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Recreational marijuana

    SEEING GREEN

    Pot Sales of $10 Million Net $610,000 for Provincetown

    Next: spending the money to address pot’s social costs

    By

    PROVINCETOWN — With three recreational marijuana shops now open, at least two more on the way, and an edibles production facility in the works on Court Street, Provincetown’s adult-use marijuana sector has blossomed since the first two retail outlets opened here in 2020. Now, local tax receipts show the harvest: $10 million in total sales has produced $610,000 in new revenue for the town.

    The numbers reflect a strong start across the last four quarters, split between Curaleaf’s Provincetown location, which opened in February 2020, and B/well, which opened in September 2020. The third pot shop to open, Hennep, appeared too late in the fiscal year to have much effect on the town’s take.

    Provincetown receives 3 percent of pot shop sales through a state-collected local-option tax, which brought in $310,000 over the four quarters of fiscal 2021. Another 3 percent of sales is paid directly to the town as host community fees negotiated with the stores, which netted another $300,000 over 12 months. (The two numbers differ slightly because host community fees and sales tax quarters don’t correspond to identical periods of time.)

    How to Spend It

    The 3-percent local-option marijuana tax is General Fund money that can be spent for any municipal purpose. Last week, Town Manager Alex Morse told the select board that the committees administering the town’s two existing housing funds, the Community Housing Council and the Year-Round Market-Rate Rental Housing Trust, want to talk about the new marijuana tax revenue as well as the new short-term rental tax revenue.

    The 3-percent host community fees, in contrast, are supposed to offset the costs to the town of hosting the pot shops.

    That’s why Provincetown is seeking to direct that revenue toward social programs, according to Assistant Town Manager David Gardner. Those would include, he said, “substance abuse programs, mental health programs, social and community programs, and public safety and crowd control programs.”

    How the host community money is used this year could affect the town’s standing to secure the same funding two years from now. Provincetown’s host community agreements will be up for renegotiation in 2023.

    Meanwhile, community impact fees are being contested elsewhere in the state, including in a lawsuit brought by a dispensary owner in Haverhill. And the Cannabis Control Commission has asked the legislature for the power to regulate the host community agreements between towns and dispensaries.

    Health Director Morgan Clark outlined a mental health program to the select board last spring that would cost half a million per year if fully funded. The largest line item is $250,000 per year for two full-time mental health clinicians who could act as crisis counselors in the community, seeing people immediately and regardless of ability to pay.

    “There are very long waitlists for almost all of our mental health clinicians here,” Clark said.

    “This is not looking to supplant the behavioral health wing of Outer Cape Health Services,” she added, but “we all see this need.”

    The plan also includes funding for up to five mental health and substance use disorder support groups, and a grant program to expand the pool of mental health clinicians here. That program could support outreach, recruitment, and even relocation assistance programs to help bring mental health practitioners to Provincetown.

    The Pot Economy in Context

    The $610,000 in pot revenues is good news in an otherwise tough year — the quarters in question include significant parts of last year’s Covid spring and summer and were some of Provincetown’s worst quarters ever.

    Meals tax revenue, which is collected in all the town’s restaurants and bars, was down one-third in that same period, compared to fiscal 2019, the last fully pre-pandemic year.

    The state’s rooms tax recently began to apply to short-term rentals, which complicates comparisons across years. But the state supplied the Independent with a breakdown of rooms tax into revenue from short-term rentals versus revenue from traditional lodgings that had been taxed previously. Those numbers show that tax revenue from traditional lodgings was down 35 percent in those four quarters, compared to fiscal 2019.

    Ten million dollars in sales is a strong opening for new businesses in a new sector in town. For comparison, tax figures show that the entire hotel sector in Provincetown, excluding short-term rentals, had about $24 million in sales in the fiscal year that just ended (that figure is down from $37 million in pre-pandemic fiscal 2019).

    The entire restaurant and bar sector had about $58 million in sales in fiscal 2021 (down from $87 million before the pandemic).

    The last year for which Provincetown’s tourism director Tony Fuccillo has general sales tax data is 2017. In that year, the entire retail sector, excluding clothing articles not taxed, had $38 million in sales.

    The pot sector is changing fast, with new shops opening in Wellfleet and Eastham and almost every retailer on the Outer Cape diversifying into cultivation, edibles production, or both. The fortunes of individual operators will surely vary greatly, but it seems clear entrepreneurs think Provincetown’s pot industry has room to grow.

    CANNABUSINESS

    New Pot Shop Flouted Host Community Agreement

    But select board did not enforce ownership change provision

    By

    WELLFLEET — A new cannabis dispensary called Terps is expected to open next month at the intersection of Route 6 and Cove Road in the Cove Corner building, right next to the Dunkin’ doughnut shop in the space formerly occupied by an antiques dealer.

    The shop will be opening under the terms of a host community agreement (HCA) negotiated with the Wellfleet Select Board in June 2018 by a company called Nature’s Alternative, which still nominally owns the business. That agreement states that any “interest or obligation” outlined in the HCA cannot change hands without the prior consent of the select board.

    The ownership of Nature’s Alternative has, in fact, changed since the HCA was granted. In 2018, the company was owned by the Medeiros Family Trust, Patrick Casey, and Nicholas Salvador. Aspen Blue LLC, a Rhode Island-based marijuana company, now owns 99.9 percent of the company. The sale took place because of a change in location — from the former South Wellfleet General Store to Cove Corner — that the original shareholders did not want to be party to.

    The change in ownership appears to fall in a gray area of the law regulating marijuana businesses. Although the business entity in this case, Nature’s Alternative, has remained the same, the people behind that entity have changed. Attorneys consulted by the Independent differed in their interpretation of whether an “interest or obligation” in the HCA had actually changed hands.

    “When you negotiate a contract with someone, you negotiate terms that are specific to the people who are negotiating them,” said Michael Fee, a lawyer who lives in Truro and has represented marijuana entrepreneurs. “It is the people, and not the business name, that are party to that contract.

    “It’s pretty clear that the marijuana business should have disclosed that it was changing hands,” Fee continued. “In accordance with the HCA, it should have asked the Wellfleet Select Board’s agreement.”

    Benjamin Zehnder, the Orleans attorney who represents Nature’s Alternative, said that the company was forthright with the select board. “The underlying ownership of Nature’s Alternative, like many marijuana companies, has changed over time,” he said. “Certain selectmen expressed concerns that they wanted to know who the owners were, and we provided them that information.”

    Nature’s Alternative informed the select board only after the ownership had already changed, however. The HCA calls for the company to obtain the “prior written consent” of the board before changing hands.

    Michael DeVasto, chair of the Wellfleet Select Board, said he agreed with Zehnder. “I’m not a lawyer,” he said, “but we were told at some point that the contract is with the LLC and that corporate restructuring or ownership is not up to us.”

    Recreational marijuana is illegal in Rhode Island, where Aspen Blue, the current owner of Nature’s Alternative, is located. Although one of the members of Aspen Blue LLC separately owns a medical cultivation center in Rhode Island, the company’s business operations are all taking place in Massachusetts. The company says it expects to open stores in Mashpee and Attleboro, and to cultivate its own cannabis in those locations.

    “No member of Aspen Blue has a residence on the Outer Cape,” said Matthew Wilkes, the chief business officer for the Terps shop in Wellfleet.

    “Terps is short for terpenes,” said Wilkes. Terpenes are the aromatic oils in cannabis that give different strains their specific flavors, like citrus, mint, berry, lavender, and orange peel. It is also believed that terpenes cause different effects in the various cannabis strains. For example, terpenes associated with lavender are believed to lower anxiety, whereas terpenes associated with rosemary are believed to be stimulating.

    Wilkes said that construction of the shop at Cove Corner will be completed this month, at which point the Mass. Cannabis Control Commission will come in for a final inspection. “We have a high level of confidence we’ll be open in May,” he said.

    Terps is also in the process of conducting first- and second-round interviews for jobs in the shop. “For the most part, we’re hiring locals,” said Wilkes.

    The Nature’s Alternative Wellfleet HCA requires that 3 percent of the company’s revenue be paid as a community impact fee for five years. (HCAs are part of the documentation that prospective marijuana businesses need to submit to the Cannabis Control Commission in order to obtain a license.) The agreement also calls for Nature’s Alternative to prioritize local vendors in the construction, maintenance, and operation of the facility, as well as to prioritize hiring local residents to work in the shop.

    Attorney Fee did not think the company’s lack of transparency in its ownership change would necessarily count against it.

    “In this instance, where this business is trying to establish itself in good stead with the community in the long haul, being opaque is not the way to proceed,” he said. “Transparency would have been the way to do it. It’s probably a misstep not to have disclosed, but that’s not to say that they can’t redeem themselves.”

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