ and beverages’ markets. With the rising popularity of cannabis distillates and isolates, many new interesting products are finding their way into the marketplace. Beyond the classic brownies and cookies, everything from gummy candies to cannabis-infused pizza can be found.
However, there are still some regulations surrounding how edibles can be sold and what people can make at home. Edible products can contain at most five milligrams per serving and ten servings per package. At home, there are limitations related to how much can be made. Because of these limitations, a black market still exists, but the ever-increasing availability of all cannabis products is reducing the viability of the black market.
According to Bernard, home grow is a factor in reducing black market sales. “Any state that is looking at legalization needs to look at home grow. Any state that denies itself home grow is asking for a monopolistic situation with a product that’s always going to be too expensive. People need to fight for that. Before we had home grow, a pound on the black market was running $3,800 to $4,000. Today it’s $2,000 to $2,200 because of the wider availability.”
The MGAC believes that legalization at the federal level will happen eventually, but it has concerns about what that will mean for cannabis companies in its home state. Growers on the West Coast can produce cannabis in much larger volumes, and it is unlikely that growers throughout Massachusetts and the rest of New England will be able to compete without reducing quality. The hope is that because of home grow, local talent will have developed the expertise to create innovative craft products that will remain competitive in a national market.