In Maine, cannabis store license fees are all over the map
If you want to open a recreational cannabis store in Manchester near Augusta, you will need to pay around $100 per year to license your business.
About 100 miles south in Lebanon, you’ll have to shell out upwards of $40,000 and then $20,000 every year after that.
The two cities are perhaps the most extreme examples, but licensing fees in the roughly 60 Maine municipalities that permit recreational cannabis stores are ubiquitous.
In Bangor, the fee is $217. In Sanford, it’s $22,500. In Hallowell, it’s $250. In Windham, it’s $10,000.
Fees even vary greatly between neighboring communities. In Portland, the cost of obtaining a license for an adult-use cannabis store is $10,000. In South Portland, it’s $1,400.
The difference creates a disparity that some say can disproportionately hurt small businesses. City officials, meanwhile, argue that fees are the only way to cover the cost of regulating a new and complex market.
Maine law states that fees established by a town or city “shall reasonably reflect the municipality’s costs associated with the licensing or permitting process and its enforcement.”
That leaves a lot of room for interpretation, which may partly explain why fees vary so widely across the state, said John Burke, a Scarborough-based attorney who specializes in cannabis licensing. Every town or city looks at the costs of cannabis differently.
Most of the roughly 60 municipalities that have chosen to participate in the state’s adult-use cannabis retail market charge between $1,500 and $3,500 to license retail stores. But there are a lot of outliers.
In Portland, setting up licenses and regulations for cannabis businesses has been time-consuming and costly for the city, said Jessica Hanscombe, director of the city’s licensing and inspections department. With licenses in high demand, the $10,000 fee makes sense, she said.
The Portland City Council initially decided in 2020 to cap the number of new licenses at 20 in order to slowly open up the market and reduce the risk of flooding the market with too many cannabis stores. The council later removed the cap after a federal judge ruled that some of the city’s licensing requirements were discriminatory. A month later, residents voted to permanently eliminate the retail cap.
Now there are 23 licensed stores in Portland with 10 more still awaiting approval.
When the order was first written, the 20-store limit seemed reasonable, Hanscombe said. But when that was eliminated, his department faced a tidal wave of additional work.
“It doubled our work immediately, just for retail,” she said.
Hanscombe hired a marijuana compliance coordinator and an additional licensing assistant and likely could have warranted another, she said.
There are a lot of considerations for licensing a marijuana business that would not offer, say, a liquor store. They include standards for ventilation and odor control, hazardous waste disposal, public safety and more, Hanscombe said. For this reason, its staff frequently have to work with other departments, which takes more time.
“(The fee) is clearly tied to the amount of work we do on those licenses each year,” she said.
Matt Hawes, director of the Maine Cannabis Industry Association, understands that the licensing and enforcement around a cannabis business will cost a bit more than a typical gas station or grocery store.
The $2,500 he pays to license his cannabis drink manufacturing plant in Scarborough may seem expensive, but he thinks the price is likely close to the costs of inspections and multi-agency administration.
Much higher, though, and Hawes isn’t buying it.
“I think some of these municipalities have gone way beyond that,” he said. “It’s certainly hard to believe that (any city) incurs costs of $40,000.”
But in Sanford, Mayor Anne-Marie Mastraccio sthe city’s $22,500 license fee doesn’t even begin to cover the expense.
Sanford tried to regulate cannabis like the city would regulate any other business, she explained. At the same time, Mastraccio doesn’t want to see Sanford foot the bill, especially since City aren’t getting anything back in revenue sharing.
Recreational cannabis products are subject to a 10% state excise tax, which goes entirely to the Maine general fund and none to local coffers.
Sales numbers have steadily increased since the market launched in October 2020, with August’s $17 million making it the most lucrative month yet. This year, the adult use market brought in about $98.2 million, generating nearly $10 million in tax revenue for the state.
But none of that comes back to the host communities.
Sanford’s legal fees, board and staff time, code enforcement officer training and other necessities add up to what Mastraccio said are adequate fees. Like so many others, Sanford operates with a small staff and limited resources, and the added workload is costly.
“I don’t think we can be accused of being punitive,” she said. “If I was in Portland, I would charge a lot more” than $10,000, she said.
If the $22,500 fee is found to be too high, Sanford will consider lowering it, she added.
To date, the city has only received one request since the ordinance was passed in March.
WHO WILL PAY ?
Expensive license fees won’t keep cannabis companies away, according to Burke and Hawes.
“So few municipalities have opted into this specific business, and as a result many cannabis businesses looking to open an adult retail store will go anywhere licensing is possible, even though licensing fees may be excessive” , Burke said.
But Hawes worries the high fees will affect the kinds of business owners who can settle in Maine’s cities.
The cannabis industry doesn’t have the lucrative profit margins that many people think it does, he said, and fees can create a barrier to entry that keeps small business owners from running. .
“Someone is going to pay,” he said. It will only be the “highly capitalized people”.
Burke recommended that cities simplify their licensing ordinances and use the Maine Office of Cannabis Policy as a resource on compliance issues. He also suggested that municipalities adopt cannabis advisory councils, which could provide an annual audit of fees.
And there is good news for local governments. In April, the Legislature passed a bill to reimburse municipalities up to $20,000 for costs associated with entering the adult cannabis market. Lawmakers hoped the refund would encourage more cities to allow retail marijuana sales.
According to Sen. Benjamin Chipman, D-Cumberland, many communities are not participating due to the cost of rule making, licensing, inspection, enforcement, etc.
Because of this, Chipman told the Senate, the state still has a viable black market. Allowing reimbursement of up to $20,000 should help persuade cities that have waited because of the cost, he said.
Claims for reimbursement opened last month and Portland is already working on building up a claim.
Burke isn’t sure the law will encourage more cities to join or that communities that are reimbursed will then reduce their licensing fees.
To Sanford, who requested the money, Mastraccio said that if awarded, the funds “will only begin to reimburse staff time spent developing the Adult Marijuana Use Ordinance.
Meanwhile, Maine isn’t the only state grappling with how to balance fees for businesses and costs for municipalities.
Until last month, Massachusetts law allowed communities to collect an “impact fee” of up to 3% of a cannabis store’s annual revenue as long as the fee was “reasonably related” to the regulatory costs of the cannabis store. ‘facility.
However, many cities have charged large fees to companies without citing specific impacts – in some cases raising hundreds of thousands of dollars. The high fees prompted a change in Massachusetts law and at least one lawsuit.
New law says communities in the state can’t charge a percentage of sales proceeds, fees can’t be more than 3% of a business’s revenue, and must be reasonably related to costs associates.
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