HAVERHILL — An Essex Superior Court judge has denied a marijuana shop's request to place a disputed $356,000 in impact fees into an escrow account while a lawsuit against the city is pending.
In her lawsuit, Caroline Pineau, owner of Stem on Washington Street, argues that officials should provide detailed documentation of the impacts her shop has on the city before she pays the fees called for in a Host Community Agreement signed by her and the mayor.
The city is arguing that since the agreement calls for payment of the fees, Pineau should pay the money and detailed documentation can come later.
During a court hearing on Monday in Essex Superior Court in Newburyport, Pineau's lawyer Thomas MacMillan asked for a preliminary ruling allowing the court to hold the money until a final decision is made on Pineau's lawsuit against Mayor James Fiorentini and the city.
On Tuesday, Judge James Lang refused Pineau's request to withhold the money. He ruled Pineau would be able to recover her money from the city should she win the suit.
The $356,000 impact fee is in addition to the sales tax the shop has paid the city in the last year.
After the judge's decision, Pineau said she will pay the money to Haverhill so she is not in default.
"We are not discouraged or surprised by this preliminary ruling," Pineau said. "The law clearly states that impact fees must be directly related to a cannabis establishment’s operations and must be documented and made public."
Pineau's lawsuit against Haverhill, which is still pending, could have widespread impact on retail cannabis shops across Massachusetts and affect their financial futures.
During Monday's hearing via Zoom, MacMillan argued the city should provide detailed documentation of the impacts Stem has on Haverhill before the shop pays the $356,000.
The city argued that since the Host Community Agreement calls for payment of impact fees, Pineau should pay the money now and detailed documentation can come later.
Attorney Michele Randazzo, who represents the city, said the pandemic interfered with the city's ability to determine the full impact of Stem and related costs to the city. She said it's reasonable Haverhill needs more time to compile information about Stem's impact.
City Solicitor William Cox said Haverhill has filed a motion for the judge to dismiss Pineau's lawsuit.
"Our motion to the court says that by law, there is no case, and now we are waiting for a hearing date," Cox said.
Pineau responded to Cox by saying, "We are confident that the judge will ultimately conclude that the city must obey the law."
During Monday's hearing, MacMillan said the city violated the Host Community Agreement by not producing documentation as required by state law. That law states, "Any cost to a city or town imposed by the operation of a marijuana establishment or medical marijuana treatment center shall be documented and considered a public record."
Following Pineau’s attempts to get a statement listing specific impacts caused by her shop, Cox, the city solicitor, provided a letter on Feb. 28 highlighting some of the city’s concerns but failing to list related costs.
In addition to an increased need for police and fire services, Cox’s letter said Haverhill has “seen an increase in need for drug abuse and mental health services, in both our community, and more specifically, our schools, as well as an increase in domestic issues” as a result of Stem and other shops opening in Haverhill.
“We have seen an increase in anxiety, depression and drug use in our schools, including the use of marijuana,” Cox wrote. The increase is so high, he said, that he and other city officials believe a survey should be done to gauge students’ addiction levels to arrange for counseling and other services.
Pineau and her lawyer have argued Cox's letter fails to give impact details that are specific enough to meet the state's requirements.
Reacting to the judge's decision that came Tuesday, the mayor said “We are pleased and thankful for the court’s preliminary decision. We anticipated this decision, which is based upon well-established law, and believe we will win the final decision also."
"Whatever differences exist between Stem and the city in the interpretation of the Host Community Agreement, we firmly believe that those differences do not relieve Stem of its obligation to pay a community impact fee, which it voluntarily agreed to as part of its process for obtaining a license to operate from the Cannabis Control Commission," Fiorentini said. "This agreement was negotiated after several months of negotiations with a very experienced and skillful attorney representing Stem. The final agreement that was negotiated allowed Stem to become one of the few cannabis providers in the entire state to be allowed in an urban downtown area."
In addition to the impact fee payment, the city is also scheduled to receive 3% of the shop's gross sales in the form of a local option tax charged to customers. That is projected to bring $360,000 to the city in Stem's first year of operation.