Pot tax revenue for Northampton: $737,331

  • Daquaan Hamilton of Northampton heads a long line of people waiting to legally buy recreational marijuana, Nov. 20, at NETA in Northampton. GAZETTE FILE PHOTO

Staff Writer
Published: 4/3/2019 6:36:51 PM

NORTHAMPTON — This week, the city of Northampton received $737,331.40 in revenue from recreational marijuana sales at New England Treatment Access.

But Mayor David Narkewicz doesn’t want people to make too much of these early numbers.

“Obviously, we’re going to err on the side of caution,” said Narkewicz, who noted that the monies were collected when there were fewer recreational marijuana dispensaries open in the Bay State.

The money comes from two sources: A 3 percent excise tax on all gross sales of recreational marijuana at NETA, and 3 percent community impact fee on all gross sales of recreational marijuana at NETA taken as part of the dispensary’s host community agreement with the city.

The Department of Revenue delivered $449,825.40 to the city on Sunday, while NETA hand-delivered a check for $287,506 this week. The $449,825.40 payment represents the tax collected at NETA for the 11 days it sold recreational marijuana in November, as well as all taxes collected on sales for the city in the months of December and January.

In November, $85,817.71 in excise tax was collected on behalf of the city, when NETA was one of only two recreational marijuana retailers open in Massachusetts. In December, when it was one of five, $201,688.06 was collected while in January $162,319.63 was collected, when it was one of eight such retailers.

This payment structure is a quarterly one, based on the fiscal year, and the next scheduled disbursement of marijuana tax money to the city is set for June 30, and will consist of the revenue collected for the city for the months of February, March and April.

NETA spokesman Peter Brown said the arrangement works for the company, too.

“NETA is proud to be a member of Northampton’s vibrant and diverse business community, and we are pleased to see the city benefiting from a safe and regulated marketplace,” Brown said in a statement.

Restricted funds

The host community agreement money that was delivered represented what was collected for November and December, and at $287,506 it matches the excise tax collected on behalf of Northampton, with NETA rounding the amount up by a few cents.

Both sums of money come with restrictions. Narkewicz said that because the excise tax money was not budgeted for this fiscal year, due to Department of Revenue regulations, it will be going into undesignated funds, which is set to be certified as free cash in November by the DOR. Until that happens, it cannot be used, a status that will also affect the next payment.

Free cash in Northampton is normally divided up evenly for three different uses: shoring up stabilization funds, investing in capital projects and being on-hand for unforeseen circumstances like extra snowfall.

Narkewicz said, however, that this marijuana money will be used for capital projects, likely roadwork.

“Pot for potholes,” the mayor said.

Once the third payment comes in on Sept. 30, the money will go into the city’s general fund.

“It’s going to help all departments of the city,” said Finance Director Susan Wright.

Narkewicz said the money will serve to help the city dip less into, or avoid dipping into, its fiscal stabilization fund in the coming fiscal years, pushing back the date Northampton will have to consider asking for an override.

“It basically would mean we would be able to extend that (fiscal stabilization) plan,” said Narkewicz.

Wright and Narkewicz both noted the challenge of estimating marijuana tax revenues for the next fiscal year. This challenge is also compounded by Northampton not receiving its next payment until June 30, by which time its fiscal 2020 budget will have been finalized. The next payment will also include months where there are significantly more recreational marijuana shops open in the state.

Narkewicz said the city will be looking at a number of different sources in order to make a proper estimation for the coming fiscal year.

“We’re trying to develop it now,” he said.

“What’s a sustainable market share for Northampton?” asked Wright.

The host community agreement lasts for five years, and the money collected as part of it must be used specifically to mitigate the impacts of the business on Northampton. Narkewicz said he plans to use the first payment to replenish the city’s paving fund to deal with the increased wear on the streets around NETA. He also said a fund to hold the mitigation money will be established.

Both Wright and Narkewicz said they were happy the city has a new revenue source.

“Any new revenue we get helps us extend when we will face the cliff, basically,” Narkewicz said.

They noted, however, that its future is uncertain. In addition to the new recreational dispensaries open in Massachusetts, both New York and Connecticut are looking into legalization.

Bera Dunau can be reached at bdunau@gazettenet.com.

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