Update on PILOT payments & medical marijuana contingency fees (Updated)

Leading up to and following Annual Town Meeting, there was a lot of discussion around the burden residents shoulder in paying for the Town’s budget. Last week, two items prompted questions for me about the status of other revenues the Town is/isn’t receiving.

I followed up for details on PILOT payments and contingency fees from the medical marijuana dispensary.

Marijuana dispensary payments status

The Southborough based dispensary has prospered during the pandemic. But regulations mean long delays in the Town’s ability to spend any revenue sharing payments made under the Host Agreement.

A recent article on owners of the medical marijuana dispensary in Southborough touted the profitability of the location. With recreational marijuana facilities temporarily shuttered under the state of emergency, medical dispensaries thrived. MassLive reports:

The Commonwealth Cannabis Company says it is on track for an expansion that will add at least 50 jobs, triple production and make it the largest family-operated and locally owned cannabis company in New England.

Owners say that increased medical marijuana sales during the coronavirus pandemic are the reason those expansion plans are still possible, despite losing about $2 million in roughly two months as the recreational marijuana market in Massachusetts was shut down. . . 

With recreational stores shuttered, the state Cannabis Control Commission saw a big increase in registrations of medical marijuana patients. . .

[Co-owner Ellen Rosenfeld] said Southborough, which has been open since 2017 [sic]*, has an established base of medical patients. Though, sales did drop from about $100,000 per week down to about $60,000 last year when a ban on the sale of vape products in the state began in September. Sales stayed around $60,000 a week when 2020 began, Rosenfeld said.

But then, sales ticked up in March. At that time, as the seriousness of coronavirus started to set in, people started to stock up on products, trying to prepare for potential quarantine time at home. Some also anticipated that there would be retail shutdowns.

So, at the beginning of March, Southborough sales went up to $70,000 a week, and then to $90,000 a week, where sales remain now, Rosenfeld said. (read more)

Back in 2016, selectmen approved a Host Agreement with CommCan that included some lump payments and an annual 3% of sales revenues. There was a built in 1-2 yr delay from the start of sales for some of those payments. The dispensary opened in the summer of 2018.*

Reading the article made me wonder what expected CommCan payments were included in the projected revenue for the next fiscal year. The answer surprised me.

Town Administrator Mark Purple explained that payments were already made last summer, but that revenue source can’t be used by the Town for more than a year:

In FY20, CommCan paid the Town $56,182.63 per our Community Host Agreement. The Dept. of Revenue has determined that financial obligations for (medical) marijuana facilities are considered mitigation payments, and therefore cannot be used without further appropriation, and must first close out to Free Cash before they can be appropriated. Since the payments were not received until after July 1 of this fiscal year, they will not close out to Free Cash until after June 30, 2020, and will not be available for appropriation for use until FY22. Therefore, we did not estimate any medical marijuana revenue in our FY21 revenue estimates, because none was available to be appropriated by Town Meeting.

PILOT contributions status

Ladder truck payments completed in the fiscal year that ended in June 2019.***

As I wrote about last week, a debate sprung up on Town Meeting floor about the Town’s strategy for pursuing PILOT payments from Southborough’s private school. During the debate, the Capital Committee Chair referred to the schools’ PILOT payments for the Fire ladder truck as coming to an end. When I looked back at details, I realized the 10 years of payments were announced in 2009.

I followed up with Purple to find out if the final installments had come in, or when they were due. He informed me that the ladder truck payments were finished in FY19, which ended in June of last year. 

The ladder truck was a $980,000 purchase. Harvard University (which owns an 89 acre parcel on Pine Hill Road) contributed $50,000 over three years. The other three private schools split payments over 10 years. New England Center for Children paid $120,000. St. Mark’s School and Fay School* each paid $100,000. 

NECC and Harvard’s payments were in addition to other annual contributions they have continued to make to the Town. 

Harvard’s contributions are specified to be split between Police and Fire departments. The FY20 donation was $23,760. The university increases its donation by 2.5% per year. NECC makes quarterly contributions to the Town meant to represent the taxes for all of the land they own in Southborough—at the rate for the year in which those parcels were purchased. In FY20, they paid $104,072.

Fay School had been making $5,000 annual payments prior to the ladder truck deal. The truck payments replaced those. But starting in FY20, the school pledged another $100,000 over 10 years to support the new Public Safety Building.

One other non-profit made a PILOT contribution in FY20. L’Abri Fellowship paid $800.

[Editor’s Note: The statement below was written prior to the email I received from St. Mark’s School’s CFO.*** It appears that a PILOT payment from St. Mark’s was made the week of June 23rd.]

So far, no commitment has been made by St. Mark’s School, and it looks like nothing was paid in FY20. The school purchased additional downtown properties in 2019-2020 and has been working on plans to site a new dorm downtown.

At Annual Town Meeting, Selectman Marty Healy told voters that he is working with the private schools to try to increase their PILOT contributions.

Healy began representing the Town in discussions with Fay and St. Mark’s administrators last year. At the June 13th meeting, he told voters that those talks were held up this spring by the pandemic. He pointed out that the schools have no obligation to make any payments. He asked them to trust him as he pursues “different approach” than past efforts.

Voters overruled motions from the floor that would have asked selectmen to pursue PILOT payments from the schools specifically to support a new $600,000 pumper truck for the Fire Department. (You can read more about arguments on both sides of the debate here.)

*Despite what the MassLive article states, the Southborough dispensary didn’t open its doors until July 2018.

**[Editor’s Note: Fay School is an advertiser on the blog.]

**Updated (6/29/20 4:23 pm): Initially, I wrote:

St. Mark’s School is the lone private school not currently contributing or committing to any Payments in Lieu of Taxes. . . 

So far, no commitment has been made by St. Mark’s School, and it looks like nothing was paid in FY20.

St. Mark’s CFO, Rob Kuklewicz, emailed me on Friday, June 26th. (I was offline for a long weekend.) He informed me:

I noticed in your 6/23 post you highlighted that St. Mark’s School did not make a donation to the Town, we did make this annual donation earlier this week. It must have arrived just after you published your comment

I don’t yet have details on the amount and whether or not it was a one time payment.