Article - Worcester Limits and Tax

WORCESTER - City Manager Edward M. Augustus Jr. wants to limit the number of establishments selling recreational marijuana here to 15 with a 3 percent local tax assessed on those sales

He also intends to negotiate host community agreements for those businesses, much like what he has done with medical marijuana dispensaries, as a way to provide additional resources for oversight of Worcester’s marijuana businesses.

In addition, Mr. Augustus is looking to impose “time, place and manner” restrictions on the operation of local marijuana establishments by requiring them to obtain a license from the city’s License Commission before opening their doors.

He also wants to place zoning restrictions on where recreational marijuana establishments can set up shop, similar to those in place for medical marijuana dispensaries.

The recommendations are part of a package the city manager has submitted to the City Council detailing how the city should respond to the new state law that allows for the sale and use of marijuana

The law goes into effect in July 2018.

In advance of that, Mr. Augustus has begun laying the groundwork for how the city might deal with these new businesses through recommendations he has offered to the City Council.

The council will receive them Tuesday night when they are expected to be referred to a committee for further study.

Voters statewide approved a referendum last November that legalized recreational marijuana. It was approved, 53.6 percent to 46.4 percent, while voters in Worcester approved the ballot question 55 percent to 45 percent.

In December, Gov. Charlie Baker signed a bill to delay opening of marijuana shops until the middle of next year so the state can prepare for the new industry. The Legislature subsequently adopted an Act to Ensure Safe Access to Marijuana and it was signed into law by the governor on July 28.

Under the law, a maximum tax rate of 20 percent has been set on the retail sale of recreational marijuana - 6.25 percent state sales tax, plus a state excise tax of 10.75 percent, plus an optional municipal tax of up to 3 percent.

Mr. Augustus is asking the City Council to adopt an order accepting the local 3 percent tax option. He said the 3 percent local sales tax will be a general fund receipt collected and disbursed by the state in the same manner as the general sales tax.

The manager said no tax would be assessed on medical marijuana sales.

Adoption of the local sales tax options requires a simple City Council majority of six votes.

Mr. Augustus said the new law does not prohibit the city from enacting a limit on the number of recreational marijuana establishments that exceeds limitations imposed by the new law.

The highest limit is no fewer than 20 percent of the off-premises alcohol licenses, which include package stores, convenience stores and supermarkets.

Worcester has been allotted 74 off-premises liquor licenses, meaning that the city would have to have at least 15 recreational marijuana retail establishments. If the city wants to limit the number of such establishments to no more than 15 it can do so by simply enacting an ordinance, Mr. Augustus said.

That limitation would not include medical marijuana establishments.

But if the city wants to ban such establishments, or limit them to fewer than 15, it would have to prepare such an ordinance and then the City Council would have to vote to place the limitation question on the ballot at a regular or special municipal election.

If the majority of votes cast are in favor of the ban/limitation, then the City Council may formally adopt the ordinance. If the ballot question is defeated, the council cannot adopt such an ordinance, Mr. Augustus said.

The new state law also requires every recreational and medical marijuana use establishment to execute a “host community agreement” with the city and such agreements may include a requirement for a payment of a “community impact fee.”

Mr. Augustus negotiated community host agreements with the four medical marijuana dispensaries that will be operating in Worcester.

As part of those agreements, each dispensary operator will pay the city $450,000 in their first three years of operation plus an escalating percentage of gross sales, with annual payments continuing for the foreseeable future.

The manager said he intends to make every effort to negotiate host community/impact fee agreements with recreational marijuana establishments which allow for local oversight of those businesses, and maximize the reimbursement from them.

Mr. Augustus said a community impact fee must be based on documented costs to the city imposed by the operation of marijuana establishments, but cannot be greater than 3 percent of the gross sales of the establishment. Such agreements can be effective for terms of up to five years.

By also requiring recreational marijuana retail operators to first obtain a license from the License Commission, the manager said that would serve as a focal point for addressing particular neighborhood concerns, as well as ensuring compliance with other applicable city ordinances

He added that a local licensing ordinance would also incorporate the regulations recently adopted by the Board of Health concerning the licensing and operation of registered medical marijuana dispensaries.

As with medical marijuana dispensaries, Mr. Augustus also wants to restrict the location of recreational marijuana establishments through zoning.

He said they recreational marijuana establishments would be allowed in the same zoning districts where medical marijuana dispensaries are now allowed to operate.

In addition, they would be prohibited from locating within a radius of 300 feet of a public or private, primary or secondary school, licensed daycare center, public library, a public park or playground.