How Municipalities Can Navigate a Growing Cannabis Market — The Town of Babylon’s Example

How Municipalities Can Navigate a Growing Cannabis Market — The Town of Babylon’s Example

7.22.2024

By Matthew T. McDonough

With the passage of the Marijuana Regulation and Taxation Act in 2021, municipalities across New York State faced a new reality: recreational marijuana would be legal throughout the state. This sea change naturally caused hesitation among many local governments as they grappled with having to protect the best interests of their communities while adhering to the new law of the land.

While possession would be legal statewide under the new law, municipalities had until the end of December 2021 to pass a local law opting out of adult-use cannabis retail dispensaries and on-site consumption licenses within their borders. Ultimately, over 700 municipalities across the state – towns, villages, and cities – opted out.¹ The Town of Babylon ended up being an exception, one of the four townships on Long Island that did not opt out.

Nestled on the south shore of Long Island, the Town of Babylon’s opting in was not due to enthusiasm for legalization but a lack of consensus among elected officials. Under New York State law, the town board was required to hold a public hearing before opting out. However, the resolution to schedule this public hearing failed, with two board members voting no, two voting yes and another abstaining. They were not able to schedule the hearing before the deadline. Since the town could not pass a local law to opt out without a hearing, the Town of Babylon opted into recreational legalization by default.

With the reality that their town would be one of the few to opt in, Babylon officials pragmatically laid the groundwork for the law’s eventual implementation. This process involved proactive engagement with community leaders, constituents and prospective cannabis businesses, as well as a thorough review of the town’s code and regulations to see what changes must be made to align with state law. Eventually, the town would become home to two successful recreational dispensaries – the only open stores on Long Island.

While a municipality may be opted out today, the door remains open under the law to opt back in tomorrow. Once opted out, a municipality can repeal the local law to opt back in at any time. No matter the circumstances, here are some helpful lessons from our experience navigating these unfamiliar waters.

Learn the Law

Before anything, municipalities would do well to educate themselves on what the law says and how it relates to the different regulations found across the federal, state and local levels. Understanding the legal framework governing cannabis production, distribution and consumption can help develop effective policies and regulations. This involves studying legislation such as the Marijuana Regulation and Taxation Act itself, relevant state laws and federal ordinances related to cannabis.

A significant piece of the legislation was the creation of the Office of Cannabis Management, which is responsible for legal oversight, managing dispensary licenses and regulating various cannabis-related state programs. This office is governed by the Cannabis Control Board, which oversees and handles approvals of the licenses, whether recreational, medical or cannabinoid hemp licenses.

A solid grasp of these different laws should ensure compliance and avoid legal challenges. This is especially critical for any municipality with its own police force or public safety department that may be responsible for enforcement. Understand what your government has the power to control and what you don’t. Even if your municipality opts out, adults over the age of 21 are still allowed to possess and use marijuana under the new law. Municipalities were prohibited from opting out of other adult-use license types, medical cannabis or cannabinoid hemp license types.

Municipalities can still establish local ordinances and regulations regarding the time, location and conduct of adult-use retail dispensaries, as long as these regulations don’t excessively hinder the license’s business operation, as determined by the Cannabis Control Board. This includes zoning, licensee locations, operational hours and compliance with local building codes.

New York’s 2024-2025 state budget, passed by the state legislature in April 2024, expanded the powers afforded to local governments to crack down on shops illegally selling cannabis products without a license. Such illicit establishments had become a thorn in the side of surrounding neighborhoods concerned about their quality of life and were forced to wait while the state-led process to shut them down played out. Now, municipalities can close down and padlock such illegal shops and levy fines against them for civil violations.

Keeping abreast of current developments at the state level and understanding the challenges faced by a nascent department such as the Office of Cannabis Management can help prevent attorneys from being caught flatfooted about future changes to the law and leave governments better prepared to adapt to potential modifications. In March 2024, New York Governor Kathy Hochul ordered a thorough review of the office’s operations in response to public complaints regarding the slow application process for opening new dispensaries and poor communication with applicants. The subsequent report found that the office had received over 7,000 applications by the beginning of the year and issued more than 500 licenses. However, fewer than 100 dispensaries have opened throughout the entire state.² To alleviate this backlog, the governor overhauled the office, adding licensing staff and a designated point person for each application in order to complete the process within 90 days.

Know the Local Laws

In addition to understanding broader cannabis laws, municipalities need to have comprehensive knowledge of their own rules related to zoning, licensing, taxation and public consumption. Local governments should consult with their own counsel, outside legal experts and state officials to ensure local laws comply with all relevant statutes.

The Town of Babylon benefited from already having experience in the cannabis market, as it was already home to a medicinal marijuana facility that had opened a few years prior. This case helped provide a blueprint for future local cannabis regulations and set the example of how such businesses could, and should, operate within the Babylon community. Town officials had to look closely at their code to see how such an establishment would fit within current zoning regulations and what changes had to be made to address such establishments specifically.

The medical dispensary was located in an area of the town that was zoned for business but excluded smoke shops and vape shops. Given that this was technically a medicinal facility, the town had to examine state and local laws to see if such zoning would apply. Legal analysis led town staff to the Public Health Law of New York State, which defines medicinal marijuana as intended for certified medical use.³ This classification led the town to determine that medical marijuana facilities were not characterized as vape or smoke shops under both state law and local zoning, as they provide products strictly for medical treatment.

Municipalities should thoroughly review their existing laws and, if necessary, consider amending them to align with the new law. The Babylon Town Board refined its code to state that a special use permit would be required for all recreational dispensaries, which would be prohibited from operating within a 1,000-foot radius of a residential area, within a 200-foot radius of religious properties or within a 500-foot radius of schools, libraries, parks, playgrounds, childcare centers or other locations where minors congregate. Such businesses were also limited from operating within a 500-foot radius of each other. Even with these limitations, nearly 1,000 parcels within the Town of Babylon were determined to be eligible for recreational dispensaries.

While possession may be legal statewide, there are areas where localities can limit public consumption of marijuana under their own code. Local law enforcement must know when and where residents are permitted to use the substance legally. For instance, the Town of Babylon already had regulations on the books that prohibited smoking and vaping of all types at town parks and recreation areas, including all playgrounds, pools and beaches. Additionally, smoking was banned within a 50-foot radius of all entrances to any buildings and facilities owned or leased by the Town of Babylon and accessible by the public unless otherwise stated by signage. In 2022, the town board voted to modify the code to include marijuana use in those prohibitions.

Engage the Stakeholders

Effective policymaking requires active engagement with the community to understand their concerns, preferences and priorities. Municipalities should prioritize concerns regarding cannabis legalization from residents, businesses, advocacy groups and other stakeholders to gather diverse perspectives.

Babylon town officials have always leveraged community input to inform decision-making processes and build trust between the local administration and the public. They have found that public forums, surveys and town hall meetings effectively solicit feedback and involve the community in decision-making. Babylon Town officials spoke with residents from all sides of the legalization issue, and their concerns were taken into account. The town actively sought public comment regarding the matter on its website and social media channels. Community meetings were held at Babylon Town Hall to encourage community members to engage with officials firsthand, where much of the feedback involved where dispensaries would be located.

This proved to be a delicate balancing act, as some were concerned about how close dispensaries would be to homes, schools and other family-friendly areas. In contrast, others worried that the town would limit them to out-of-the-way locations on the outskirts of town, where customers might be more challenging to attract. Making matters more complicated, the Town of Babylon is home to three smaller incorporated villages with their own local laws: Amityville, Babylon and Lindenhurst. These three villages have walkable downtowns that are home to many thriving retail and dining establishments. While some naturally looked to these areas as potential locations, they were within the jurisdiction of village governments that had opted out.

Following much discussion with various stakeholders, a compromise emerged: recreational dispensaries would be located in the northern part of the town, home to manufacturing and industrial businesses. Cutting through this section of the town is the Route 110 corridor, a major hub of local economic activity convenient to customers from both Nassau and Suffolk counties. This location became an ideal choice, as it is separated from residential areas but not inaccessible to consumers.

Adapt and Be Flexible

The legal recreational cannabis industry is new and evolving, with changes in legislation, market trends and consumer preferences. To accommodate these shifts, municipalities must be flexible and adaptable in their approach to cannabis regulation. This includes regularly reviewing and revising existing laws, if necessary, to address emerging issues, seize opportunities for improvement and stay ahead of potential challenges.

The reality of the situation is that this is a new world for both state and local governments, with some bumps along the way for everyone. Work with state officials to find common ground or solutions that fit the character of your community. An example of this could be seen in the state’s Rule 119, which allows applicants to appeal directly to the Cannabis Control Board should they feel that a locality’s zoning and laws around cannabis sales are overly restrictive. This caused concern for local officials, who feared an encroachment upon their home rule and the possibility of lengthy legal disputes.

The town has maintained an open dialogue with Office of Cannabis Management officials since legalization and continues to refine its code to ensure that its restrictions are reasonable in the eyes of New York State. For example, the town eventually reduced the radius between cannabis businesses and residences from 1,000 feet to 750 feet, creating 77 additional locations for potential dispensaries. In hopes of streamlining the process, the town planning commissioner now has the power to conduct a site plan review if the applicant meets specific criteria instead of having the town planning board do that review.

Another example of the town’s maneuvering in this matter could be seen in the philosophy by which the town counts eligible parcels for dispensaries. In keeping with Long Island land use precedent, the town calculates parcel distance from property line to property line instead of measuring from the central point of a property. Despite some concern about this method from all sides of the issue, the town felt it was a reasonable compromise when considered alongside the residential radius reduction.

Municipalities should not be afraid to press pause and slow down. When licenses were opened to the general public, Babylon Town Hall was hit with a deluge of applications. Previously, the state had prioritized applications based on certain social justice criteria, specifically individuals who had previously been convicted of cannabis-related offenses and those from areas disproportionately impacted by such convictions. The staggering number of new applicants and the potential effects of Rule 119 led the town to consider pursuing a moratorium on new dispensaries opening within the town. However, that was eventually put on the shelf following constructive conversations with state officials.

Flexibility also allows municipalities to adjust policies in response to broader changes in the legal landscape. For example, the federal government just announced that marijuana may be reclassified by the Drug Enforcement Administration as a Schedule III controlled substance rather than its current Schedule I status. This historic change would represent the larger societal shift in treating cannabis as more accepted recreationally compared to heroin, cocaine and LSD – all currently classified as Schedule I. While this classification may not directly affect municipalities, it represents the ever-changing landscape of the issue.

Support Wellness

Cannabis legalization presents opportunities to promote public health and wellness initiatives within municipalities. Municipalities should look to implement programs and resources to support responsible cannabis use. This may include funding public education campaigns on safe consumption practices and providing substance abuse prevention and treatment resources. By prioritizing wellness, municipalities can mitigate the potential negative impacts of cannabis legalization and promote their communities’ overall health and well-being.

Such initiatives were of utmost importance to Babylon town officials, who already had a significant focus on substance abuse given the loss of life and addiction issues caused by the opioid epidemic throughout the region. The human devastation from opioids made officials even more cautious about allowing recreational sales of cannabis, with its popular reputation as a gateway to more harmful substances. Most notably, Supervisor Rich Schaffer, the town’s highest ranking elected official, was an outspoken leader on issues related to substance abuse who was opposed to legalization. However, he recognized that it would be legal in the town, regardless of his personal position. Facing that reality, the town board looked at what it could do to mitigate potential harm and help residents struggling with substance abuse.

The town decided to apply the entirety of the sales tax revenue from dispensaries to substance abuse and wellness programs. The town’s Division of Drug and Alcohol Services actively provides services to those suffering from substance abuse through its Beacon Family Wellness Center. This state-licensed substance abuse treatment facility offers outpatient services to town residents and their families. Additionally, town officials have formed strong bonds with many community groups that focus on the issue and work closely with them on various initiatives and events throughout the year.

Conclusion

The Town of Babylon’s story is just one case study of many. Attorneys who are counseling municipalities should be sure to look at and consult other places that have also legalized recreational marijuana – even if outside the state. In addition to New York, 23 other states, the District of Columbia and three territories have legalized recreational marijuana or are in the process of doing so. While the specifics may vary across the country, reaching out to those who have previously worked on the issue to learn more about best practices for implementation and enforcement can be helpful.

Meanwhile, the other municipalities on Long Island that also opted in have yet to open legal dispensaries in their areas and are not expected to within the near future. These municipalities can be considered to have opted out through restrictive zoning laws, at least for the time being. As a result, dispensaries within the Town of Babylon have the advantage in the legal marijuana market on Long Island. An article by Newsday written in the fall of 2023 stated that one of the dispensaries in the town had been bringing in an average of $1.25 million a week to that point, collectively taking in $13 million in its first three months of operation. These sales place that particular establishment among the highest performing licensed dispensaries in the state.⁴

The Town of Babylon’s practical and considerate strategy shows the importance of community engagement, legal foresight and proactive leadership in successfully opting into recreational cannabis sales in a responsible and open manner. Despite very real hesitancy and opposition to legal cannabis, Babylon town officials recognized the reality of a changing landscape. They found a way to make it work within their community and leverage the financial benefits to benefit residents.

Matthew T. McDonough is a solo practitioner based on Long Island and serves as special counsel to the supervisor of the Town of Babylon, where he facilitated the strategic implementation of marijuana dispensaries across the town. He has served as chief executive officer of the Town of Baylon Industrial Agency and village attorney for the Village of Babylon. A version of the article appears in a recent issue of Municipal Lawyer, a publication of the Local and State Government Law Section. For more information, please visit NYSBA.ORG/LSGL.