The news of the Fall River mayor’s arrest this month on federal charges of soliciting bribes from marijuana vendors might sound like fodder for late-night comics, but it’s no joke for the would-be dispensary owners trying to comply with a state law that, in the words of one cannabis advocate, gives cities a license for “extortion by another name.”

“This whole thing would be funny if it weren't so sad,” said David O’Brien, president and CEO of the Massachusetts Cannabis Business Association. “It really is just unbelievable.”

Since recreational marijuana use was approved last year, the Cannabis Control Commission has wrestled with the policies for the state-mandated agreements between the businesses and the cities in which they operate.

The contracts are intended to help offset the financial impacts the businesses could reasonably impose on the host community, but activists and business owners say the steep requirements imposed by some cities are a reason for the slower-than-anticipated rollout of the retail marijuana market.

By law, the Community Host Agreements cannot last for more than five years with fees that cannot exceed 3% of the establishment's gross sales, on top of a 3% state tax. The cities can also impose “donations” above and beyond the 3% fees.

“No other industry in the state, except for maybe gaming, do you find this level of unfair treatment,” O’Brien said. “These businesses are already paying property taxes, excise taxes, sales taxes. Liquor stores are what we’re most often compared to, but you don’t see any of them having to pay 3% of their gross revenue.”

Nevada and California voters approved nonmedical marijuana laws in November 2016, at the same time the ballot question passed in Massachusetts. But while retail shops opened in Nevada in July 2017 and in California in January 2018, shops in Massachusetts didn’t open their doors until more than two years after the vote passed.

Blake Mensing, an attorney working with cannabis businesses in Massachusetts, said the CCC, perhaps unintentionally, failed to prioritize the licensing of marijuana testing labs earlier in the process, ensuring some of the current delays.

Whatever the reason, Cambridge resident Shirley Hunt said the process has been painful to watch.

“I think voters feel duped,” said Hunt, who has used medical marijuana for years. “The people spoke in this state and said we wanted [recreational marijuana]. To see Beacon Hill, or whoever, drag their collective feet is typical politics, but it’s a disgrace. They had the chance to start a brand-new industry from scratch, and it got bogged down in red tape from day one. It’s disappointing.”

Hunt, who has a master’s degree in business administration, said she even considered opening a recreational shop but after seeing what companies have gone through, she said the timing wasn’t right.

“Like most things, maybe they will work the bugs out over time,” Hunt said. “But as it stands right now, the system is very broken.”

‘They fail across the board’

There were problems with the CHAs well before Fall River Mayor Jasiel Correia II was arrested on Sept. 6 for allegedly extorting nearly $600,000 from individuals trying to open cannabis businesses in the city.

With Correia facing 11 charges that he took bribes in exchange for nonopposition letters that cleared the way for vendors to open up shop, state legislators in Fall River have asked the CCC to delay pending retail or medical marijuana applications in the city and enact a moratorium on such licenses. As of Sept. 12, at least 14 facilities were in various stages of state and local approval.

On Friday, Fall River Rep. Carole Fiola announced legislation that would require every municipality across the state to involve its top locally elected board in the approval process for marijuana businesses. Her bill (H 4491) would prevent communities from leaving the decision in the hands of a single individual.

Even when the agreements are aboveboard, they rarely, if ever, play out as intended, said Jim Smith, an attorney at Boston-based Smith, Costello and Crawford who represents dozens of marijuana businesses.

Smith, who testified before the Joint Committee on Cannabis Policy on Aug. 5 as lawmakers on that panel considered bills (S 1126 and H 3536) that seek to rein in some of the issues with CHAs, said two of the most common issues with the agreements are they extend beyond the five-year limit or require fees in excess of 3%.

“I think the agreements fail across the board, just universally,” he said. “I don’t think there is a single, solitary agreement that meets the standards of the Legislature.”

Less traffic ‘than a Dunkin’

Part of the problem, Smith said, is that the definition of a “community impact fee” can be highly subjective.

“Retail sales are retail sales regardless of the product, and cultivation is just a form of very light industry,” he said. “There’s no impact. These towns aren’t being impacted by these businesses nearly as much as these agreements would indicate.”

A host agreement between the town of Sharon and Four Daughters Compassionate Care, for example, justifies a 3% fee by listing several “anticipated” additional expenses and impacts the town “reasonably expects” from the establishment. They include impacts on public safety services, inspectional and permitting services, educational services, administrative services and public health services, in addition to any unforeseen things.

The agreement between the town of Wellfleet and Atlantic Medical Partners lists a different set of impacts, including fire protection services and a burden to the town’s road system.

Traffic is a common impact listed in an agreement, which Smith called “ridiculous.”

“When you look at how much traffic these places generate, in the long run, it’s less than a Dunkin’ Donuts,” he said. “Yeah, when they first open you have lines out the door and people coming from New Jersey to shop there, but that’s not going to always be the case as they stay in business longer and more and more shops open up.”

Businesses are also often asked to give “donations” to various groups or charities in the community or directly to the municipality. Alternative Therapies Group, which operates in Salem, must contribute $25,000 annually to public charities of its choosing.

In Plymouth, Medical Marijuana of Massachusetts is required to pay its community donations on a sliding scale: $20,000 for 2016, $40,000 for 2017 and $100,000 for 2018. These payments then increase by 3% each following year. The money is paid directly to the town.

In the eyes of Newton Mayor Ruthanne Fuller, the biggest concern about the agreements has come when communities have imposed “very significant contributions above and beyond the tax revenue that the CCC allowed.”

Newton didn’t do that, she said. Instead, in addition to the 3% tax collected by the state and the 3% that goes directly to the community, the city asked applicants to make a yearly payment of $2,500 to nonprofits located in Newton. The contribution goes up by 5% in the following year.

Newton’s neighbor, Brookline, requires New England Treatment Access, or NETA, to make annual payments to the town of 3% of gross revenue from the establishment’s marijuana sales, both medical and nonmedical, and also requires payments to the Brookline Community Foundation, though those amounts are subtracted from the annual 3% payment. The agreement requires foundation payments of $300,000 in 2018, $325,000 in 2019 and $350,000 in 2020.

Smith said his clients want to give back to their host communities, but calling the payments “donations” is disingenuous and the amounts can get out of hand.

“It’s not some legal term, make no mistake,” Smith said. “You can’t require someone to give an involuntary donation. That’s not how it works.”

Smith listed Worcester, Lynn and Boston as examples of big cities that are reasonably fair with their agreements, along with many smaller communities in Western Massachusetts.

“Some of the smaller towns are just so happy to get the additional revenue through these businesses coming in that they don’t ask for too much,” he said. “I don’t see any connection between the size of the community and how outrageous these agreements are.”

Ultimately, he added, it’s the base 3% fee, regardless of the cited impacts, that can stand in the way of a dispensary making it through the first few years.

“When you look at 3%, some might say it’s a small number, but really that could be half a million dollars of their growth in the first year,” Smith said. “Does that sound like a reasonable fee to you? Should someone have to pay that because a store generates some traffic? Last time I checked, a store generating a lot of traffic meant a lot of business was coming into the town.”

'Pay the ransom’

If they’re so unfair, why do business owners sign off on the agreements? Smith says often they have no alternative but to comply. Often businesses won’t see the CHA until it is finalized and ready to be signed.

“The majority of these places, I’d say around 80%, are just small-business owners trying to make a living and open up a shop,” Smith said. “They’ve put their savings into this place, invested so much time. They’re stuck.”

Wicked Local reached out to close to a dozen dispensaries for comment about their agreements and did not hear back from any willing to talk. Smith said most owners would be hesitant to speak out about the negative impact their CHA has on their business, as most want to “be good neighbors and stay in their community for 20 years.”

O’Brien acknowledged that the leverage between the municipalities and marijuana companies is often lopsided.

“Oftentimes the business will be told, ‘We have a lot of other people in line looking to open up a shop, and these are the terms you need to accept,’ ” he said. “These businesses have no choice but to pay the ransom. Because that’s what it is, in the end, a ransom.”

Tightening regulations over what municipalities can ask for and ensuring the new rules are followed would be a good start to evening the lopsided nature of CHAs, O’Brien said.

“If these companies don’t follow the rules of the law, the state is the agency that will shut them down, not the host community,” he said. “So why then are we allowing the municipality to go along for the ride and take these highly generous fees? If they aren’t the ones in the business of marijuana, why are we letting them reap the revenue it generates?”

Information from Jo C. Goode of the Herald News, Julie Cohen of the Newton TAB and Colin A. Young of State House News Service was used in this report.