Dispatch 1: The Kings of Cannabis

Estimated reading time: 16 minutes

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In the fall of 2016, voting Littletonians answered YES (3,233 to 2,713) on Ballot Question 4, the measure to legalize cannabis for recreational use and to create a statutory framework to regulate—and heavily tax—its sale. A YES vote also meant that Littleton would be a town where cannabis would be sold.

The commonwealth's statutory framework sets forth that for every four liquor stores (or part thereof) there would be one cannabis store. Because there are seven liquor stores in our town, Littleton is obligated to offer its residents, the majority of whom voted to legalize cannabis’s recreational use, two shops.

We have one.

It is owned and operated by David Giannetta, a Littleton resident and a realtor who has “sold over 100 homes in the Greater Boston and Central Massachusetts areas” and represents that he has “local knowledge” and a “desire to help others.”

Naturally, you can see why I’d be looking to talk to him. David Giannetta not only owns and operates a retail recreational cannabis shop right here in Littleton (and another recreational cannabis shop in Billerica) but also David Giannetta is in real estate.

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To understand the king-making in the cannabis industry, we need to go back to 2012 when Massachusetts voters went to the ballot and voted to legalize cannabis for medical use by a margin of 2 to 1. That vote birthed a new industry that, by design, was guaranteed to make a lot of already rich people a whole lot richer—the word filthy comes to mind.

Those interested in entering this budding market were required, by the regulations governing the medical-use of cannabis, to be “fully integrated.” You couldn’t just have a grow facility or merely manufacture cannabis-infused products or only operate a shop. If you wanted to be part of the cannabis industry in Massachusetts, back in the 20-teens, medical-use was the only show in town, and you had to do it all: seed to sale.

If you’re thinking, Wow, to do it all, you would’ve needed a boatload of money, you’d be right.

By and large, the people who were able to “fully integrate” and launch the compassionate and necessary medical-use cannabis market in the early 20-teens were middle-aged, white guys who, by reasonable measures, did, in fact, have those money-filled boats and wisely saw that selling cannabis to sick people would be a way to grow their armadas. Capitalism at its best.

There were no “little guys” in the medical-use market because there were no small-business loans available from FDIC-insured banks (Aren’t they all FDIC insured?) because those banks wouldn’t take the “existential risk” of loaning money to a cannabis-related business that—while operating legally within the Commonwealth of Massachusetts—would be in violation of federal law. Of course, if you had substantial capital, the door was wide open.

Four years later, when Massachusetts voted to legalize cannabis for recreational use—and on the same day America went to the polls to choose a new president—many, many people in Massachusetts wanted that cannabis as soon as humanly possible. Reasonably, given the need to draft and approve the regulations that would govern the “rec” industry,* it wasn’t until late November 2018 that the first two recreational shops in Massachusetts (as well as along the entire Eastern Seaboard) opened: NETA in Northampton and Cultivate in Leicester.

In Massachusetts, both NETA and Cultivate had been around for years as fully integrated companies selling (and growing and infusing and packaging) cannabis in their dispensaries for the medical-use community. These companies and others similarly positioned had two huge advantages in 2016 over anyone just getting “into” cannabis at “the rec level.” These pre-existing medical-use companies knew what they were doing, and they had plenty of capital.

Owner/operators of medical-use companies were able to open their doors to recreational users well before anyone new to the industry could because those owner/operators were able to pivot into “the rec market.” These companies expanded their grows, ramped up the manufacture of infused products, and built out their recreational shops. As they stocked their shelves with what they were now growing for “rec purposes,” those just waking up to the idea of market participation were only beginning the rigorous application process. Whether looking for a license to grow or infuse or sell, with recreational cannabis, you didn’t have to be fully integrated. You could choose, but it was clear to most newcomers that they were already late to the party.

So now, let’s say you decide in 2023 that you want “in.” You’ve decided you want to open a recreational shop. (Note, for this hypothetical, it is immaterial whose hands the profits end up in.) Your first hurdle in opening a shop is in finding a permissible location. In Littleton, like other YES communities, zoning limits where recreational cannabis shops can be. Moreover, the regulations that govern the “adult use of cannabis” (935 Code of Massachusetts Regulations 500.00) require shops to be at least 500 feet from each other as well as 500 feet from all entrances to schools.

Without a location in the permissible zone and away from other shops and schools, you can’t have a shop. And this was one of the reasons I was hoping to speak to David Giannetta, the owner of Community Care Collective in Littleton (and also Community Care Collective in Billerica).

In March, 2021, the Town of Littleton gave David Giannetta permission to sell cannabis in town until March 17, 2031. This permission came in the form of a negotiated contract, known locally as a “Host Community Agreement” or “HCA,” between David Giannetta and the Town of Littleton as represented by one member of Littleton’s Select Board, Littleton’s town administrator de jour**, and Town Counsel.

I think it’s reasonable to believe that the other recreational cannabis shop in Littleton will be open long before the end of David Giannetta’s 10-year HCA with the town—a happy eventuality for 2016 voters who were promised two shops in Littleton. Furthermore, I thought it would be worthwhile for David Giannetta to meet with the person who is trying to become his future “competition” about what location might be of mutual benefit to both recreational shops in Littleton.

(Side note: For those of you thinking that my suggestion of cooperation with David Giannetta flies in the face of capitalism, I’ll remind you that I’m trying to abolish poverty in my hometown by operating a recreational cannabis shop that gives away 100% of its profits to poor people who live right here in Littleton. I’m not much of a capitalist. )

The other reason I was looking to speak with David Giannetta was to “check my math.”

The profit margins on early recreational sales were astounding.

Example: In early 2019, I had a chance to meet with Caroline Frankel, owner/operator of Caroline’s Cannabis in Uxbridge. When I asked about her earnings, she said she’d just had a “$40,000 Tuesday,” which, once all of her operating costs were paid, left her with “Twenty. I take home half.” Her shop had a forty-thousand-dollar day. She herself had a twenty-thousand-dollar day. One day.

Knowing that any estimates that were relevant from four years ago are dated, I was hoping to speak with David Giannetta about my back-of-the-napkin calculations. If anyone would know about the status of the local market (sales numbers) and the local profit margin, it would be David Giannetta because he’s in the thick of it right here in Littleton (and also in Billerica, which is local-ish).

I stopped by the shop in Littleton several times (July 13, 18, and 27), leaving my card each time. While at the shop, I made mention to the employees on site that I was looking to speak to David Giannetta about abolishing poverty in town. Last week, I found his cell phone number online, called, and left a long VM (August 3) on the same theme. I’ve also texted twice (August 4, 5). No reply.

You may be thinking, “Sheesh, Jenna, he’s obviously not interested in speaking to you.” Until I hear that message from him—until David Giannetta tells me that he’s not interested in helping to abolish poverty in our shared hometown—I don’t consider my request to meet with him denied.

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So, without David Giannetta’s input, I was left to come up with finding the answers on my own and, thankfully, got some good help from others.

As the daughter of an engineer, I knew I could figure out the sales numbers at David Giannetta’s shop in Littleton through a little reverse engineering.

The excise tax.

Because Littleton has that local cannabis excise tax, which is equal to 3% of gross sales, whatever excise tax that’s been received could be extrapolated to get the gross sales number.

My first stop was at the town’s website. Seeing as though we’d voted at Town Meeting to assess the 3% local cannabis excise tax, I was sure that any record/ledger of received tax would be readily available. I had no luck finding anything about any received cannabis excise tax, so I went to town hall and asked Littleton’s tax collector what the amount was.

When I was told that the “marijuana tax information is in the Select Board’s office,” I tromped upstairs to the Town Administrator’s office, where I was asked to send an email to Interim Town Administrator, Ryan Ferrara with my request, which I did.

Ryan Ferrara replied to my inquiry with: “Jenna, excise tax is issued to the Town by the State on a quarterly basis.  Below is the quarterly Fiscal Year 2023 summary for Community Care Collective:

Because the town has received $146,204.79 over the last four quarters from Community Care Collective, this translates to gross sales of $4,873,459.67 in the corresponding quarters.

Over the last year, David Giannetta’s Littleton store^ sold close to five million dollars of cannabis and cannabis-related products.

Okay, so that’s the sales volume locally. But what’s the profit margin?

It’s surely not “half” as it had been in 2019 for Caroline Frankel and others. I imagined it wasn’t what it had been during the pandemic when cannabis sales went through the roof. (Side note: Gage Cannabis in Ayer, Massachusetts, a neighboring town to Littleton, sold $31,000,000.00 of cannabis in 2021, the likely reason for all the improvements around Ayer and the DECREASE in residential real estate tax bills.)

Without someone with “local knowledge” to ask, I turned to the internet, hardly an “authority” with various sources suggesting profit margins between 15% and 21%.

Using my back-of-the-napkin calculations and plugging in $4.87 million at 18% (the average profit margin), I worked the numbers for the 326 households in Littleton who cannot afford to feed themselves and their children. Sadly, the amount was not the ten dollars a day I was hoping for; instead, only $7.37/day, $2,690.87 annually—for three hundred twenty-six households.

I was marginally, but only temporarily, discouraged because just last week, Judy Smith from Sanctuary Medicinals^^ reached out to schedule a meeting between me and Nick Satmary, the Chief Operating Officer at Sanctuary.

I’d met Nick in the fall of 2018 when he and Jason Sidman, Sanctuary’s CEO took me on a tour of the grow facility in Littleton. At that time, the facility was operating at “half-capacity.” While on the tour, I asked about the cost of the build-out, which felt way more high-tech incubator than the fancy, garden center I was expecting. When I was told $4,000,000.00, I couldn’t help but picture a navy’s worth of cash-heavy boats. I asked how long it would take to get a return on that kind of investment. “Just a couple of quarters” was Jason Sidman’s matter-of-fact reply. I was floored first by his statement and then the further realization that Sanctuary was then growing at “half-capacity.”

This past Thursday, when I arrived at Sanctuary for my meeting with Nick, the place was hopping. Daniel at the front desk told me that “about a hundred and thirty people work at the site” and “it’s different than it had been” when I took my tour nearly five years ago.

As Nick showed me into his office, I reminded him that we’d met “forever ago” and asked about the progress he was making on “the plant level”—Nick is a plant scientist—to come up with a cannabis strain to suppress appetite. (As soon as I saw him, it triggered the memory of him saying, five years ago, that appetite-suppressing cannabis would be “The Holy Grail” of cannabis and that Sanctuary was trying to “get the genetics” for that.) Nick said progress had been made and was still being made on that front. (I am intentionally leaving out the details.) After a little more chit-chat, including my sharing my strong opinion that “we’re running out of time to be good to each other,” I laid it all out for him.

With my marked-up copy of POVERTY, BY AMERICA by Matthew Desmond in hand, I pitched Nick the idea that Sanctuary could be part of the story of how one little town took its poverty rate from 6.3% to 0.0%. I spoke to Nick about the various arguments Professor Desmond outlines in his book while Nick nodded along. I got the feeling that he appreciated what I was sharing with him and agreed that poverty was worth abolishing.

When I told him that I want to open a recreational cannabis shop that gives 100% of its profits to poor people who live “right here in Littleton,” Nick thought it was a great idea. He asked what Sanctuary could do. Without missing a beat, I said, “I’d like Sanctuary to buy the Bank of America building that’s sitting empty in the center of Littleton and lease it to me for $1.00 a year for the next ten years.”

I know: bold.

But guess what? Nick didn’t say no.

When I began to talk about what that could mean for those families living in poverty and what it could mean for anyone willing to talk about poverty and work to end it, I got a sense of his kindness. The truth is, for all of us who put our efforts into ending poverty in one little place—not the entire nation, not even throughout the commonwealth—in just one little town, we benefit, too. Nick impressed me as the sort of person who already knew this.

The room went quiet, and Nick appeared to be deep in thought. When he spoke, with what I heard as hesitation, he pointed out that if Sanctuary purchased real estate for the shop (that one I want to open) that it might be problematic for Sanctuary because it already has its three medical-use dispensaries and its three recreational-use shops. (Why might this be problematic? you ask. Because the “Controlling Limitations” found at 935 CMR 500.050(1)(b) are clear that no person or entity having direct or indirect control shall be granted, or hold, more than three licenses in a particular class.)

So, I said, “Okay, if Sanctuary can’t buy the building, can you?” Nick laughed and said, “I wish. No.” I asked if Jason could. Nick said, “I don’t speak for others. I don’t know if he could or would.”

Nick suggested that “for now Sanctuary could do a food drive. We do those at Christmastime, but we could have a food drive now, here (at the grow facility) and at the shops.”

Every little bit helps, and what Nick was suggesting was going to be helpful right away. I told him I thought it was a really great way to do something thoughtful for others and start a conversation about the poverty those others endure every day.

I gave Nick the contact information for Patricia Sterns, the Director at Loaves and Fishes, which is the food pantry that serves Littleton and surrounding towns. I said I thought it would be better for all involved if I was not the middleman between Sanctuary and the food pantry. Nick agreed with this and said he’d reach out to Patricia.

I left my copy of POVERTY, BY AMERICA with Nick. I actually think he’s going to read it. On the way out, when I told Nick that I would follow up with Jason directly, he said that would be best. I said, “I think this could be really great.” Nick agreed and said, “Location-wise, Littleton’s a great place to have a shop.” I smiled and said, “It’s also a great place to end poverty.”

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Next Dispatch: The Would-Be Queens of Cannabis

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THE GOOD NEWS:

Thus far, after platform and banking fees, POT TWIST Subscriptions have raised $603.26 to end poverty in Littleton.

I’ll be going to local grocery stores this week. I’m going to ask them to match whatever I purchase in grocery-store “gift cards” for the poor. I’ll report back.

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ENDNOTES:

*Back in 2018, when I first got involved with this controversial little plant, I used the phrase “the cannabis space” as this was what others in the industry were calling it at the time. Any whimsical ideas people may have had about the “space” got quickly crowded out by the greed and the obscene profits. Make no mistake, cannabis is an “industry,” a multi-billion-dollar one with Massachusetts surpassing the $5,000,000,000.00 (5B) mark just last month since the first two shops opened in November of 2018.

The commonwealth’s taxation of cannabis—with both the standard sales tax of 6.25% and the cannabis state excise tax of 10.75%—has raised $850,000,000.00 and if all municipalities voted for the 3% local cannabis excise tax, $150,000,000.00 would have come to those local municipalities in four years and eight months—a potential sum total of $1B.

If you go into your local recreational shop, let’s say David Giannetta’s shop in Littleton, and select $100.00 worth of cannabis and/or cannabis-related products, you’re going to have to pay $120.00 to leave. $100.00 to the shop; $20.00 to the taxman. You’re the one on the hook to pay those three taxes, and the recreational shop (as part of its license) has agreed to collect the taxes and then act as a “pass-through” entity—the middleman between the customer and the taxing authorities. The middleman is not taxed, the customer is.

** The title “Town Administrator” has been held by several people since Keith Bergman’s departure in November 2018 after 11 years as Littleton’s TA. This article is on the latest departure from the third-floor office at Littleton Town Hall.

^During one of three visits to the Littleton location, I was also told by a CCC employee that David’s Giannetta’s Billerica shop “is going gangbusters: way more traffic than in Littleton.” My subsequent research relative to David Giannetta’s sales at his other recreational cannabis shop in Billerica confirmed this claim.

^^The HCA that Sanctuary has with the Town of Littleton to grow cannabis, signed five days before Massachusetts voted to legalize cannabis for recreational use—does not have any accompanying cannabis excise tax.

Instead, the negotiated HCA requires Sanctuary to make annual (and escalating payments) of $50,000.00 in Years 1 and 2; $75,000.00 in Years 3 and 4; and $100,000.00 in Year five and all years thereafter, annually contribute $5,000.00 to “public local charities in the town” and provide 150 hours of “man hours yearly to participate in community service activities.”

In June 2018, a “Side Letter to Host Community Agreement” was signed by Jason Sidman and then-Town Administrator Keith Bergman permitting Sanctuary to expand its growing of cannabis for the recreational-use market. The original HCA limited the growing of cannabis for medical-use. This “Side Letter” includes an annual payment of $10,000.00 from Sanctuary to the town in addition to the terms and conditions agreed to in November 2016.

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Of General Note:

The words spoken between people are not offered—nor should they be read—as a word-for-word transcript of words said to me or by me. Rather, I provide them in a way that evokes the feeling and meaning of what was said, and therefore, in all instances, the essence of the dialogue is accurate.

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And because it’s always nice to have a soundtrack ready for when Netflix calls, I’ll leave you with this last comment, made musically. When it comes to abolishing poverty in Littleton, I intend to ask bold things. Until I get a clear answer, let this be your earworm . . .