Business, officials delve into details for redraft of community host agreement for Lenox pot shop
LENOX — Local leaders are drafting a revised host community agreement for Select Board review, the first step in business owner Jim Nejaime's application to open the town's first adult-use recreational marijuana store, on Routes 7 & 20 (Pittsfield Road).
Nejaime, owner of Spirited, a wine and liquor shop at Pittsfield and Holmes roads, first unveiled his plan to the Select Board in May, at a meeting also attended by his business partner, Stephen Abraham.
The two entrepreneurs formed Cedar Wellness LLC during the spring and entered into a verbal agreement with property owner Eric Taylor's 439 Pittsfield Road LLC to lease 3,900 square feet of retail space at that location, formerly the Essencials day spa, across the highway from Spirited.
At a follow-up discussion last month, the partners ran into some pushback from Select Board members on how the town would be compensated for police details and other expenses if Cedar Wellness wins a state permit from the Cannabis Control Commission.
"We want to make a commitment to run an operation that will be very high-quality, very service-oriented, benefiting the community much more than it does us," Nejaime said.
But he cautioned that "we don't want to be negatively impacted by fees that aren't totally in balance with what's out there in the community."
He was referring to how the community impact fee imposed by state law on marijuana shops is calculated.
The commission's regulations state that "the community impact fee shall be reasonably related to the costs imposed upon the municipality by the operation of the marijuana establishment and shall not amount to more than 3 percent of the gross sales of the marijuana establishment or be effective for longer than 5 years."
Nejaime argued that any police overtime, legal and consulting fees, including the town's costs in negotiating the host community agreement, and auditing expenses should be included in the 3 percent impact fee paid by the business.
According to Abraham, "the fee is specifically designed to cover those items" so the town should not add those costs on top of the impact fee.
But at the most recent Select Board meeting, Chairman Edward Lane said he was "very reluctant" to agree, since "we don't know what those costs are going to be."
Board member David Roche stated that "my comfort level would increase significantly" if the applicants presented their business plan including anticipated revenues.
Citing existing summertime traffic problems that require police overtime, Selectwoman Marybeth Mitts suggested that retail marijuana establishments could add significantly to those costs.
Nejaime proposed that if the expenses exceeded half of what the town collects from a community impact fee, "then we would pay for those costs."
Abraham predicted that the new store, if licensed, would not be swarmed by as many purchasers as experienced by Theory Wellness in Great Barrington, for example, "because we'd be later to the game." But, he added, if the shop is busier than expected, the impact fee's proceeds would rise accordingly, thus covering any expense burden on the town.
Mitts cautioned that "we don't know what we're getting into." She pointed to heavy traffic in and out of nearby Guido's Fresh Marketplace just over the town line in Pittsfield, also requiring police presence at busy times in the summer.
"If we have it going all up and down Pittsfield Road, there could be some issues with traffic and police," she said. "Because we are a tourist town and things get really crazy here in July and August, traffic goes up to a significant degree."
And Roche maintained that "our police resources are stretched to the limit, and we're going to have to add people. That's going to be a significant cost, and I don't think the town should bear that burden until we take a good look at it."
Nejaime responded that if such expenses reach a certain level, "we then pay more rather than automatically pay more."
Abraham added that "we just don't want to be unfairly burdened against competition."
Two potential marijuana stores are pursuing licensing just over the Pittsfield line on South Street, while hotel entrepreneur Navin Shah plans to seek a permit for a pot shop at the former, long-vacant restaurant site he owns at the entrance to Lenox Commons.
Selectman Neal Maxymillian urged caution because "we need to get some operation behind us before we can reasonably understand numbers. We're all just guessing at this point."
Nejaime acknowledged that "you've got to protect the town, and we have to make sure we have a business that succeeds to pay money to the town as well as, hopefully, ourselves."
He proposed accelerating a review of the community impact fee in two years instead of five "when we all have the experience and see what's going on at that point," with any changes subject to mutual agreement.
"That's not an unreasonable thought," Maxymillian said.
Nejaime also objected to a provision in the original draft agreement that would impose the fee not only on marijuana products containing THC — that's the psychoactive drug that creates the user's high — but also on "noncannabis, CBD products that any store can sell," he said. "So, we're unfairly impacted on a tax that is not unique to our business. We're looking for a level playing field."
CBD oil, a nonintoxicating extract from marijuana or hemp plant flowers and buds — it's used by purchasers for medical conditions — is widely available in states like Massachusetts that have legalized medical marijuana, and it's also legal under federal law.
The nonintoxicating marijuana extract is being touted as a treatment for a host of medical problems — everything from epileptic seizures to anxiety to inflammation to sleeplessness — though its benefits remain unproved and it is unregulated.
Nejaime asked the Select Board to exclude noncannabis products from the community impact fee.
But, as Lee-Lenox Chief Administrative Officer Christopher Ketchen pointed out, the state Department of Public Health ruled a month ago that it is not legal to add CBD to food products because "all food must be from approved sources that comply with federal, state and local law and must not contain any prohibited ingredients."
The Food and Drug Administration has concluded that federal law prohibits the addition of CBD to food products "because CBD is an active ingredient in FDA-approved drugs. Since CBD is not an approved ingredient under federal law, it may not be added to manufactured foods."
The FDA also has reiterated that cannabis products — hemp-derived or otherwise — that are marketed with claims of therapeutic benefit or any other disease claim must be approved by the FDA.
Lenox voters approved a marijuana zoning bylaw at the May annual town meeting limiting retail pot shops to two and restricting them to the commercial corridor along Pittsfield Road north of the downtown business district.
All marijuana businesses are required to collect the 6.25 percent sales tax; the 10.75 percent excise tax on marijuana and marijuana products; and the optional 3 percent local tax, which can be applied to retail sales only. The community impact fee of up to 3 percent of gross sales is separate from the taxes.
The Select Board is expected to resume its review of Nejaime's application at its next meeting, at 7 p.m. July 17.
Clarence Fanto can be reached at email@example.com, on Twitter @BE_cfanto or at 413-637-2551.
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