Judge’s Rulings This Week Limit Both Sides on Stem Impact Fee Suit Against Haverhill

Essex County Superior Court Judge Jeffrey T. Karp hears an argument during February 2024 from outside city lawyer Michelle E. Randazzo. (WHAV News photograph.)

Heading into trial, a Superior Court judge may well have shaped the future outcome of a dispute over “community impact fees” the City of Haverhill has assessed against a cannabis retailer over the last four years.

Superior Court Judge Jeffrey T. Karp, in a Monday decision, refused Haverhill-based Stem’s request to immediately decide in its favor that city fees are overinflated and lack proof, while also saying Haverhill must properly account for any increased cost to the city by hosting cannabis businesses. Further, the judge knocked down one of Haverhill’s key arguments, deciding “marijuana use and abuse educational programming” is not a cost solely related to Stem. Karp left open the possibility that Haverhill could proportionally assess educational expenses against all cannabis retailers.

Karp was also clear that legislative changes made since Haverhill and Stem entered into a state-mandated host community agreement in 2018 do not apply retroactively. Besides an undisputed sales tax, the agreement calls for the city to be paid 3% of Stem’s gross sales in so-called “community impact fees.” If the newer state law and regulations were allowed, Stem could have sued the city for “breach of contract” if there are fees “not reasonably related to the actual costs imposed on the host community.”

Haverhill Mayor Melinda E. Barrett told WHAV in a statement, “I am pleased to see that the court’s recent ruling largely sided with the city. The ruling clarifies important legal issues, among which is that the ‘mandated revised regulations adopted by the CCC…do not apply retroactively to the HCA entered into between Stem and the City,’ which includes the part of the HCA governing impact fee payments. I am hopeful the court’s decision will bring the parties closer together in terms of resolution.”

On the other hand, in a statement released to WHAV, Stem took issue with Karp’s decision.

“Stem disagrees with the court’s order supporting the city’s position that the amendments to the law effective Nov. 9, 2022 did not apply to the parties’ host community agreement, and that the city did not have to document the costs prior to the expiration of the five-year term or in any particular manner.”

In so ruling, Karp then agreed with the city on two other points. He decided the original state law does not set a specific time, such as annually, as argued by Stem, for Haverhill to present its documentation of costs. However, Haverhill would have to make an accounting of those added expenses, if any, within the five-year term of the host agreement. In addition, Karp ruled the law does not require the city to compile its list of expenses in any “particular manner or format.” The judge wrote “The court cannot read language into the status that is not there.”

While Karp agreed with the city the newer law can’t be retroactively applied, he ruled in favor of Stem that the city must prove its added costs are related to the business. The judge explained the plain dictionary definition of “reasonably related,” cited in both the old and new laws, suggests the city must show any expenses are “connected to a fair or moderate degree.”

In the host agreement, Haverhill said it expected additional expenses from impacts on roads and infrastructure; police, fire and inspectional services; public health and addiction services; and permitting and consulting services. It also calls on the city to justify every year that additional costs are “reasonably related” to the business. Stem paid impact fees of $358,943 in 2021 and $328,568 in 2022.

As WHAV previously reported, City Council Vice President Timothy J. Jordan asked the city solicitor whether any of the city’s three other cannabis retailers had been charged impact fees. Lisa L. Mead declined to comment, adding Haverhill is currently renegotiating its community host agreements as mandated by Gov. Charlie Baker’s 2022 Act Relative to Equity in the Cannabis Industry.

Stem Owner Caroline Pineau told WHAV she expects the trial to be scheduled for next year, adding she is looking forward to her “day in court.”

This report was prepared by WHAV’s Jacob Posner and Tim Coco.

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