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Accounting and Tax Planning

Where There’s Smoke…

By Kristina Drzal Houghton, CPA, MST

 

Kristina Drzal Houghton

Kristina Drzal Houghton

The production and distribution of cannabis, once known to many only as marijuana, is the newest and most variegated industry in America. Some would even say it is one of the toughest industries in America in which to do business. This article will discuss a few unique challenges from a financial perspective faced by the industry.

The first complexity starts with the difference between cannabis and CBD. When you look at a cannabis plant and a hemp plant side by side, the plants themselves look identical to an untrained eye, making it a bit challenging to identify, as the real difference lies in the chemistry of the plants.

CBD can be extracted from hemp or marijuana. Hemp plants are cannabis plants that contain less than 0.3% THC (the compound that creates the ‘high’ sensation), while marijuana plants are cannabis plants that contain higher concentrations of THC. This article will refer to all products containing more than 0.3% THC as cannabis, while products with less will be referred to as CBD.

So, basically, the only difference from a scientific standpoint is the level of one chemical. However, things are much more complex from a legal and tax perspective. Under the 2018 Farm Bill, CBD and hemp are now legal, and not on the schedule I list of controlled narcotics right up there with heroin and LSD. In 2016, Massachusetts passed a law making all cannabis legal, and all but five other states have passed laws making it either fully legalized, decriminalized, or medically authorized. While cannabis is federally illegal, the Internal Revenue Service is perfectly willing to collect taxes on companies that handle the product.

Federal tax law is very punitive on the cannabis industry. Internal Revenue Code Section 280E is a very short part of the tax code (just one sentence) and states:

“No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by federal law or the law of any state in which such trade or business is conducted.”

Under 280E, you’re not allowed any deductions or credits on your return, but you can deduct the cost of goods sold, as that is part of the definition of taxable income. A cannabis farm will only be allowed to allocate various costs, direct and indirect, into cost of goods sold and inventory. Section 280E will affect only cannabis entities. CBD companies, since they are legal, are allowed all normal business deductions and credits available to other non-cannabis companies. This provides many more opportunities to reduce taxable income to a hemp/CBD company.

It is not only the federal tax difference which significantly attributes to the disproportionate cost of cannabis versus CBD. Due to discrepancies between state and federal law, legal cannabis businesses are forced to operate almost entirely in cash, with very little access to financial services, since most banks are federally insured and therefore unable to establish accounts for this federally illegal business. This leaves thousands of dollars stored in backroom safes and transported in shoeboxes and backpacks, creating a prime target for crime. Another banking challenge that cannabis businesses regularly face is exorbitant monthly account fees, or banks that take a percentage of each deposit.

The industry faces many other challenges as well. For example, most states have a mandated ‘seed to sale’ software-tracking system that must be used and accurate (daily), and must be reconciled with POS (point of sale) systems and accounting systems. Additionally, because this is a new industry, many of the tools other industries use are simply not readily available, including a cannabis-tailored chart of accounts, QB POS systems, reliable inventory software, and common merchant service platforms.

There is an opportunity for dispensaries to separate some revenue streams outside of the cannabis division, meaning normal business deductions are allowed for the non-cannabis division. These might include clothing, paraphernalia, coffee, CBD, and other goods. While this is good news for the industry, it only creates even more complexities when allocating selling and administrative expenses.

A recent report from the U.S. Treasury inspector general for Tax Administration recommends increased audits by the IRS of cannabis businesses to identify potential non-filers and returns that are not 280E-compliant. For this as well as the above reasons, cannabis businesses need to find an accounting firm that really knows what it’s doing. The cannabis accountant has to not only understand Section 280E, but also know how to treat a business that deals strictly (and necessarily) in cash. Many cannabis companies have bad books because their bookkeepers do not understand the special accounting and therefore didn’t properly categorize expenses. It can be time-consuming to fix them.

So, while the many layers of regulatory control and reporting may be of utmost importance to those operating in the cannabis industry, overlooking the complexities in the finance area of the business can lead to the proverbial perfect storm — or the business going up in smoke.

 

Kristina Drzal Houghton, CPA, MST is a partner at the Holyoke-based accounting firm Meyers Brothers Kalicka, P.C.

Business of Aging Special Coverage

House Calls

While the pandemic may have challenged the home-care industry, it certainly didn’t suppress the need for such services. In fact, demographic trends in the U.S. — where about 10,000 Baby Boomers reach age 65 every day — speak to continued, and growing, demand for care services delivered in the home. That means opportunities both for agencies who specialize in this field and job seekers looking for a rewarding role and steady work.

Michele Anstett says business was like “falling off a cliff” when COVID hit, but client volume has returned to normal.

Michele Anstett says business was like “falling off a cliff” when COVID hit, but client volume has returned to normal.

By Mark Morris

In early 2020, Michele Anstett, president and owner of Visiting Angels in West Springfield, was pleased because her business was doing well. As a provider of senior home care, she managed 80 caregivers for 50 clients.

“We were going along just fine,” she said. “And when COVID hit, it was like falling off a cliff.”

The business model for companies like Visiting Angels involves interacting with people in their homes, so when early mandates encouraged people to keep away from anyone outside their immediate ‘bubble,’ it hit the industry hard.

Even though caregivers were designated as essential workers, Anstett saw her numbers shrink to 39 caregivers who were now responsible for only 19 clients. In order for her business to survive, she continued to provide services for her clients who needed personal-care services around the clock and for those who had no family members in the area.

“Where possible, we asked family members to step in to help out,” she told BusinessWest. “At the beginning of the pandemic, there was less risk to everyone when a family member could be involved with their loved one’s care.”

Anstett also incorporated a detailed checklist of risk factors for each caregiver to review to prevent COVID-19 from spreading to them or their clients.

“I thought patients weren’t following up because of a language barrier. As it turns out, they weren’t responding because they didn’t understand the severity of the situation.”

“We talked with caregivers about the people in their circle,” Anstett said. “It was similar to contact tracing, but we did it beforehand, so people would understand what they had to consider to protect themselves, their families, and their clients.”

A Better Life Homecare in Springfield runs two home-care programs. In one, it provides personal-care services such as helping seniors with grooming, cooking, laundry, and more. The other program provides low-income patients with medical care in the home, such as skilled nursing services, occupational therapy, and physical therapy.

On the medical side of the business, licensed practical nurses (LPNs) handle many of the home visits, while certified nursing assistants (CNAs) and patient care assistants (PCAs) are the main frontline workers on the personal-care side. A Better Life also employs case workers to supervise PCAs and CNAs and to set up other resources a patient may need, such as Meals on Wheels and support groups.

When COVID hit, said Claudia Lora, community outreach director for A Better Life, she and her staff made patient communication a top priority.

Claudia Lora

Claudia Lora says communication with clients was key to navigating the pandemic.

“We implemented daily phone calls to our patients that also served as wellness check-ins,” she recalled. Because a majority of the company’s clients are Spanish speakers, A Better Life employs many bilingual staff. At the beginning of their outreach efforts, Lora became concerned when some patients didn’t seem to follow up and respond to communications.

“I thought patients weren’t following up because of a language barrier,” she said. “As it turns out, they weren’t responding because they didn’t understand the severity of the situation.”

On the other hand, she said some patients temporarily stopped their home-care service out of concern about interacting with anyone in person. The system of daily phone calls helped address patient concerns and keep them current on their treatments. In addition, patients received whimsical postcards to lift their spirits and care packages of hygiene products and food staples.

“The pandemic opened our eyes in different ways,” Lora said. “It made us aware that we needed a system of daily phone calls in both programs, which we will continue even after the pandemic is no longer a concern.”

 

Growing Need

The lessons home-care agencies learned from the pandemic — some of which, as noted, will lead to changes in how care is provided — come at a time when the need for home-based services is only increasing.

That growing need is due in part to people living longer, of course. According to government data, once a couple with average health reaches age 65, there is a 50% chance one of them will live to age 93, and a 25% chance one of them will see age 97. With the increased longevity, there is also a greater chance these seniors will need some type of assistance with daily chores or treating a malady.

Receiving care at home, with an average cost nationally of $3,800 per month, is less expensive than moving into a nursing home (approximately $7,000 per month), and nearly everyone would rather stay in their home. When seniors need assistance, Anstett said, they often rely on family members out of fear of having an outside person come into their home.

Now that concerns about COVID are easing, she reports that people are increasingly more willing to have someone come in to their home to help, but there are still some who resist. “I wish they could understand we are not there to take away their independence, but to give them more independence.”

Lora said some of her patients were reluctant to allow people to come into their homes until they considered the alternatives.

“The only other option for people receiving medical care would have been checking into a skilled-nursing facility or a nursing home,” she noted. “I knew that was the last place they wanted to go.”

She added that the extensive news coverage of high rates of COVID in nursing homes and the high case rate locally at the Holyoke Soldiers Home convinced most people that care at home was a wise choice.

Anstett and Lora both pointed out that their companies always make sure anyone providing home care wears appropriate personal protective equipment and follows the latest guidelines for preventing the spread of COVID. Anstett said she encourages her caregivers to get vaccinated, but doesn’t force the issue because she recognizes some people have health issues.

“However,” she added, “I make it clear to the unvaccinated folks that the pool of clients willing to see a caregiver who is not vaccinated is fairly small.”

While the pandemic may have slowed down business in the short term, demographic trends still remain strong for the years ahead. According to U.S. Census Bureau data, about 10,000 people reach age 65 every day. This trend is expected to continue until 2030, when all living Baby Boomers will be at least 65 years old.

 

Looking Ahead

Fifteen months after the chaotic early days of the pandemic and with many people now vaccinated, Lora said A Better Life is busier today than before the pandemic.

“In the last six months, admissions have increased by around 50%,” she noted. “That’s more than I have seen in the past three years; it’s been insane.”

She added that her company is now short-staffed because of the rapid growth it is seeing and has been offering incentives to try to bring more CNAs and PCAs on board.

Anstett said her client numbers and caregiver numbers are back to where they were before the pandemic and noted that she has not had any problem filling open positions.

“I just cut 80 paychecks, and we are anticipating even more growth,” she said, adding that her secret to hiring is treating caregivers with respect and encouraging them to grow in their careers. “I stay in touch with every one of our caregivers. They’re the reason I’m working, so I treat them with the utmost respect.”

While many professions look to push out older workers, Anstett said she appreciates more seasoned workers and looks forward to hiring them. “Caregiving is an opportunity to keep working for those who want to, and we welcome their experience.”

Pointing out that she hired another case manager last week, Lora added that, while her organization is expanding, it has not forgotten its mission.

“Even with our growth,” she said, “we see our patients as part of a family and a community, not just a number.”

Cover Story The Cannabis Industry

Creating a Buzz

Every week, it seems, brings news of another cannabis establishment opening its doors or planning to set down roots in Western Mass. So, how does one stand out in an increasingly crowded field? For this issue, we talked with three women who own or co-own new enterprises in the region. By emphasizing facets of the business from sustainable growth to community gatherings to social equity, they make it clear that not all ‘pot shops’ are the same — that, in fact, there are many ways to make a mark on an increasingly robust cannabis ecosystem.

Helen Gomez Andrews and Chris Andrews of the High End

Sustaining a Plan

The High End Takes a Natural Approach to Edibles and Much More

Stephanie McNair of Turning Leaf Centers

Budding Connections

Turning Leaf Centers Plants Itself Firmly in the Community

Charlotte Hanna of Community Growth Partners and Rebelle

Charlotte Hanna of Community Growth Partners and Rebelle

Hire Calling

Community Growth Partners Builds on Model of Social Equity

Construction Special Coverage

Building Momentum

The past year has been an unusual time for the construction industry — one marked by project postponements, soaring prices for materials, and the establishment of strict COVID safety protocols on job sites. But for most builders, it wasn’t a devastating year, and, in many cases, it led to a surprisingly promising 2021. After all, the need for projects to be completed hasn’t gone away, and the backlog is actually creating a surplus of projects to bid on. The aforementioned challenges still remain, contractors say, but the work rolls on.

Laurie and John Raymaakers

Laurie and John Raymaakers say there’s plenty of infrastructure work available — and that trend should continue in the coming years.

 

By Mark Morris

 

For Dan Bradbury, 2020 was “a year of pivoting and finding new ways to get the job done.”

As director of sales and marketing for Associated Builders, Bradbury saw a slowdown at this time last year as several projects that were scheduled to break ground were instead postponed indefinitely.

By including construction as an essential industry, Gov. Charlie Baker allowed job sites to stay open and keep workers employed while following pandemic protocols. While Bradbury appreciated the ability to keep projects moving, other slowdowns were out of his control.

“There are a lot of hurdles to get over in a large industrial or commercial project, and COVID hit the brakes on all of them,” he said, noting in particular the new challenges surrounding what in the past had been routine business with municipal governments.

“We already had some projects scheduled to start this spring, but, more importantly, we’re starting to fill our pipeline again with projects that will take us well into the fall of this year and potentially into 2022 as well.”

“Because municipalities had to move to fully remote meetings, they occurred less often, which made it difficult to get building permits, zoning-board approvals, and the other essential documents we need to start and finish a building project,” Bradbury said, adding that Associated has projects in the works in a number of different sectors. One example is a 30,000-square-foot building in Bloomfield, Conn., where a local chemical company will occupy part of the building and lease the remaining space.

His company’s experience isn’t unique. BusinessWest spoke with several area construction managers to discuss how their industry looks this spring compared to a year ago, when COVID-19 suddenly changed the world — and the main takeaway is one of optimism and promise.

A significant part of Houle Construction’s business involves interior renovations for medical facilities. Company President Tim Pelletier noted that, when COVID first struck, business came to a complete halt as medical professionals were dealing with rapidly increasing numbers of COVID patients. One year later, he’s optimistic about the increase in construction activity.

“It’s absolutely busier than last year,” he said. “We’re seeing more projects taking shape, especially with our hospital clients.” In the meantime, Pelletier has picked up renovation projects at organizations that offer hall rentals, such as the Masonic Temple in East Longmeadow.

“The temple has not been able to host gatherings for the past year, so they are using the downtime to make renovations for when they can open again,” Pelletier said, adding that it’s a way to take advantage of what everyone has gone through and find a positive side.

An aerial view of Worcester South Community High School

An aerial view of Worcester South Community High School, one of the many recent school projects undertaken by Fontaine Brothers.

Bradbury credits pent-up demand for the increase in projects his company has been taking on this year.

“As soon as the calendar page turned to 2021, our phones started ringing,” he said. “We already had some projects scheduled to start this spring, but, more importantly, we’re starting to fill our pipeline again with projects that will take us well into the fall of this year and potentially into 2022 as well.”

Dave Fontaine Jr., vice president of Fontaine Brothers, said his company has been fortunate to have several projects ongoing since before the pandemic hit. Many of his largest projects involve building schools, for which budgets are approved long before breaking ground, so funding for them was not affected by COVID concerns. Since the pandemic hit, Fontaine said some towns have delayed public funding approvals, but not as many as he had anticipated.

“In the last six to eight months, we’ve picked up more than $400 million in new work,” he noted. “Some of these projects are in pre-construction now and will start this summer.”

Among the projects scheduled to begin in June are the $75 million DeBerry-Homer School in Springfield and the $240 million Doherty Memorial High School in Worcester.

Infrastructure construction also experienced steady business last year. J.L. Raymaakers and Sons Construction specializes in installing water and sewer lines as well as site excavation for municipalities, airports, and private companies. After a busy 2019, co-owner John Raymaakers said 2020 was nearly a record year for his company, and he’s on pace to fill up the project list for 2021.

Associated Builders project in Bloomfield, Conn

In this Associated Builders project in Bloomfield, Conn., a local chemical company will occupy part of the building and lease the remaining space.

“It’s amazing the amount of infrastructure work that is out there for bid,” Raymaakers said, explaining that his company subscribes to a register that lists all the new public and private projects available for bid. Since the middle of last year, he has seen no slowdown in the volume of bidding opportunities. “Looking only at our category of construction, there were five to six new projects announced just last week.”

Raymaakers predicted bridge construction, another area of expertise for his company, will also see increased activity.

“In the next few years, I think we are going to see a lot of work on replacing aging bridges in New England,” he said, adding that this should happen even without a federal government infrastructure bill, citing two recent bridge-replacement projects his crews are working on in Stockbridge and Pittsfield. Still, he’s hopeful that some kind of infrastructure legislation passes, saying it would be “a huge boost to us and others in our industry.”

 

Help Wanted

While business activity is brisk for everyone BusinessWest spoke with, they’ve all faced recent challenges; some are unique to doing business in the COVID environment, and others are chronic problems made worse by the virus. The issue of having enough workers was a challenge on both fronts.

“We’ve definitely lost people from the workforce due to COVID concerns,” Fontaine said. “They might be taking care of a family member, or they might be in a group that has underlying health concerns.”

He added that managing COVID on the job site is also difficult. “Anytime someone tests positive for COVID, that individual and anyone in close contact with them has to go home and quarantine for the time period,” he explained. “That can result in a lot of labor disruption on a daily basis.”

COVID also exacerbated the long-running problem of fewer workers in skilled-trade and general-labor jobs. Raymaakers said finding help in construction is a constant challenge. Co-owner Laurie Raymaakers pointed out that heavy-equipment operators and construction laborers can make a good living.

“There’s a misconception that laborers aren’t paid well,” she said. “The pay and benefits at our company are pretty good; the reality is there are just fewer people who want to do this type of work.”

She added that it’s also misleading to suggest laborers are not skilled, pointing out that her company’s laborers are highly skilled at making sure pipes are situated properly and secured to withstand years of service.

“Our workers also put together fire hydrants, which require about 50 bolts that have to be tightened in a certain pattern. Hydrants are under constant water pressure, so if it’s not built correctly, parts of the hydrant will go flying in the air.”

As older craftsmen such as plumbers and electricians continue to retire, their ranks are not being filled by enough younger workers. With projects increasing, Bradbury said an already-competitive labor market gets squeezed even further.

Tim Pelletier, president of Houle Constrution

Tim Pelletier, president of Houle Constrution, at the Masonic Temple in East Longmeadow.

“Between the demand for commercial/industrial as well as residential, everyone in the trades is busy, and they can’t find enough workers,” Bradbury said. “On top of that, solar companies are hiring all the electricians they can find at a time when electricians were already in short supply.”

The biggest hurdle to doing business right now, according to Bradbury, involves managing enormous price increases for materials, in some cases rising by more than 100% compared to this time last year.

“Over a period of months, we’ve seen multiple price increases in steel and lumber products,” he said. “Those two create a trickle up that affects prices for every other building material.”

Bradbury noted that steel manufacturing has been affected by labor outages due to COVID, leading to product-supply shortages. He also pointed to increased demand for lumber, especially on the residential side, where housing starts are booming. In addition, his company and many others receive a great deal of lumber from Canada, where the U.S. still has tariffs in place on lumber.

Bradbury said COVID issues are not affecting project schedules because his firm will not start a job until it has a guarantee that materials are available. “We are also adding cost protections in our contracts as a way to guard against the constant increases in materials.”

It’s too early to determine what immediate impact the pandemic will have on building design, but Bradbury said clients from current and future projects have begun asking about air handling and filtration.

“For sure, air handling and using UV light to sanitize a space are areas where people have been putting more focus,” he said. “I think these requests will continue as there is an increased emphasis on clean air and other ways to keep facilities sanitized.”

At Worcester South Community High School, workers installed air-handling units that use bipolar ionization, or, as Fontaine described it, a system that cleans the air and removes many of the germs and bacteria from the building.

“The motivation to install this system was driven by COVID, but there are other benefits, too,” he said. “Systems like this provide a better environment for people with asthma and other health concerns.”

 

Spring of Hope

The arrival of spring and increased numbers of people receiving COVID vaccines gives all the construction managers we spoke to a sense of optimism about life and getting their projects done.

At press time, asphalt plants in the area had begun to open. Because the plants close for the winter, municipalities will not allow road construction because there is no access to repave the roads. So the plant openings are great news for companies like Raymaakers, which plans its water- and sewer-line projects around those openings.

Other managers look forward to a time when they do not have to socially distance their crews and wear masks all day.

“Masks are another nuisance to deal with,” Pelletier said. “If we can start to get distancing and masks behind us, it will speed things up on the job site.”

As part of planning for future business, Bradbury has begun to ask some fundamental questions about what lies beyond the horizon. “Where is the growth potential going to be as we come out of COVID, and which industries will still want to build and have the money to build?”

As he considers the types of industries that are prevalent in Western Mass. and Northern Conn., such as aerospace and manufacturing, he wonders if government spending will still drive those industries. He has also given some thought to the insurance industry.

“Typically, there has been a huge demand for office space for the insurance industry, and how they address that moving forward is a big question mark coming out of COVID.”

As the insurance industry reconsiders its needs, Bradbury added, there has been a sharp decline in demand for all office space. “We are definitely not building more office space anytime soon.”

But his and other firms are building — and that’s good news after a year of uncertainty and a pandemic that hasn’t yet gone away.

Construction

Starts and Stops

Total construction starts fell 2% nationally in February to a seasonally adjusted annual rate of $797.3 billion, according to the latest report from Dodge Data & Analytics. Non-building construction starts posted a solid gain after rebounding from a weak January; however, residential and non-residential building starts declined, leading to a pullback in overall activity.

“With spring just around the corner, hope is building for a strong economic recovery fueled by the growing number of vaccinated Americans,” said Richard Branch, chief economist for Dodge Data & Analytics. “But the construction sector will be hard-pressed to take advantage of this resurgence as rapidly escalating materials prices and a supply overhang across many building sectors weighs on starts through the first half of the year.”

Non-building construction starts gained a robust 20% in February to a seasonally adjusted annual rate of $200.3 billion. The miscellaneous non-building sector (largely pipelines and site work) surged 76%, while environmental public works increased 26%, and highway and bridge starts moved 11% higher. By contrast, utility and gas plant starts lost 17% in February.

For the 12 months ending February 2021, total non-building starts were 13% lower than the 12 months ending February 2020. Highway and bridge starts were 4% higher on a 12-month rolling-sum basis, while environmental public works were up 1%. Miscellaneous non-building fell 26%, and utility and gas plant starts were down 37% for the 12 months ending February 2021.

The largest non-building projects to break ground in February were the $2.1 billion Line 3 Replacement Program, a 337-mile pipeline in Minnesota; the $1.2 billion Red River Water Supply Project in North Dakota, and the $950 million New England Clean Energy Connect Power Line in Maine.

Non-residential building starts fell 7% in February to a seasonally adjusted annual rate of $208.1 billion. Institutional starts dropped 8% during the month despite a strong pickup in healthcare. Warehouse starts fell back during the month following a robust January, offsetting gains in office and hotel starts, and dragging down the overall commercial sector by 8%.

For the 12 months ending February 2021, non-residential building starts dropped 28% compared to the 12 months ending February 2020. Commercial starts declined 30%, institutional starts were down 19%, and manufacturing starts slid 58% in the 12 months ending February 2021.

The largest non-residential building projects to break ground in February were Ohio State University’s $1.2 billion Wexner Inpatient Hospital Tower in Columbus; ApiJect Systems’ $785 million Gigafactory in Durham, N.C.; and Sterling EdgeCore’s $450 million data center in Sterling, Va.

Residential building starts slipped 7% in February to a seasonally adjusted annual rate of $388.9 billion. Both single-family and multi-family starts fell during the month, with each losing 7%.

For the 12 months ending February 2021, total residential starts were 4% higher than the 12 months ending February 2020. Single-family starts gained 12%, while multi-family starts were down 15% on a 12-month sum basis.

The largest multi-family structures to break ground in February were Bronx Point’s $349 million mixed-use development in the Bronx, N.Y.; the $215 million Broadway Block mixed-use building in Long Beach, Calif.; and the $200 million GoBroome mixed-use building in Manhattan, N.Y.

Regionally, February’s starts fell lower in the South Central and West regions but moved higher in the Midwest, Northeast, and South Atlantic Regions.

Earlier this month, Dodge Data & Analytics released its Dodge Momentum Index, which rose 7.1% in February. The Momentum Index is a monthly measure of the first (or initial) report for non-residential building projects in planning, which have been shown to lead construction spending for non-residential buildings by a full year. The institutional component of the Momentum Index jumped 26.3% during the month, while the commercial component was essentially flat.

February’s Momentum Index marked the highest levels in nearly three years as a result of a surge in large projects that entered planning. It remains to be seen if this level of activity, especially in the institutional sector, is sustainable given the tenuous economic recovery and rising material prices. Institutional planning projects in February were concentrated in large hospitals and labs, while commercial planning projects primarily included data centers, warehouses, and office projects. Compared to a year ago, the overall Momentum Index was up 9.2%; the commercial component was 15.2% higher, while the institutional component was down 3.3%.

Special Coverage The Cannabis Industry

Natural Resources

Tim Van Epps

Tim Van Epps with some of the ‘mother plants’ growing indoors at Heritage CBD’s Northampton facility.

Tim Van Epps volunteers with an organization called Fairways for Freedom, which helps combat-injured vets assimilate back into society through holistic initiatives and golf, teaching them the game and sponsoring trips to great courses around the world.

That’s where Van Epps, president of the Sandri Companies, first saw the benefits of cannabidoil, or CBD, a chemical compound made from the hemp part of the cannabis plant.

“I saw veterans who were taking 30 different pills a day, and a lot of these veterans are just using CBD now, and that’s it,” he told BusinessWest. “I saw 25 guys who were doctor-prescribed drug addicts, and now they’re on CBD, and their lives have changed dramatically. I saw what this could do. I saw what it did for one of my older brother’s sons, and for folks with stage-4 cancer. I’ve watched with my own two eyes what it’s done for a lot of people who had a lot of problems.”

He’s done much more than observe, however, launching a company called Heritage CBD almost three years ago with Sarah McLaughlin, a nutritionist and registered sports dietitian who had built a whole-foods company called Sun Valley Bars, sold it to Nature’s Bounty, and was looking for a new challenge in the natural-products world.

“We took the idea to start a hemp/CBD company in the carriage house on my property,” Van Epps said, and soon after moved to a 17,000-square-foot property on nearby Industrial Drive in Northampton, where the company now works with well over a dozen farms that grow hemp, which is processed into a mulch-like substance called biomass, then processed into the line of oils, lotions, tinctures, gummies, and other products Heritage sells today.

“We wanted to do everything, soup to nuts — or seed to sale,” he explained, but emphasized the company’s relationship with local farmers as a critical component to his vision.

Heritage CBD founders

From left, Heritage CBD founders Tim Van Epps and Sarah McLaughlin and President Jake Goodyear.

“Many have been hurt financially over the past 10 years, and for many, the next generation doesn’t want to go into the business, so farms out here are struggling,” he said. “We saw hemp as a value-added cash crop we could introduce to the farming community. This was all about jobs, first and foremost — creating jobs in Western Massachusetts.”

Michael Lupario’s vision was multi-faceted as well. With a degree in environmental science from UMass Amherst, he’s long been passionate about soil sciences and promoting cleaner, more sustainable ways to farm.

Meanwhile, his interest in plant-based medicine goes back to high school, when he learned to forage medicinal plants and experimented with making teas and oils. As president of Western MA Hemp, he now combines his desire to farm with the opportunity to bring plant-based medicine to a broader audience.

“My company’s focus has always been intertwining cannabis back to the larger pharmacopia that is herbal medicine — to not only show the efficacy of cannabis, but get back to this broader realm of plant-based healing,” Lupario explained. “There’s a lot of misinformation and confusion out there about hemp and CBD and cannabis, and we want to bring it to people and explain what we do and how it’s done.”

“There’s a lot of misinformation and confusion out there about hemp and CBD and cannabis, and we want to bring it to people and explain what we do and how it’s done.”

Like Van Epps, he’s seen plenty of people use CBD to relieve pain, anxiety, restlessness, and other conditions — some of the same issues for which medicinal marijuana is often used, but without the psychoactive ingredient THC (the stuff that gets users high), which is present in only the barest sense in CBD.

“I find a certain set of consumers are looking for that psychoactive side; that’s appealing for them. For others, it deters them from cannabis. Some can integrate it into their lifestyle with no problems, but others may be drug-tested on the job.”

Michael Lupario

Michael Lupario

Whether seeking out marijuana or CBD for chronic injuries or any number of other conditions, in many cases, “conventional medicine is not working, and they’re looking for something new — they’re willing to try anything,” Lupario said. “They just want to feel better.”

While providing products that many customers swear by — although the products themselves, because they’re not FDA-approved, are not allowed to make specific medical claims — companies like Heritage CBD and Western MA Hemp have set down roots (literally and figuratively) in a field that’s still rapidly changing, in ways both regulatory and otherwise.

 

Overcoming the Stigma

Jake Goodyear, who ran the Renewable Energy division at Sandri before moving into the role of Heritage CBD president, said it wasn’t initially a move he wanted to make.

“I was a skeptic,” he told BusinessWest. “I’d been brainwashed into the stigma around cannabis and marijuana. It took me a while just to get my head around the history of the plant — and then I got mad that my point of view was so twisted on this subject because of what I had been told my whole life. When I got over that, I realized there was a huge opportunity here, and there really was nothing negative about hemp and CBD, and there are a lot of positives.”

One of the first challenges was regulatory, as the federal government still listed hemp and CBD as a Schedule 1 drug, so Heritage was unable to access a bank account or merchant services for credit-card payments. That changed with the 2018 Farm Bill, though THC-rich cannabis remains federally illegal as a Schedule 1 drug. Still, the state has offered its own unique series of barriers.

“Massachusetts policy gave us a license to grow hemp and process it into specific products like tinctures and gummies and soft-gel capsules,” Goodyear said, “but there was no regulatory pathway to sell them to market.”

For that reason, product sales at both Heritage and Western MA Hemp are largely online. Both companies emphasize multiple layers of third-party testing to ensure the products are clean, free of pesticides and toxins, and contain the ratios of ingredients they claim.

“I had a cannabis background — I was a fan of cannabis, both medical and recreational; it helped me a lot,” said Lupario, who launched his business a couple years ago with mentor and arborist Jim Sweeney. “He took me under his wing and provided some finances to allow me to put to use what skills and knowledge I had.”

The company also wholesales hemp flower and biomass to various processors for industrial uses; in fact, that’s the more lucrative side of the business while Lupario continues to grow his line of wellness products.

“It takes time to build a brand. We knew we wouldn’t be able to make our operating costs with what we made from these products … so what we don’t use in our products goes into the wholesale line,” he explained. “Because we grow our own material, we can keep margins down, have competitive pricing, and still create a really high-grade product.”

Trays of CBD-infused gummies

Trays of CBD-infused gummies are ready for packaging at the Heritage plant.

On a similar note, on a tour of the Heritage plant, Van Epps paused in the room where gummies are being infused with CBD to point out a rack of the gummy substance in bulk sizes without any CBD, which Heritage sells to cannabis companies that infuse it with THC, which he is legally unable to handle.

“Right now, this is what pays the bills, our bulk formulation,” he said. “We could morph into a candy company.”

McLaughlin said she brings a strong science background to her work at Heritage, citing the six different tests — checking for everything from pesticides to potency — each product has to pass along the production journey. “We wanted everything evidence-based. We really came at this trying to make the highest-quality product possible.

“It seems like a bit of a stretch from being a dietitian, but if you think about what a dietitian does, we study the effects of what you consume and how it affects your body, and this is no different,” she went on. “I saw all the potential and all the different areas CBD could help. And since we started, more and more research has come out about the positive effects of CBD. It’s exciting work, with incredible potential to help people.”

Van Epps said a growing public awareness about the benefits of CBD helps boost sales, but competition is fierce, too. “There are so many brands. What brands do you trust? We’re seeing lot of inferior brands that tried to get rich quick fall by the wayside.”

The key for Heritage, he added, is to stand out with quality products that are tested in transparent ways.

“We had a blank slate at first,” McLaughin said. “Anything known about formulating came from the black market, and you almost had to scrap it all and start over and understand there was most likely a better way of doing it.”

 

Altered States

More industry standardization would be another ‘better way’ to do business, said all those we spoke with. For instance, while Massachusetts limits THC levels in CBD to 0.3%, Vermont allows 1%. “In a perfect world, you’d standardize the rules across the country,” Van Epps said.

Added Lupario, “you’ve got to be able to pivot and deal with all the upheaval of laws and everything that comes with the ever-changing dynamics of the agriculture industry. You’re going to see that for the next couple of years until it settles down a bit; that will come with more federal oversight. We’re getting there.”

Van Epps said it’s been a tough year for some in the hemp industry, especially for farms that planted too much, too soon. “They thought it was a get-rich-quick scheme, and unfortunately, a lot of farmers got hurt by that. Farmers who didn’t bite off more than they could chew will tell you it’s a good business, worth investing in, and they see long-term growth. It’s exciting.”

Goodyear said less than 25% of American adults have tried a CBD product, so there’s plenty of room for growth; in fact, he sees the potential for Heritage to expand from about 20 employee today to 150 in a couple of years.

The trend toward greater public awareness is certainly good for business, Lupario said, but it also boosts his mission to give cannabis and hemp a stronger connection to natural, plant-based wellness.

“It’s another plant within the herbal pharmacopeia,” he said — one whose story continues to blossom in Massachusetts and beyond.

 

Joseph Bednar can be reached at [email protected]

Cover Story

The Plot Thickens

Even in a normal year, Feb. 29 is an odd date to open a business.

“We really won’t have an anniversary for another four years,” Thomas Winstanley, director of Marketing at Theory Wellness, joked about his company’s third cannabis dispensary, which opened in Chicopee on that leap-year date almost six months ago.

Of course, 2020 is no normal year, and a couple weeks after opening, Theory closed its doors as part of a statewide shutdown of ‘non-essential’ businesses due to the COVID-19 pandemic.

“It’s been an interesting six months, to say the least,” Winstanley told BusinessWest. “We had a brand-new team in place, the final approvals had come through, and that team was just getting their sea legs on the retail side when the shutdown came.”

When dispensaries were eventually allowed to open, it was only for medical marijuana at first, while the vast majority of business — recreational sales — remained shut down.

And now?

“It’s dynamite,” he said. “A lot of money is coming back to the market, and our team hasn’t missed a step since coming back — and we’ve seen the team continue to grow. We’ve come back a lot stronger.”

The line that forms outside the shop each morning testifies to demand that certainly didn’t go away during the weeks when product was unavailable.

It’s a story taking shape across the state, with cannabis businesses continuing to launch and grow even as the pandemic still rages and the economy nowhere near returning to its 2019 condition. Take Holyoke, for example — a city whose leaders fully embraced the cannabis trade from the start, and where two more businesses opened in recent weeks, Canna Provisions on Dwight Street and Boston Bud Co. on Sargeant Street.

“It’s been an interesting six months, to say the least. We had a brand-new team in place, the final approvals had come through, and that team was just getting their sea legs on the retail side when the shutdown came.”

“I’m not going to lie — I was very nervous as the economy took a downturn,” said Marcos Marrero, Holyoke’s director of Planning & Economic Development, about the cannabis hub city leaders have worked to cultivate, one that now includes a handful of cultivation, production, and retail businesses, with more on the way. “Oddly enough, we haven’t seen a significant stoppage in stores’ actions at this point. I can only speculate why that is.”

One reason, quite simply, is that some sectors do better than others during recessions. Marrero compared it to when prohibition was lifted during the Great Depression, and smart entrepreneurs immediately saw the long-term (and pent-up) demand for alcohol, even during tough economic times.

Theory Wellness in Chicopee

Theory Wellness in Chicopee closed in March just a few weeks after it opened, but customer traffic has been solid this summer.

“Today, we have a very robust alcoholic-beverage industry,” he said, reflecting demand that has never subsided over the decades. “So I don’t think there’s anything remarkably special about cannabis in that regard.”

Another apt comparison is the financial crisis of 2008, when the fundamentals of the economy were coming apart — a different story than in 2020. “Now, the economy is tanking because there’s no consumption, and the labor force is contracting.”

Those investing in the cannabis sector, however, are looking beyond that; they know demand for these products is likely to remain high — no pun intended — in the long term.

“This may be as good an investment as anything,” Marrero said. “We’re still seeing investments going forward at the local level; it’s a very positive outlook, even during the pandemic.”

Creating a Pipeline

The proliferation of cannabis businesses across the region, with the promise of more to come, means jobs, and that potential isn’t lost on area colleges and universities.

First, Holyoke Community College (HCC) and the Cannabis Community Care and Research Network (C3RN) announced the creation of the Cannabis Education Center last fall, to provide education, training, and other business resources to individuals in the region who want to work in the cannabis industry.

HCC and C3RN are designated training partners through the Massachusetts Cannabis Control Commission’s (CCC) Social Equity Vendor Training program, which was designed to provide priority access, training, and technical assistance to populations and communities that, traditionally, have been negatively impacted by the drug war.

Soon after that, American International College (AIC) dipped a toe into the sector by launching a three-course certificate program called Micro-Emerging Markets: Cannabis, offering an overview of cannabis entrepreneurship, business operations, and law and ethics.

This fall, AIC is launching a master’s program in Cannabis Science and Commerce — with a one-year online program or a two-year hybrid model — that takes a deeper dive into preparing students to work in this field, said Jennifer Barry, AIC’s director of Continuing Studies and Special Projects.

She cited some striking statistics — 15% job growth in the legal cannabis industry in 2019, $404 million in legal cannabis sales in Massachusetts that same year, and 245,000 full-time-equivalent jobs created nationally by early 2020 — to explain why the program is necessary.

JENNIFER BARRY

Jennifer Barry

“We want to provide opportunities to connect students with an industry where there’s a lot of room for employment growth. The idea is to connect students with experts in the industry.”

“We want to provide opportunities to connect students with an industry where there’s a lot of room for employment growth,” Barry told BusinessWest. “The idea is to connect students with experts in the industry.”

To that end, the program will be taught collaboratively by faculty members, cannabis-industry professionals, and occasionally guest lecturers, either in person or by video.

“We’re taking the academic rigor of an AIC course normally taught by faculty members and keeping it current and relevant by pulling in industry experts,” she explained, noting that classes cover topics from law and policy to the chemistry of cannabis.

“It’s hard for people who work full-time in the cannabis industry, which is such a demanding field, to make time,” she added, but quickly noted that they recognize the need to create a pipeline of talent in the region so the sector can continue to grow and avoid a skills gap. In that way, she noted, this master’s program is a win-win — helping graduates access a solid career while helping area businesses grow.

“That’s the real benefit of our program,” Barry continued, noting that it’s the first program in the U.S. that blends business, science, and the legal aspects of the trade. “What we’ve found, speaking with cannabis professionals, is you have to understand the chemical components of the plant to be prepared to sell it, package it, speak about it intelligently in the field.

“That’s why we have a chemistry course, and one that talks about cannabis from seed to sale, how it makes it through the pipeline, giving students a broad understanding of the process. Then, through individual courses, they can dig through each individual element.”

The goal, again, is to support both opportunities for job seekers and business growth, and Marrero sees elements of both in Holyoke’s enthusiastic adoption of the cannabis sector. He said Holyoke officials don’t “game the system” with host-community agreements, trying to squeeze as much from license applicants as possible. Instead, it’s a standard template that can be approved in a day.

“The CCC does its due diligence on businesses; we regulate things like land use and how businesses are integrated into the community,” he said of the city’s approach to license approval. “For us, it’s been about how to create jobs, how to help businesses get into the cannabis industry.

“It’s about creating a cluster,” he went on. “We’ve made a concerted effort to make it smooth, to work with industries to create a cluster. What it gets us is more than the sum of its parts; it’s how many jobs are created by these companies — and we have a dozen already special-permitted.”

Those services run the gamut from plumbers and pipefitters to security, delivery services, cleaning services, lawyers, and more.

“Any new company produces opportunities for other types of other businesses, and those businesses have to employ people. It’s that economic contagion that’s also attractive,” Marrero explained — one of the few times one might hear the word ‘contagion’ these days in a positive light.

A Social Contract

Winstanley said Theory’s experience setting up shop in Chicopee went as smoothly as it could have, considering the built-in rigor of the process, especially at the state level.

“We’ve always known there were a lot of policies in place at the state level and the local level. It’s a long process,” he told BusinessWest. “But we want to make sure we get it right and operate in ways that are beneficial to the local population, and we want to make sure to set an example for what legal cannabis should look like in this day and age.”

One way Theory — which also has locations in Great Barrington and Bridgewater, and employs about 200 people in its cultivation, manufacturing, and retail divisions — does that is through the kind of social-equity program the CCC made a point of emphasizing.

It recently accepted applications from ‘economic-empowerment’ applicants as designated by the commission and will select a qualified applicant to partner with, guiding and mentoring the entrepreneur through the process of opening their doors, from financial assistance to professional services to zoning and regulatory hurdles.

That financial commitment will total up to $250,000, $100,000 of which will be offered in the form of 0% interest debt financing, with $150,000 worth of initial cannabis inventory to be offered on consignment, providing a boost of capital to help get the operation off the ground. Theory will also connect the successful applicant with professional services like banking, legal, insurance, and HR.

“This is something we felt really strongly about,” Winstanley said. “We felt it’s the future of the industry, to make sure everyone has an opportunity to get into it.”

Barry is well aware of the social-equity component as well, saying it aligns with AIC’s mission to provide access and opportunity to a diverse student population.

“Each course will have a social-equity component; students will get exposure to the business through the lens of social equity, and by the end of the program, they’ll be entrenched in how we can potentially undo some of the disproportionate harm done in the past, while creating a workforce that meets the needs of the industry.”

Because, again, the opportunities appear to be increasing.

“They’ll build a network of professionals they can use as resources as they create their careers, whether they start out working for someone else or start their own business,” she added. “They’ll know it’s not limited.”

That’s true in Holyoke right now, where the next site to open will likely be True Leaf, located near the Holyoke Dam, Marrero said. “They’re a pretty sizable operation — they would be the biggest in Holyoke by square footage, and they’re near completion of construction.”

Winstanley said Theory learned a lot from its original store, in Great Barrington, the first dispensary to open in the Berkshires. Now, competition is springing up across Western Mass., but he says the company still has plenty of room to grow.

“It’s not only the growth of our company, but the significant tax revenue that’s definitely needed,” he said. “Right now, we’re just really happy to see cannabis is back, and hopefully we can continue to contribute, and the industry will provide some much-needed life in these strange times.”

Joseph Bednar can be reached at [email protected]

Features

An Uphill Battle

By Mary Bonzagni

Federal trademark registration is viewed as an attractive form of property-rights protection for most industries. The benefits of such a registration are numerous.

A federal trademark registration serves to recast what would normally be localized common-law trademark rights into nationwide trademark rights. It provides the owner with the right to use the ® designation, to enforce the owner’s rights in federal court, and to file the trademark registration with U.S. Customs to block infringing imports. A federal registration also provides a basis for registering the trademark in foreign countries and jurisdictions.

Unfortunately, members of the cannabis industry have faced an uphill battle when trying to protect their brands on the federal level.

This article will focus on strategies for protecting trademarks used on CBD products, which may be grouped into two categories: marijuana-derived CBD products and hemp-derived CBD products.

Mary Bonzagni

Mary Bonzagni

“Unfortunately, members of the cannabis industry have faced an uphill battle when trying to protect their brands on the federal level.”

Marijuana is still treated as a controlled substance and is illegal under the Controlled Substances Act (CSA), regardless of its legality under certain state laws. As such, trademarks for marijuana-derived CBD products cannot be federally registered. The U.S. Patent and Trademark Office (USPTO) has issued trademarks for goods and services that are indirectly related to marijuana, but the closer the description of goods and services is to the sale or distribution of marijuana, the less likely it is that the UPSTO will allow the application.

Hemp was previously regulated as an illegal substance under the CSA. It was removed as an illegal substance under the Agricultural Improvement Act of 2018, also known as the Farm Act, which federally legalized hemp and hemp-derived products that contain no more than 0.3% THC (by dry weight). The 2018 Farm Act legalized CBD derived from hemp not from marijuana, so, at least for now, the federal government will view the source of the CBD as decisive in determining its legality under federal law.

To recap, marijuana-derived CBD products are illegal under federal law, and, thus, trademarks for such products cannot be federally registered. On the other hand, products infused with CBD derived from hemp, which have a low-THC content, are now legal under federal law, and the trademarks under which they are used are capable of federal registration. Being capable of federal registration, however, does not guarantee registration.

The U.S. Patent and Trademark Office’s current policy is to refuse trademarks for foods, beverages, dietary supplements, and pet treats containing hemp-derived CBD that have not been approved by the Food and Drug Administration (FDA). These goods raise lawful-use issues under the Federal Food Drug and Cosmetic Act (FDCA). Trademarks for the following goods, however, can be federally registered:

• Hemp-derived CBD products that are not consumed (e.g. salves, ointments, and skin oils) which contain less than 0.3% THC on a dry-weight basis; and

• ‘Generally recognized as safe’ (GRAS) products (e.g. hulled hemp seeds, hemp seed protein powder, and hemp seed oil). On Dec. 20, 2018, the same day the 2018 Farm Act took effect, the FDA approved the sale of hulled hemp seeds, hemp seed protein powder, and hemp seed oil, and the use of these products in human food. Therefore, trademarks for these hemp products are eligible for federal registration at the USPTO.

In addition, trademarks for hemp advocacy groups and trade associations, and for services such as consulting and advertising services and the like, can also be federally registered. It is legal for advocacy groups and trade associations to educate the public and advocate for changes in hemp and marijuana laws. Thus, the USPTO is willing to issue trademarks to those groups and to others providing services to the legal hemp industry.

Let’s assume for purposes of this article that your trademark is being used on goods that do not fall within one of the above categories, and thus your trademark cannot be federally registered. Here are some options for proceeding.

Federal Registration for Permissible Ancillary Products and/or Services

The first area to explore is whether you also sell goods or offer services that fall outside the restrictions of the CSA or FDCA. For example, do you sell goods without CBD as an ingredient, or provide a website featuring blogs and publications (e.g. articles, brochures, etc.) advocating for changes in hemp and marijuana laws, which constitute lawful goods or services? By obtaining a federal trademark registration in relation to any such lawful goods and services you provide (i.e. registering around the edges of the CSA or FDCA), you may still be able to protect your brand.

Alternatives to Federal Registration

Whether or not you pursue federal registration, you should also consider proceeding within the common-law and state-law frameworks so that you can protect your mark within your geographical trading area. You may also consider copyright protection to protect your logo or design trademark.

Common-law Trademark Rights

By using your trademark in commerce on select goods and services, you will develop common-law rights in that mark. Common-law rights are based solely on use of the mark in commerce within a particular geographic area. Your common-law rights may be used to stop infringers.

State Registrations

Another option to consider is seeking one or more state registrations for your trademark in states that recognize the legality of your goods or services. While state registrations confer the benefits of registration only within the boundaries of that state, registering on the state level can be an effective way to protect your mark and to prevent third parties from using the same or confusingly similar mark on the same or similar goods or services in that state.

Copyright Registrations

Copyright protection may constitute an alternative route to protecting your logos or design trademarks, provided they contain original authorship and are not just familiar shapes, symbols, or designs. Copyright is a form of protection provided under U.S. law to ‘original works of authorship,’ once fixed in a tangible form. A copyright registration establishes a public record of a copyright claim as well as offering several other statutory advantages.

In Conclusion

CBD-based businesses should start using their trademarks on their goods and services as soon as possible in order to establish common-law trademark rights, seek federal registration for trademark uses that are legal under the CSA and do not raise lawful-use issues under the FDCA, seek state registrations in states where trademark use occurs and where cannabis use is legal, and seek copyright registrations for eligible logo and design trademarks.

Please contact us for further information or to set up an initial consultation. We look forward to assisting you in protecting your valuable IP.Please contact us for further information or to set up an initial consultation. We look forward to assisting you in protecting your valuable IP.Please contact us for further information or to set up an initial consultation. We look forward to assisting you in protecting your valuable IP.

Mary Bonzagni is the IP partner with the Springfield-based law firm Bulkley Richardson; (413) 272-6200.

Law

What’s Next for the Cannabis Industry?

The cannabis industry is off to a fast and quite intriguing start in the Bay State, and two new categories of license have particular potential to move this sector in new directions: one for home delivery of cannabis products, and another for social-consumption establishments, or cannabis cafés.

By Isaac C. Fleisher, Esq.

We are nearly three years into the Commonwealth’s experiment with recreational cannabis, and the industry is finally moving beyond an amusing novelty.

The Cannabis Control Commission (CCC) reports that retail sales in 2019 alone have already exceeded $190 million, and this is just the tip of the iceberg. To date, the CCC has issued only 72 final licenses for marijuana establishments, but there are currently another 400 license applications that are pending or have received provisional approval.

Isaac C. Fleisher

This all means that, over the next few years, the Massachusetts cannabis industry is set to grow at an unprecedented rate. What we don’t know is how this growth will change and shape the industry.

Much of the excitement and rhetoric around legalization has focused on the potential to create new business and employment opportunities for communities that have been disproportionately harmed by prohibition and for local entrepreneurs. Lawmakers attempted to pursue these goals (with mixed success) through the design of the original regulations, with provisions for local control by cities and towns, special categories for equity applicants, and caps on the number of licenses that a single business could control.

The CCC has recently been grappling with these issues once again as it revises its regulations.

On July 2, after months of policy discussions and hearings, the CCC released new draft regulations for both medical and recreational marijuana, which will be open for public comment until Aug. 16. While most casual observers will not find the draft regulations to be scintillating reading material, there are a number of interesting new provisions that can tell us a lot about what the future of Massachusetts’ cannabis industry could look like.

Two new categories of license have particular potential to move the cannabis industry in new directions; one for home delivery of cannabis products, and another for social-consumption establishments (i.e., cannabis cafés).

Social Consumption

A social-consumption license would authorize businesses to sell cannabis products to customers for on-site consumption. Just think of your neighborhood bar, but it serves cannabis instead of alcohol. Under the proposed regulations, cannabis could be consumed at a social-consumption establishment in almost any form, except for combustible (i.e. smoking it the old-fashioned way), but even that possibility is left open by a provision for an outdoor smoking waiver.

Cannabis edibles would have to be prepackaged and shelf-stable, but there is no prohibition on serving prepared food on site, so long as the food isn’t directly infused with marijuana. That means we could soon be seeing cannabis restaurants that offer gourmet food alongside gourmet pot.

“There is no prohibition on serving prepared food on site, so long as the food isn’t directly infused with marijuana. That means we could soon be seeing cannabis restaurants that offer gourmet food alongside gourmet pot.”

The CCC is taking an incremental approach to this new class of license by including provisions for a social-consumption pilot program that would be limited to only 12 municipalities. Towns that participated in a working group on social consumption — including North Adams, Amherst, Springfield, Provincetown, and Somerville — would be among those able to opt into the pilot program. Licenses would initially be available only to applicants that were already licensed as a ‘microbusiness’ or a ‘craft marijuana cooperative,’ or applicants certified by the CCC as an ‘economic empowerment’ applicant or ‘social equity’ applicant. The pilot program is an interesting attempt to address the demand for new cannabis markets, while still preserving access for small, local, and minority-owned businesses.

Home Delivery

A licensed ‘delivery-only retailer’ could deliver marijuana products directly to a customer’s residence. Advocates for home delivery have long touted its potential to level the playing field between large, well-funded businesses and the small, local entrepreneurs the CCC seeks to attract.

In theory, a delivery-only licensee wouldn’t need much more than a vehicle in order to begin operating. However, the draft regulations include a number of provisions that could create substantial barriers to entry for small-time operators. Home-delivery orders would still need to go through a traditional brick-and-mortar retailer, who would presumably not be particularly interested in providing their product to competitors at wholesale prices.

Additionally, the draft regulations prohibit deliveries to any residence in a town that has banned brick-and-mortar retailers.

Numerous security provisions included in the draft regulations create further costly (and controversial) requirements for delivery-only retailers. Each delivery vehicle would need multiple surveillance cameras, and delivery agents would need to wear body cameras to record the entire delivery, including the customer. This has predictably resulted in a number of concerns about privacy and regulatory overreach.

At a recent CCC meeting, Commissioner Shaleen Title pointed out that, “to the extent that home delivery to [medical-marijuana] patients has been ongoing, there may already be security in place that goes above and beyond our regulations, and to my knowledge there haven’t been incidents … That seems to be an argument that you should not be putting in additional burdens and regulations.”

While body cameras got the most attention at the CCC’s meetings, one provision in the proposed home delivery regulations with the potential to be far more consequential is the option to use a “third-party technology platform provider” to facilitate the ordering process. In simpler terms, we could soon be saying “there’s an app for that.”

While there is still a thorny tangle of federal and state laws preventing a true e-commerce for cannabis, it’s not hard to imagine startups racing to be the first ‘Uber for weed.’ This would certainly make the consumer experience even more convenient, but it would mean yet another blow to the delivery only retailer’s profit margin, and does not seem consistent with the goal of lowering the barrier to entry for small businesses.

Of course, excitement about new markets comes with the important caveat that the rules still need to be finalized and, in some cases, there would need to be a corresponding change in state law. Nevertheless, it is encouraging to see that regulators are willing to consider new ideas for Massachusetts’ cannabis industry. The lines around the block at the first retailers have everybody seeing dollar signs, but with no statutory limits on the number of licenses that the CCC can issue, it is only a matter of time before supply exceeds demand.

In states that are further along in this process there is already evidence of a boom-bust cycle, as oversupply causes wholesale prices to plummet and smaller operators are forced out of the market. In Massachusetts, where the cannabis industry is still relatively nascent, there is still opportunity for regulators, consumers, activists, and entrepreneurs to play important roles in shaping the future of the industry.

Attorney Isaac C. Fleisher is an associate with Bacon Wilson, P.C., where his practice is focused on business and corporate law, with particular emphasis on the rapidly expanding cannabis industry. An accomplished transactional attorney, he has broad experience in all aspects of business representation, for legal matters ranging from mergers and acquisitions to business formation and financing; (413) 781-0560; [email protected].

Opinion

Editorial 1

A year ago — and, actually, long before that — this region was awash in speculation about what the gaming industry might bring to the region and what its broad impact might be.

The industry was new to the state, and there were questions. There was also excitement, some anxiety, no shortage of opinions, and plenty of hope. A year later, most of those emotions are still in evidence, and there remain many questions.

But in the meantime, another industry has emerged that apparently has the potential to have far more reach and far more impact: cannabis.

As several different stories in this issue reveal, the cannabis industry has certainly put down roots in the four counties of Western Mass., and while it’s still too early to know for sure, it appears to have far more potential to change the landscape — in all kinds of ways — than gaming.

Why? Because this is a far-reaching industry with myriad moving parts and potential business opportunities — from cultivation to retail to real estate to, yes, a new publication (see page 6). Also, it is seemingly far more democratic.

Indeed, while the gaming industry is reserved for large, as in very large, players investing $1 billion or more, the cannabis sector offers opportunities for individuals and small groups of investors — not that getting into this business, let alone succeeding in it, would be considered easy in any way, shape, or form.

And, as Michael Kusek, founder of that publication, A Different Leaf, points out, this is one of the few industries in this state where the opportunities are in Central and Western Mass., not Boston and within the Route 128 beltway. That’s because the majority of cities and towns in this region are welcoming of this industry, while most of those surrounding Boston are not.

When Easthampton Mayor Nicolle LaChapelle said her community was “head over heels in love, I would think, with cannabis, and I don’t think that’s overstating it,” she wasn’t just speaking for many of her colleagues — remember, Holyoke’s mayor, Alex Morse, joked to a television reporter that his goal was to rename the city the ‘Rolling Paper City’ — but she was speaking about how this sector can be a real game changer in terms of everything from jobs to tax revenue to foot traffic on Main Street.

The cannabis industry is not an easy one to follow. As noted, there are a lot of moving parts, and the scene changes every month, if not every week, as new locations open, more host-community agreements are forged, and more real estate is acquired for the purpose of establishing businesses in this sector.

But as hard as it is to keep track of all that is going on, it’s a worthy endeavor, because this industry certainly bears watching. No one really knows how things will shake out as more and more locations are opened and, eventually, more states decide to follow the Bay State’s lead.

But it seems almost certain that this sector will bring more impactful change, from a business perspective, than anything this region has seen in decades.

Architecture Construction

Designs on Growth

As one local architect noted, we’re far enough away from the last recession to start worrying about the next one — and recessions tend to hit this sector particularly hard. Still, despite mixed signals in the long-term economic picture nationally, work remains steady locally, with municipalities, colleges, and businesses of all kinds continuing to invest in capital projects. Even if storm clouds do appear down the road, the 2019 outlook in architecture seems bright.

Curtis Edgin put it in simple terms when asked how 2019 is shaping up in the architecture sector.

“We’re busy; I can’t complain,” he told BusinessWest. Those five words sum up a strong outlook in an industry that tends to be a leading indicator for the economy as a whole — when things slow down, construction, finance, and other areas tend to follow — and is currently trending up, or at least holding steady.

“We’re far from the last recession — maybe far enough to worry about the next one,” said Edgin, a principal with Caolo & Bieniek Associates (CBA) in Chicopee. “But I don’t see that coming yet, looking at our workload.”

The American Institute of Architects (AIA) reports a similar outlook, with architecture firm billings nationally strengthening to a level not seen in the previous 12 months. Indicators of work in the pipeline, including inquiries into new projects and the value of new design contracts, also improved in January.

“The government shutdown affected architecture firms but doesn’t appear to have created a slowdown in the profession,” AIA Chief Economist Kermit Baker noted. “While AIA did hear from a few firms that were experiencing significant cash-flow issues due to the shutdown, the data suggests that the majority of firms had no long-term impact.”

Broken down by region, the Northeast is performing better than the West, but slightly trailing the South (which continues to rebuild from a rough 2018 hurricane season) and the Midwest. Nationally, billings softened slightly in February from the January pace, but remain strong in the big-picture sense, Baker said. “Overall, business conditions at architecture firms across the country have remained generally healthy.”

Curtis Edgin says specializing in a range of diverse niches is a plus for any firm

Curtis Edgin says specializing in a range of diverse niches is a plus for any firm, serving as a buffer against a downturn in any one area.

Jonathan Salvon, a principal with Kuhn Riddle Architects in Amherst, reports strong business as well, especially in the education realm, traditionally a strength for the firm, with projects for UMass and a historic-renovation conversion project for Elms College.

“Then there’s a mix of multi-family housing and commercial projects,” he told BusinessWest. “We’ve got a new office building for Way Finders going up on the old Peter Pan site in Springfield, which is our biggest commercial project at the moment. And there’s a 36-unit, multi-family housing project going up on University Drive in Amherst.”

Caolo & Bieniek, known for its wide range of public projects, from schools to fire and police stations, has expanded its base of private projects since merging with Reinhardt Associates in 2017.

“It’s been kind of a good synergy. We’ve blended our strengths and their strengths,” Edgin said, noting that one example is the recently completed Baystate Health & Wellness Center on the Longmeadow-East Longmeadow line, as Reinhardt has a solid history in medical office buildings.

“E-commerce has been growing at about three times the rate of traditional brick-and-mortar sales. The slowdown in housing hasn’t helped, as new residential development often spurs new retail construction activity. Instead, larger shares of investment in these facilities is going to the renovation of existing buildings.”

Other recent CBA projects recently started or well underway include a senior center in West Boylston, a police station in Williamstown, a public-safety complex in Lenox, a renovation of Chicopee’s public-safety facility, a pre-K to grade-8 school in Easthampton, and some work with UMass Amherst, Westfield State University, and other colleges.

“There’s a good mix of private and public, and we seem to be doing a fair amount of work with human-services agencies,” Edgin added, noting that the firm just did a project for Guidewire in Chicopee, and Sunshine Village in the city has also been a consistent client. “We seem to have a bit going in that sector right now. We’re busy, and it’s a good mix all around.”

Strong Pace, but Red Flags

The AIA suggests that growth in architecture should continue at least through 2020, but a number of emerging red flags suggest a cautious outlook.

Spending on non-residential buildings nationally is projected to grow by 4.4% this year, paced by healthy gains in the industrial and institutional building sectors, it notes. For 2020, growth is projected to slow to 2.4%, with essentially no increase in spending on commercial facilities, but gains in the 3% range in the industrial and institutional categories.

“Still,” Baker said, “there is growing concern inside and outside of the industry that a broader economic downturn may be materializing over the next 12 to 24 months.”

Nationally, growth in gross domestic product is estimated to be close to 3% in 2019, while the job market continues to be healthy, with more than 2.6 million net new payroll jobs added in 2018, an improvement over 2017’s figure of just under 2.2 million. In fact, the national unemployment rate was below 4% for most of 2018. Consumer-sentiment levels remained strong, and the nation’s factories also were busy, with industrial output achieving its strongest growth in almost a decade.

Jonathan Salvon says one of his firm’s three ‘legs,’ residential work, has been impacted by a slowdown in single-family construction

Jonathan Salvon says one of his firm’s three ‘legs,’ residential work, has been impacted by a slowdown in single-family construction over the past decade, but a rising portfolio of multi-family projects has picked up the slack.

However, there are several signals that point to an emerging slowdown in the broader economy, and therefore in the construction sector, Baker noted. These include declines in leading economic indicators, weakness in some key sectors of the economy, and softness in the markets of major U.S. trading partners. “These signals may be temporary responses to negative short-term conditions, but historically they have preceded a more widespread downturn.”

Meanwhile, since dropping sharply during the Great Recession, housing starts have had a very slow recovery, the AIA notes, and Salvon can attest to that reality locally. But Kuhn Riddle has adjusted in other ways.

“We’ve always been a stool with three legs,” he said. “One-third is work for various colleges, charter schools, prep schools, secondary schools, and even some day cares — we run the whole gamut in education. The second third is residential work; in the past, before the 2009 recession, that was often single-family residences. That market has never really come back, at least for us. But we’ve been lucky to develop a new market in multi-family projects.”

The third leg is a variety of commercial projects, including office buildings, restaurants, and bank renovations, to name a few, Salvon said.

“Hopefully we all stay busy. But we do know it goes in cycles; we’ve been through plenty of slower times and a lot of boom times. But we’ve been very blessed. We’re pretty busy and hope to stay that way.”

Nationally, Baker sees design work on the commercial front as a bit of a mixed bag at the moment.

“Business investments often reflect what corporate leaders feel is the growth potential for their companies. Investment nationally in new plants and equipment saw healthy growth in 2017 and through the first half of 2018, but slowed significantly beginning in the third quarter of last year,” he noted. “Given the recent trends in business-confidence scores, investment is unlikely to accelerate anytime soon. Business confidence fell sharply through 2018, with the fourth quarter showing the lowest levels in six years.”

In the Bay State, the picture is equally muddy. The Business Confidence Index issued monthly by Associated Industries of Massachusetts (AIM) reported a gain in February after dropping in January to its lowest level in more than two years.

“Employers remain generally optimistic about a state economy that continues to run at full-employment levels and a U.S. economy that is projected to grow by 2.2% this year,” said Raymond Torto, Chair of AIM’s Board of Economic Advisors and a lecturer at the Harvard Graduate School of Design. “At the same time, the erosion of confidence among Massachusetts manufacturers during the past 12 months raises some concern about the long-term sustainability of the recovery.”

On a sector-by-sector basis, Baker reported, design work for retail facilities continues to suffer from the growth on online shopping.

“E-commerce has been growing at about three times the rate of traditional brick-and-mortar sales. The slowdown in housing hasn’t helped, as new residential development often spurs new retail construction activity,” he noted. “Instead, larger shares of investment in these facilities is going to the renovation of existing buildings.”

On the other hand, office projects represent the strongest commercial sector in construction right now, with 5% growth projected for this year and 1% in 2020. “This sector has benefited from strong job growth and the apparent bottoming out of the years-long decline in office space per employee,” Baker said. “Much of the increase has come from the booming technology sector, so the outlook is dependent on continued growth in this industry sector.”

Meanwhile, eds and meds — or education and healthcare, two pillars of the Western Mass. economy — represent very healthy sectors nationally for architects and general contractors. AIA projects 5.5% in the education sector this year and an additional 4% in 2020, and 4% growth in healthcare in 2019 followed by 3.6% in 2020. 

“We’re pretty diversified and active in a lot of different environments,” Edgin said. “It’s not just schools, not just police stations, not just fire stations, but a little bit of everything.” He cited the recent renovation of Polish National Credit Union’s Front Street branch in Chicopee, as well as a new Arrha Credit Union branch in West Springfield and a project with the Boys and Girls Club of West Springfield. “A lot of things take a while, so it’s that advance planning that keeps you busy a year or two from now.”

Leading Indicator

Baker reported that business conditions at U.S. architecture firms in 2018, as measured by AIA’s Architecture Billings Index (ABI), were essentially unchanged from 2017.

“Since the ABI has been shown to lead construction spending by an average of nine to 12 months, this would suggest that the growth in spending on non-residential buildings in 2019 should be close to the growth rate of 2018,” he noted. “Additionally, new design contracts coming into architecture firms grew at a healthy pace in 2018, underscoring the robust level of backlogs currently enjoyed by most firms.”

Meanwhile, Dodge Data & Analytics recently released its 2019 Dodge Construction Outlook, which predicted that total U.S. construction starts for 2019 will be $808 billion, staying essentially even with the $807 billion estimated for 2018.

“There are, of course, mounting headwinds affecting construction, namely rising interest rates and higher material costs, but for now these have been balanced by the stronger growth for the U.S. economy, some easing of bank lending standards, still-healthy market fundamentals for commercial real estate, and greater state financing for school construction and enhanced federal funding for public works,” said Robert Murray, chief economist for Dodge Data & Analytics.

Locally, both architects and builders are maintaining the same sort of cautious optimism, at least in the short term.

“Right now, it’s strong,” Edgin said. “We’ve increased our staffing.”

Finding talented staff remains a challenge, he said, because strong growth among architecture firms in general means stiff competition, and Greater Springfield isn’t always a top destination for young professionals in the field compared to, say, Boston or New York, where pay scales are higher (but, of course, so is the cost of living).

Salvon understands that reality as well, but said Kuhn Riddle has benefited from its location in downtown Amherst, where it has easy access to the UMass architecture program. “We’ve been a little spoiled — we’ve been privileged to get some employees out of that program over the last decade or so, and we’ve tried to make a nice work environment, so people been staying here.”

All things considered, he told BusinessWest, the outlook seems strong in architecture locally, and others agree.

“We’ve been able to build some good staff and a good team, so we’re happy about that,” Edgin said. “Hopefully we all stay busy. But we do know it goes in cycles; we’ve been through plenty of slower times and a lot of boom times. But we’ve been very blessed. We’re pretty busy and hope to stay that way.”

Joseph Bednar can be reached at [email protected]

Home Improvement

Total Transformations

With the economy chugging along, home-improvement businesses report solid activity over the past few years, with the prospect of more to come. Locally, perhaps partly because of a relatively mild December and January, companies logged more customer calls during a time of year when homeowners traditionally want to hibernate. Now, on the cusp of spring, they’re ready to hit the ground running.

If there’s one thing R.J. Chapdelaine is grateful for, it’s changing tastes in home design.

Take, for example, the current trend — one that has been building over the past decade or two — of open floor plans.

“People seem to want to open up the kitchen to family room space, open the kitchen to dining room, and create that open floor plan. That, I think, is what we see the most, taking someone’s compartmentalized house and opening it up,” said Chapdelaine, owner of Joseph Chapdelaine & Sons in East Longmeadow.

“You see the center-hall Colonial with a dining room, living room, and kitchen, and we go in and open up the walls,” he continued. “I say, thank God my grandfather and my father built them the way they did. Now I can go in and open them up. It’s job security. And you watch — someday down the road, it’ll go back.”

Whatever the trends and the homeowner’s personal tastes, the home-improvement industry has been riding a wave for some time now.

According to the Home Improvement Research Institute (HIRI), the market for home-improvement products and materials grew by 6.3% in 2018 after a 7.3% jump in 2017. Breaking it down further, the professional market increased by 9.9% last year, while the consumer market saw a sales increase of 4.7%. That trend is expected to slow slightly over the next three years, but still increase by an annual average of 4.2% through 2022.

“What I’ve seen is a very strong push for kitchens and baths, additions, and remodels,” Chapdelaine said. “That seems to be our strongest portion of the business right now. The new homes have slowed for us considerably, but the kitchen, bath, and addition calls have been very strong, straight through the winter.”

“The new homes have slowed for us considerably, but the kitchen, bath, and addition calls have been very strong, straight through the winter.”

That’s somewhat surprising because normally calls slow through December, January, and February, he added. “Over the years, we’ve come to the conclusion that people really don’t want us in their house around the holidays. But this year, it’s been incredibly strong right through the winter months, which is great. As we gear up for spring, there’s a lot of work on the board. Usually we would be expecting the phone to ring now in anticipation of a good spring start, but it’s been ringing throughout the winter.”

Frank Nataloni, co-owner of Kitchens & Baths by Curio in Springfield, has also seen a busier-than-usual winter, perhaps because the snowfall has not been too onerous.

“We’re a year-round operation, but it really depends on the type of winter we have,” he said. “If we have a mild winter, what happens is demand ends up being spread out, and we see a bit more people through the winter. When the weather is really bad, nobody goes outside. Either way, spring is always the strongest time from a sales standpoint.”

According to the Project and Sentiment Tracking Survey conducted by HIRI toward the end of 2018, which queries adults across the U.S. about their planned home-improvement projects, outdoor living spaces will feature the most activity in the next three months. More than one-quarter of homeowners surveyed indicated they will take on lawn and garden and/or landscaping projects during this time.

R.J. Chapdelaine

R.J. Chapdelaine says the region’s older housing stock and demographic changes have contributed to a strong remodeling business in recent years.

Taking all types of projects into consideration, inside and out, the Northeast and South lead the way, with about two-thirds of homeowners in both regions saying they plan home-improvement projects this spring.

Meanwhile, whether homeowners shoulder the work themselves is relatively dependent on the project type. On average, a little more than half of all projects are of the DIY variety — and of those, many involve outdoor living spaces, with 82.6% of homeowners tackling landscaping projects.

“I have to say, people feel confident, and they’re willing to spend money on their house,” Chapdelaine said. “It seems as though people are upbeat, and we’re reaping the phone calls and the benefits of that consumer confidence.”

Trending Topics

HIRI reports that, nationally, the home-improvement products market continues to outperform many other sectors of the economy. At the organization’s 2018 Industry Insights Conference last fall, experts in the sector shared what they felt were some prevailing trends heading into 2019. Among them:

• DIYers are more likely to be Millennials, which may have to do with that generation’s connection to devices. “DIYers spend more than 60 hours per week on TV and digital devices, including computers and smartphones,” Peter Katsingris, senior vice president of insights at Neilsen, told conference attendees, according to Forbes. “The technology and the choices it provides make DIY a realistic option for people.”

• More than one-third of homeowners who completed a home-improvement project in the past year regret not spending more on the project.

• The rental housing market is on the rise. A wave of growth has increased the number and share of rental households in the U.S., especially higher-end rentals in urban areas. This reality could lead to greater interest in portable and free-standing home-improvement products tenants can take with them when they move, as opposed to permanent fixtures.

• With home wellness on the rise, the lighting industry has been coming up with intriguing options. A technology known as circadian rhythm lighting is one rising trend, producing indoor illumination that more closely matches natural light in its warmth and, paired with home automation, can shift through the day with the sun to ease the impact of artificial light on the human body.

• Finally, remodeling activity isn’t slowing down anytime soon, due in part to an aging housing stock. With home prices increasing and new construction harder to find in some areas of the country, people are staying put and remodeling. “With the existing house stock averaging 38 years old, much of the inventory is in need of updating,” Mark Boud, senior vice president and chief economist at Hanley Wood/Metrostudy, told the conference.

That aging stock is an especially relevant reality in Western Mass., but so is another trend boosting the remodeling market: an increasing desire among Baby Boomers to age in place.

This recent remodeling project by Kitchens by Curio

This recent remodeling project by Kitchens by Curio reflects some current trends in kitchens, particularly its color palette dominated by white and grey.

“We’re seeing more aging in place, and we’re seeing that as a reason people are making changes,” said Lori Loughlin, manager of Frank Webb Home in Springfield. “They’re doing what they can to make sure they stay in their homes as long as possible because they feel like it’s a better option.”

In some cases, that means installing mobility and safety equipment, but in others, it means building in-law suites, or even moving to — by either building or remodeling — a smaller house.

“We’re getting phone calls now for people looking to to downsize,” Chapdelaine said. “I think the Baby Boomers are going to be looking for that smaller house and aging in place.”

Style Points

As for interior styles, those haven’t shifted much over the past couple of years. Painted cabinetry finishes and color palettes dominated by white and grey are still popular in kitchens and bathrooms, Nataloni told BusinessWest. “I just did a process of cherry wood with a black finish rubbed off, and the cherry comes through the black. It’s spectacular, actually.”

Styles change, he noted, but they don’t change abruptly. “White is very popular, grey is popular, but we are starting to see other colors, hints of yellow and green, coming in. I’ll be doing a yellow kitchen — not school-bus yellow, a very pale yellow, but a very warm color.”

“We’re seeing more aging in place, and we’re seeing that as a reason people are making changes. They’re doing what they can to make sure they stay in their homes as long as possible because they feel like it’s a better option.”

Chapdelaine reported similar, gradual movement toward color, but mainly pastels and muted colors, not too much that would be characterized as bold. “We’re still seeing a lot of white cabinetry and floors stained a number of different colors. With surfaces, we’re still running strong in quartz — some granites, but mainly quartz.”

The most important trend, of course, is that the home-improvement business as a whole remains strong.

“We’re seeing everything from full bathroom jobs to kitchens with the walls removed, right up to additions, which are ranging from family rooms to master suites,” he said. “We’re seeing more whole-house updates — painting, hardwood floors, that kind of work — and we’re also seeing whole-house remodels, which is very similar to building a house. You’re gutting the house down to the bare studs, going through and doing a new bathroom, new kitchen, new flooring, new drywall, which is kind of nice.”

He expects spring to bring its usual rush of customer inquiries as the weather continues to improve, but said people looking to get into the queue for the spring should really be calling in February and March.

Nataloni agrees, and says he appreciates the fact that, with the economy performing fairly well, homeowners are investing more money in their living space, whether they plan to stay there for a long time or improve the house’s dated look in preparation to sell it.

“We have a lot of older housing stock around here,” he said. “Wherever you go, you see someone working on their house.”

Joseph Bednar can be reached at [email protected]

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