‘There’s no financing’: Cannabis equity applicants look forward to home delivery, but struggle with …

kush in jar with scale

This year is poised to have a milestone moment for the Massachusetts cannabis industry with the anticipated launch of home delivery. But members of the state’s equity programs still struggle with finding the financing to get their businesses off the ground.

To start 2021, the state Cannabis Control Commission promulgated new regulations including a delivery operator license that will allow for the wholesale purchase of cannabis items to be warehoused and then sold and delivered.

Delivery is limited to social equity and economic empowerment applicants for at least the first three years. Delivery is seen as a financially viable option for participants in those programs — who tend not to have the capital enjoyed by larger corporations already operating in the marijuana industry. But there’s still more work to be done to help people of color who were disproportionately affected by the war on drugs.

The approval process is already underway for delivery-only licenses — which will allow businesses to deliver cannabis products directly to consumers or patients from retailers, but not to sell, process, store or repackage goods. Commission Chair Steven Hoffman said those operations could start relatively soon.

For the delivery operator license, which does allow warehousing, it will be months before businesses can get going.

The Commonwealth Dispensary Association earlier this year dropped a lawsuit challenging the delivery operator regulations after several of its members left in protest. That obstacle is gone, but Hoffman said during the commission’s monthly meeting Jan. 14 that an updated application and process to review applications are still needed.

“I want to show people, hey, if I can do this why can’t you,” said Devin Alexander, an entrepreneur and cannabis activist seeking two delivery operator licenses for his business, Rolling Releaf. He said he is waiting to get a host community agreement approved south of Boston.

Devin Alexander

Devin Alexander of Rolling Releaf, a cannabis delivery company. Courtesy photo.

Having the delivery licenses available only to equity applicants is empowering, Alexander said. For consumers, delivery is helpful because a stigma still exists around cannabis use.

“It’ll give people more sense of privacy. Some people may not want to go out to a dispensary in the local community,” Alexander said. “It gives consumers just the convenience really, and also on the entrepreneurial side, it shows equity applicants there’s a pathway where you can be your own owner.”

The coronavirus pandemic has created an even greater demand for cannabis delivery, as avoiding crowds and long lines have become commonplace, especially for people who are at high risk for COVID-19.

Equity applicants will also have first dibs on license for social consumption, that is, businesses like cannabis cafes. But given the changes brought by the pandemic, there may be less of a push. Also, Legislative clarification is still needed to allow for communities to approve social consumption.

Progress with legislation is another thing Alexander hopes to see this year. Last year, there was a push for a social equity loan fund.

“Massachusetts’ equity program is great, but there’s no financing,” he said. “That financing would really set us apart and really push it over the hump and be a gold standard for other people across the country to look at.”

Last year, cannabis regulators asked the Legislature to consider a loan for people disproportionately impacted by cannabis arrests, similar to programs that exist in Illinois and in Oakland, California.

Colorado Gov. Jared Polis recently asked for $5 million to fund a cannabis advancement program aimed at helping the industry, including entrepreneurs from communities most impacted by the war on drugs, according to Marijuana Moment.

Massachusetts Sen. Sonia Chang-Diaz, who has served on the Joint Committee on Cannabis Policy, said she will continue to push for social equity loans. Last year, legislation that would establish no-interest loans for equity applicants was reported favorably by the committee.

“I’m also hopeful that the heightened level of attention that the commonwealth as a whole, and the Legislature, has on issues of racial justice and racial equity will hopefully lift up that legislation even more in the coming term,” she said.

Major Bloom

Buildout continues at Major Bloom, a recreational cannabis shop working to open on Millbury Street in Worcester.

Major Bloom, which is working to open a retail store in Worcester, is also eyeing a delivery operator license. The company still needs a host community agreement, said co-founder Ulysses Youngblood.

The company is in the middle of its buildout just blocks away from the transformation of Worcester’s Kelley Square with a peanut-shaped roundabout, the bustling Worcester Public Market and the new Worcester Red Sox stadium.

“It’s a blessing,” Youngblood said. “I think it helps to be in a position, to be in that same category of redevelopment with the baseball stadium, the peanut, so we’re really just doing our small part.”

While delivery is a major step forward for Massachusetts, Youngblood noted that the illicit market, which relies on deliveries, often in driveways or parking lots, still exists. Legal cannabis is more expensive than marijuana sold on the illicit market.

As an economic empowerment applicant, Youngblood said he’d love to see the Cannabis Control Commission provide a list of vendors who understand the cannabis industry and the equity programs to help applicants through a long and costly licensing process.

New commissioners

The Cannabis Control Commission is back to full strength with three new regulators, Ava Callender Concepcion, Nurys Z. Camargo and Bruce Stebbins, after the departures of Britte McBride, Shaleen Title and Kay Doyle last year.

For equity applicants, the loss of Title, an outspoken voice for empowerment initiatives, is tough.

“Shaleen Title is the biggest influence on my cannabis and activist path,” Alexander said.

But with two new women of color on the commission, activists hope to see more attention to equity.

Hoffman said he’s excited about “new blood, new perspective, new energy, new ideas” the regulators will bring.

Camargo said during the commission’s Jan. 14 meeting: “For me, as a community organizer, nonprofit leader, with experience both in the public and private sector, I’m really excited and looking forward to listening and learning and really meeting the constituents throughout the state of Massachusetts.”

Cannabis taxes

Massachusetts communities see financial benefits for hosting cannabis businesses. Cannabis is taxed up to 20%, including the 6.25% state sales tax, a 10.75% excise tax and a local option tax up to 3%. In the fiscal year that ended in June 2020, recreational cannabis generated $14.9 million for municipalities.

Leicester has received $77,724 in cannabis tax in fiscal 2021 to date. In fiscal 2020, the town received $437,304, and in fiscal 2019 it received $370,019. Leicester is home to Cultivate, one of the East Coast’s first two recreational marijuana shops.

The other was NETA in Northampton. So far in fiscal 2021, Northampton has seen $695,812 from cannabis tax. In fiscal 2020, the city took in $1,640,755, and in fiscal 2019 it took in $980,414.

NETA has another location in Brookline. That town has received $453,138 from cannabis tax so far this fiscal year. In fiscal 2020, the town took in $1,844,197, and the prior fiscal year Brookline saw $214,020 in cannabis taxes.

Boston’s first recreational store, Pure Oasis, opened in March 2020. It was the first business to launch under the economic empowerment program. The city now has two retail shops, after Berkshire Roots opened in East Boston. From March to October, Boston received $315,842 in cannabis tax.

In Westfield, Cannabis Connection opened in June, bringing in $45,000 in taxes so far this fiscal year.

Oxford, which is home to Curaleaf, has collected $126,286 in cannabis taxes so far in fiscal 2021 and took in $66,270 during fiscal 2020.

Worcester is home to Good Chemistry, Resinate, Mission, Diem and Bud’s Goods and Provisions. So far in fiscal 2021, Worcester has collected $141,123 in cannabis taxes. Last fiscal year, the city brought in $499,676.

Separate from the 3% tax, communities also collect revenue from cannabis establishments through host community agreements. Community impact fees are limited 3% of gross sales, though there have been allegations that some communities collect more.

In Worcester, a total of $2,435,784 has been collected in community impact fees.

Chang-Diaz said she’s hopeful the Legislature will advance a bill allowing the Cannabis Control Commission to review host community agreements. The House passed that bill last year. The measure would help make the market more accessible to smaller players, she said, including equity applicants.

Total gross sales of cannabis topped $1 billion in November, two years after NETA and Cultivate welcomed their first customers and four years after legalization in Massachusetts.

State, federal progress

In Boston, City Council President Kim Janey is expected to become acting mayor when Mayor Marty Walsh heads to Washington, D.C., selected by President Joe Biden to lead the U.S. Department of Labor.

“Hopefully that’s an influence on the rest of Massachusetts because Kim Janey was an instrumental force in creating the Boston cannabis board and she has been a champion for equity for a while now, so hopefully this brings a whole new perspective across the state,” Alexander said. “Municipalities need more guidance. A lot of municipalities don’t even understand what social equity in the cannabis industry means.”

Federal legalization of cannabis seems more possible under the Biden administration. Last month, the House voted to pass the MORE Act, which would decriminalize cannabis and allow states to make their own laws.

While Hoffman is more focused on the industry in Massachusetts, banking is something he’d like to see prioritized at the federal level.

“That to me continues to be a gigantic issue for the industry from a public safety standpoint, from an access, from an equity standpoint,” Hoffman said. “I strongly hope that the first priority is making it easier and less risky for banks to get involved in this industry because I think that would have just an enormous and positive impact.”

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