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What’s Shifting in the Massachusetts Cannabis Market

By Contributor
GTI’s cultivation facility in Holyoke
Law

High Stakes

By Scott Foster, Esq.

 

The Massachusetts House of Representatives recently unanimously adopted House Bill 4206 (HR4206), which would introduce fundamental changes in how the Massachusetts cannabis industry is regulated and managed. These changes include:

• A complete overhaul of the structure of the Cannabis Control Commission (CCC), moving from five full-time commissioners appointed by the governor, the attorney general, and the state treasurer to three commissioners in total, each of whom is appointed by the governor acting alone, with only the chair serving in a full-time capacity;

• Increasing the number of retail licenses under common control from three to six, potentially paving the way for increased consolidation in the market but also allowing early entrants to sell their business to multi-state operators and realize a significant gain on their investment of time and money;

• Legalizing CBD gummies, hemp-infused beverages, and other CBD edibles, while clearly controlling the manufacture, distribution, and sales of these products; and

• Opening the door a bit wider for employee stock ownership plans, which allow employees to potentially realize significant retirement benefits from long-term employment while also saving on taxes.

Two significant changes are also a bit ‘half-baked’ at the moment, and the Massachusetts Senate could provide more clarity on the implementation of these changes when it begins deliberations.

Currently, no individual or entity can own more than 10% of more than three licenses per category (e.g., retail, manufacturing, and cultivation). HR4206 appears to increase that threshold to 35% by exempting “any person or entity that possesses a financial interest in the form of equity in a license of less than 35%” from these license caps.

However, HR4206 leaves in place the definition of a ‘controlling person,’ which includes “any individual who has a financial or voting interest of 10% or greater.” Under the current regulations, an individual cannot be a controlling person over more than three licenses per category. The Senate has the opportunity to reconcile these seemingly contradictory provisions.

HR4206 also proposes a new delinquency reporting system that mirrors that which the Alcohol Beverages Control Commission has in place with respect to alcohol sales in the Commonwealth.

Going forward, no marijuana establishment will be able to offer credit terms to another marijuana establishment of more than 60 days from the delivery of products. If a purchasing establishment does not pay its invoice within these 60 days, the selling establishment is required to notify the CCC of this non-payment within three days, at which point the CCC reviews the situation and will post the name of the delinquent establishment on a newly created ‘delinquency report.’

At that point, no other selling establishment will be able to offer the delinquent establishment any credit terms, and all future purchases must be paid in advance or cash on delivery. Further, the CCC will not process any change of control applications for the delinquent establishment until the past due amounts have been settled.

While this may sound reasonable, the reality is that a large number — some believe a majority — of the current establishments have accounts payable over 60 days. Since HR4206 does not explicitly apply retroactively, these currently overdue accounts would not be considered delinquent.

This raises multiple issues regarding the future allocation of payments, such as whether a future payment applies to the oldest invoice or the most recent invoice, and whether the purchaser can specify to which invoice a future payment should be applied.

Hopefully, the Senate will consider the nuances of these significant changes and provide the necessary clarity before the bill is finalized. Either way, given the broad support already seen for overhauling the current statute, cannabis businesses (and their lawyers) should be on alert for a significant shift in how they operate.

 

Scott Foster is a partner at Bulkley Richardson in Springfield; (413) 272-6258; [email protected]

What’s Changing in Ludlow … and What Isn’t

By
Karen Randall
Community Spotlight Special Coverage

Community Spotlight

Marc Strange

Marc Strange considers it “disappointing” that the majority of the town wasn’t ready for a charter change.

When Marc Strange came to Ludlow as town administrator in the spring of 2022, he saw an opportunity to take a leadership position in a bustling community and use his experience and skills — he was formerly director of Planning and Development for Agawam and selectman in Longmeadow — to effect change in this community.

One big proposed change is not happening, but there’s still plenty on his plate.

“When I applied for the job, the number-one priority was the change of government,” he said of a push to change the town’s charter and system of government — now a board of selectmen and representative town meeting — to one many felt was more befitting a community of roughly 21,000 residents, either a town manager and town council, a mayor and city council, or perhaps a hybrid model.

“That’s been a focus of mine, although I wasn’t involved in the creation of the charter,” he told BusinessWest of the effort by a charter-review committee that eventually settled on a town council/town manager model, which included the hiring of the Edward J. Collins Center for Public Management to guide the process and a series of public forums. “I took it upon myself to make sure we were pushing toward on that, putting in the request to fund a consultant and just keep that ball moving.”

But the ball stopped rolling at a town meeting earlier this month, when the charter and the government change was voted down, 41-29.

“That just means that we’re going to continue status quo, the way we’ve been operating,” Strange said. “It’s disappointing because the charter committee put together a good charter, but the town just wasn’t ready for the change. The town manager would have replaced the board of selectmen, and then a town council would have replaced town meeting as a legislative body. You’re just able to get things done quicker.

“All the surrounding towns have grown, and that has contributed to our growth. And the town of Ludlow has grown tremendously since we started.”

“We have about 21,000 people, and a $84 million budget. We’re really a small city. It certainly has a town feel to it, but in terms of the form of the government, the structure of the government, I personally think it would have been more efficient to make the change. But the town meeting didn’t see it that way.”

For many town-meeting participants, Strange said, it came down to a question of representation.

“There are a little more than 100 members, technically, but there there were 70 at this town meeting. You’re going from that many people and that many voices down to a seven-member town council. I think the overriding sentiment was, the more voices you have, the more democratic a process.”

Still, he added, “Easthampton is a city, Palmer is a city, Southbridge is a city. These are smaller towns, smaller than us, that have city forms of government.”

Strange had other goals when he was hired in 2022, including efforts to make the government more efficient, which has included balancing out staffing and combining the treasurer’s and collector’s offices, and development efforts downtown.

Karen Randall

Karen Randall says location is her business’s number-one asset.

“I grew up in the economic-development world, in municipal government, and that’s one of the reasons why I was so excited to join Ludlow,” he said. “There’s so much potential here.”

 

Location, Location, Location

Karen Randall has certainly seen plenty of change in Ludlow, most of it positive. In 1962, her father built the first store at Randall’s Farm, and in 1997, the building underwent a significant expansion, including a greenhouse and big produce department.

The business also added “a postage stamp of a kitchen,” she added, which would turn out to be entirely inadequate as the bakery, deli, and prepared-food operations took off as people’s lifestyles changed.

“Center Street, where the pike exit is, is pretty built out and super busy. There are a lot of businesses there. But the downtown area, I feel like we need to really focus on that, because residents’ quality of life will rise if we can create a more exciting downtown area.”

“The kind of customers we have are mostly local customers. They’re on their way home or on their way to work, and it’s very convenient for them to have home-cooked food — not cooked in their home, but cooked in our home. We prepare everything from scratch, for the most part. And that department just went way beyond our expectations. It’s almost 40% of everything we do now, which we never saw coming. The garden center is still a big part, and produce is still a huge part, but prepared food was a surprise.”

Guests also come for the homemade hard ice cream, as well as family activities that peak in the fall with pumpkin decorating, scarecrow making, and seasonal games. Randall said the farm draws regulars from a roughly 20-mile range, from communities like Longmeadow, Westfield, and Enfield, Conn. “Sometimes people make a weekend trip just for their groceries. We have a lot of specialty grocery; we do a lot of gluten-free and allergy-friendly food. We have a big following for that.”

The Ludlow Mills project

The Ludlow Mills project, with its mix of housing, businesses, and the restored, iconic clocktower, continues to progress each year.

But after talking about what Randall’s Farm offers, she was quick to explain what Ludlow itself offers — notably its location off Mass Pike exit 54 and near a number of growing residential communities. It also benefits from its own growth, with new residential developments in recent years (more on that later).

“We’re in a great location. Location, I would say, is our number-one asset,” Randall told BusinessWest. “Having the turnpike less than a mile away, people in the surrounding towns who are using the turnpike drive by us very often. Belchertown has grown, all the surrounding towns have grown, and that has contributed to our growth. And the town of Ludlow has grown tremendously since we started.

“It’s a great community to have a business in, with great people. The town gives us excellent young employees; we have a lot of people that start in high school, and hopefully they stay while they go to college and come back and work holidays or weekends or summers,” she went on. “Some of our young employees stay with us for six years or so until they graduate from college, and then we hate to lose them. They become nurses and engineers and go on to their careers, and they leave a big hole for us because they were excellent employees.”

Ludlow at a glance

Year Incorporated: 1774
Population: 21,002
Area: 28.2 square miles
County: Hampden
Residential Tax Rate: $18.09
Commercial Tax Rate: $18.09
Median Household Income: $53,244
Median Family Income: $67,797
Type of Government: Board of Selectmen, Representative Town Meeting
Largest Employers: Hampden County House of Correction; Encompass Rehabilitation Hospital; Massachusetts Air National Guard; Kleeberg Sheet Metal Inc.
*Latest information available

All that said, “the business is doing well,” Randall noted. “We continue to grow and change with the trends and what customers want and what other stores like us are doing. We try to stay in tune with what’s happening so we can deliver the best to our customers.”

 

Downtown Developments

The town has been focusing on its downtown area in recent years as well, not just at Ludlow Mills, but in the East Street corridor, where it has planned extensive infrastructure improvements to make the street more safe, pedestrian-friendly, and aesthetically pleasing, as well as expanding its District Improvement Financing (DIF) area, which had previously covered just the footprint of the mills, to East Street.

“Our East Street corridor is sort of our Main Street, and there are a lot of small businesses there that have a loyal following and are very popular,” Strange said. “So we created a DIF last year so, with any developments made in that district, instead of that additional tax revenue going into the general fund, we can keep it in the district for infrastructure improvements.

“I’m really looking forward to being able to improve the look and the feel, but also the infrastructure of East Street. We’re also going to be repaving the roads around down State Street, which is where the mills are, then around to East Street,” he added. “Center Street, where the pike exit is, is pretty built out and super busy. There are a lot of businesses there. But the downtown area, I feel like we need to really focus on that, because residents’ quality of life will rise if we can create a more exciting downtown area.”

One of the most recent business openings on East Street is BarBurrito, a new restaurant venture from Bill Collins, owner of Center Square Grill in East Longmeadow. “We were thrilled to see BarBurrito come in,” Strange said. “Bill Collins has established businesses that are popular, so to have him come invest his money into East Street, I was really excited to see that.

“There are a lot of small businesses on East Street that have a loyal following, but we do have some storefronts that tend to turn over,” Strange added. “So we’re really hoping to, again, raise the excitement level of the downtown area, beautify it, and have more businesses like BarBurrito come in and build out those storefronts.”

As for Ludlow Mills, that remains an ongoing process, one that began two decades ago and ramped up when Westmass Area Development Corp. acquired the property 13 years ago. The 95 residential units at Mill 8 should be complete next month, complimenting the 75 units in Mill 10 and a series of commercial developments across the complex’s footprint. Meanwhile, the clock tower in Mill 8 completed its renovation this year.

“Every single year there’s something. There’s always cranes and activity down there. It’s exciting, and I think it gets people excited about the future,” Strange said, noting that the new residential units are for age 55 and up, and there is a great need for that kind of housing locally.

“I can see a vibrant downtown in Ludlow,” he added. “We have a lot of beautiful residential areas, particularly in the mountains and certainly closer to downtown as well. The clocktower so iconic. I remember, before I started here, coming over the bridge to go to Randall’s and looking to the right and seeing the clock tower. It just made you feel like you had arrived someplace. Now we have corporate resources that are putting money into the area.

“I’m really excited about what the downtown could be,” Strange went on. “I feel like, if we can complete the downtown and update it, revitalize it, and make it exciting, it’s really going to make a difference for Ludlow. That’s my focus.”

Non-traditional Family Structures Challenge Modern Society

By Contributor
Law

The Decline of the Nuclear Family

By Julie A. Dialessi-Lafley, Esq.

 

Historically, a nuclear family (also known as an elementary family, atomic family, cereal-packet family or conjugal family), was the traditional family structure which is defined as a family group consisting of parents and their children (one or more), typically living in one home residence.

Statistically speaking, this is no longer the norm. In fact, 80% of households in the U.S. have a non-traditional family structure. Family structures that may be considered non-traditional or alternative include, but are not limited to, single-parent families (a single parent raises a child alone), cohabitation (an unmarried couple shares a household), same-sex families (two individuals of the same sex raise a family), grandparenting (grandparents raising grandchildren), and polygamy (marriage among at least three people).

Julie A. Dialessi-Lafley

Julie A. Dialessi-Lafley

“In the Baby Boom of 1960, there was one dominant family structure, with 73% of all children living in a family with two married parents in their first marriage. By 1980, 61% of children were living in this type of family, and today, less than half (46%) are in households with two married parents.”

Gay and lesbian households increased from 540,000 to 980,000 post-legalization of same-sex marriages, and multi-generational households have increased from 7 to 26%, which represents a 271% increase over a decade. The change in the common family structure from traditional to non-traditional happened quickly, and the laws have not moved as quickly to keep up with the times.

To highlight the change and how quickly it has taken place, consider that in the Baby Boom of 1960, there was one dominant family structure, with 73% of all children living in a family with two married parents in their first marriage. By 1980, 61% of children were living in this type of family, and today, less than half (46%) are in households with two married parents.

The formation of the non-traditional family, and the children that may result, can bring complex legal issues such as custody, visitation, child support, property division, estate planning, and constitutional issues, to name just a few of the most obvious ones. These are the legal issues only and do not even touch on social and emotional issues, which exist due to lack of understanding and/or acceptance in a society still rooted in traditional values.

 

Planning Is Paramount

Given how quickly the nuclear family has become the non-dominant family structure, one would think the members of non-traditional families would have all the resources they need available to them to address all the legal issues we face in our increasingly more complicated modern family society. Unfortunately, due to lack of concrete guidelines, non-traditional families are often forced to resolve these legal issues in a court process due to failure to understand the unique issues of their family structure or a lack of legal process.

By way of example, it is the unfortunate reality that some laws may not support the same federal estate or tax benefits in non-traditional households versus traditional ones. Federal benefits and retirement may not pass to non-married partners or same-sex spouses without actions taken specifically to designate beneficiaries. Proper tax planning and asset planning should be a priority in these households and relationships; however, these are areas often overlooked when dealing with the daily challenges of managing life and household dynamics.

When considering that most households have more than one income, likely have purchased real estate, have commingled assets, and may have blended families with children from other parents, non-married partners, or multi-generational households caring for children, the need to plan for the distribution of assets upon death is of paramount importance.

However, there is no specific, cookie-cutter estate plan for all non-traditional families to abide by. To ensure that property passes to your non-married partner, same-sex spouse, or non-biological and/or biological children, proper estate plans need to be put into place. These plans may include a will and trusts to ensure that goals of asset distribution are met upon a death.

In the same way, plans need to be put into place and properly documented to make sure that lifetime decisions such as health decisions, personal financial decisions, and end-of-life determinations can be made by your partner if not married, or by any person you chose. In the absence of estate planning, things may not be carried out as you would want them to be or by the people you would have selected had you taken the time to put a plan in place.

The non-traditional family should consider cohabitation agreements, prenuptial agreements, custodial agreements (if recognizable in your home state), as well as formal estate planning in order to protect themselves and their families in the event of a breakup, divorce, dissolution of a household, or death.

 

Seeking Answers

It can be difficult for partners or single parents to protect their rights as a family. There is no definitive answer to these challenges with custody and parenting arrangements. Many of the outcomes are fact driven and left to the discretion of a court when agreements cannot be reached by the parents or caregivers. When relationships break down, parties are less likely to be able to put the best interests of the children at the forefront in order to reach an agreement.

Does a non-married person who has raised a non-biological child automatically have parenting rights? Are they financially responsible for the child(ren)? Do grandparents who have been a caretakers to a grandchild get visitation if the child returns to the care of the biological parent? The answers are not as clear and obvious as you would think or hope they would be when considering the relationships that may have existed between children and caretakers of any kind.

The law, again, is fact-specific and gives great discretion to the courts in reaching a decision when parties cannot resolve these issues among themselves. Thus, while many partners find informal custodial arrangements and other systems work well for them, the majority face issues when problems arise.

Frequently, mainstream advice is given with traditional families in mind, which undoubtedly creates confusion for unconventional arrangements. All family units of any structure, but especially for certain non-traditional families, should consult knowledgeable family-law attorneys and financial professionals to develop the plans that best meet the unique needs of their chosen life.

 

Julie A. Dialessi-Lafley is a shareholder with the law firm Bacon Wilson, P.C. and chairs the firm’s Family Law department. She is a certified family law mediator, a member of the Springfield Women’s Leadership Council, a member of the United Way of Pioneer Valley board of directors, and is licensed to practice law in both Massachusetts and Connecticut; (413) 781-0560; [email protected]

Businesses Need to Understand How the Rules Are Changing

By
Accounting and Tax Planning

Recording Revenue

By Rebecca Connolly

Recording revenue is, in anyone’s mind, seen as a job well done when you complete selling your product or service or receiving a donation for your organization.

But a new revenue-recognition standard for non-public companies is effective for years ending Dec. 31, 2019 and annual periods then after, and business owners and managers must be aware of what this new standard means.

The new revenue-recognition standard, Accounting Standards Codification 605, Revenue Recognition, created a five-step process to determine when you should recognize revenue.

• Step 1: Identify a contract with a customer. This contract can include an invoice, a formal signed contract, and other various forms agreed to upon the purchase of goods or services. Once a contract has been identified, you proceed to step 2.

“Know what you are signing and know, if you are entering into a long-term contract, how to structure it in accordance with generally accepted accounting principles.”

• Step 2: Identify the performance obligations (promises) in the contract. Contracts can have one or more performance obligations. An example of one performance obligation is to deliver the 10 office chairs that were ordered by a customer. An example of multiple performance obligations within a contract is a construction contract that requires a house to be built and suitable for living, a driveway to be installed, and a garage to be constructed. The key item here is to know what you are signing and know, if you are entering into a long-term contract, how to structure it in accordance with generally accepted accounting principles. Then you proceed to step 3.

• Step 3: Determine the transaction price. Transaction price is the amount of consideration the entity expects to be entitled to, in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties. This item concerns how much money the entity expects to receive. As one example, if you sell office chairs for $59 a chair, but there is a sale and the chairs are now $45 a chair, then the revenue the entity can expect to receive for the chair at this time is $45 a chair. Elements from step 2 and step 3 are then used in step 4.

• Step 4: Allocate the transaction price to the performance obligation in the contract. If there is only one performance obligation of the office- chair delivery, then no allocation is needed. It gets complicated when you have more than one performance obligation in a contract. The best method is to allocate the price per performance obligation in the contract itself. Continuing the example of the construction of a house, the price could be allocated at $200,000 and the garage and driveway obligation could potentially be allocated at $100,000. An important element here is to be consistent in your application of the price allocations and document your process with the allocation among performance obligations. Once prices are allocated, you can proceed to step 5.

• Step 5: Recognize revenue when (or as) the reporting organization satisfies a performance obligation. Recognizing the revenue in the amount determined in step 4 has become more of a checklist item, as, yes, we have completed the performance obligation, and now the revenue can be recorded. This step is ‘I have delivered the office chairs and have completed the performance obligation with this contract.’

Conclusion

The moral of the new revenue-recognition standard is that the rules are changing, and it is best to look at your contracts and how you record revenue now before your accountant comes in and notes your revenue is overstated by $300,000.

Rebecca Connelly, CPA is a manager for West Springfield-based Burkhart, Pizzanelli, P.C. She is involved in the accounting and consulting aspects of the practice and manages engagements of various size and complexity, including nonprofit and construction companies, manufacturing, and distributors; (413) 734-9040.

The Changing Retail Landscape

By
Opinion

Editorial

The headlines came in rapid succession, and they juxtaposed each other nicely.

The site in South Hadley’s Woodlawn Plaza that was once home to a Big Y supermarket is the proposed location of a mixed-income apartment complex. Meanwhile, in Westfield, plans were announced to convert the former Bon-Ton department store location in the Westfield Shops into a 50,000-square-foot trampoline park, complete with dodgeball courts, an American Ninja Warrior-style course, and climbing walls.

These headlines, and they’re only the latest of this nature — highlight how the retail landscape is changing, and also how this region and individual communities within it will be challenged to find new and imaginative uses for the hundreds of thousands of square feet of retail space now vacant or likely to be vacant.

This is not a local problem or a regional problem. Indeed, it’s a national problem and probably an international problem: just what do we do with all that space once assigned to retail?

It’s a question that needs to be answered because, from everything we’ve gathered and from everything the experts are saying, the pendulum is simply not going to swing back the other way on this issue. Traditional retail is shrinking, and it is vanishing.

In fact, the world of retail started to change perhaps a full decade and a half ago, and the process of change has only accelerated. Fewer people are shopping in actual brick-and-mortar stores, while many of the brands that once dominated this industry — like Sears and JCPenney — have been closing stores in large numbers.

These two forces have collided in places like the Eastfield Mall, which now boasts some of the largest and most barren parking lots to be seen anywhere. Plans are being developed to turn the mall, this region’s first real suburban shopping mall (it opened more than a half-century ago), into what is being called a ‘village,’ one where people can live, work (perhaps), drop off their children at day care, see a movie, work out at a gym, eat at a restaurant, and maybe even get on a trampoline. This sounds ambitious, but it is also reality. The Eastfield Mall can never again be what it once was, so it has to become something else.

And this same phenomenon is happening all across the region. The former Big Y supermarket in South Hadley was simply not going to become another supermarket, not that the owners of the property didn’t try to lure one there. So it has to become something else. Tower Square in Springfield is never going to be the thriving retail hub it was in the ’70s ever again, so it has become the home of two colleges — and soon it will be home to a YMCA and a brewery. The Bon-Ton site was not going to house another department store — in a year or 10 years. Hence, a trampoline park.

Let’s hope there is need for other things as well, because, as we said, this trend will only accelerate. More department stores will close, more mom-and-pop stores will close, and eventually the need for large auto dealerships will subside, and we’ll need to find new uses for them. (One auto dealership in Westfield has already been converted into a gym, a restaurant, and indoor batting cages.)

This kind of imagination is going to be needed moving forward, because there are now vacant stores in malls, strip malls, and Main Streets across the region. And there will only be more of them.