HANCOCK, Md. — With the population and tax base shrinking, then-Mayor Daniel Murphy didn’t know how his tiny town in Western Maryland, where nearly 1 in 4 of roughly 1,550 residents live in poverty, would survive.
The old manufacturing town along the C&O Canal had lost nearly 650 jobs in a three-year span. And Murphy felt the “huge blow” that the exodus of good-paying factory jobs had on families and on the community. Some two-income households were relying on one. Once-vibrant factories sat as empty shells.
Then a deal came along that the longtime mayor envisioned would cement his legacy and help ensure the future of a border town founded in 1749. After some private meetings and public efforts to get residents on board, Hancock in 2015 entered the marijuana business. The town leaders were excited to strike a deal with Arizona-based Harvest Inc. — one that industry experts say is probably the only partnership of its kind in the country.
But some officials have watched with mounting skepticism since Hancock agreed to open its warehouse beside the town high school to the company’s grow operations. The U.S. government clawed back grant money after learning of Hancock’s stake in selling a substance that remains illegal at the federal level, classified in the same category as heroin and cocaine. And as the medical marijuana business bloomed, profits trickled into town coffers.
Now that cannabis titan Trulieve has snatched up Harvest, town leaders want a full accounting of its profits. Hancock should be poised to share in the windfall of newly-legal adult recreational use, they say — a boom that saw more than $87 million in cannabis products sold in the state last month. But questions loom about whether the deal, which has no termination date, should go forward — and, if it does, how.
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“I thought it was going to be a godsend and like I said, my legacy,” said Murphy, a veterinarian who served as mayor for 20 years and does not want to see the partnership end. “I just, I got something in the air that makes me feel like things have changed.”
An at-times pointed debate has unfolded behind closed doors in recent weeks as both parties revisit the terms of the deal, copies of which the town and company would not provide to The Washington Post. Town leaders initially agreed to help what was then-Harvest — an Arizona-based company that was operating in Arizona, Illinois and Massachusetts — secure a medical marijuana license in exchange for 4.99 percent equity and rental of the old manufacturing facility.
“We get 5 percent of the profits, and quite frequently in these types of arrangements, there’s a bit of a disagreement on what constitutes a profit,” Town Manager Michael Faith said during a recent Facebook chat with residents about town issues. “Well, we didn’t make any money this year. Well, we think you did. So there’s always a little back and forth.”
Asked if Hancock will receive 5 percent of the profits from his business in Maryland under recreational use, Steve White, then-chief executive of Harvest and now president of Trulieve, said: “They will receive what we have agreed accounts for a 5% equity interest in the business. They will receive more money if the entity in Maryland does better.”
In an email, Faith said Hancock has received a total of $703,193.96, with its largest payment of $500,000 made in July 2021. During one of the town’s prior negotiations, a former mayor said, Hancock pushed for $50,000 in annual payments. According to Faith’s email, payments of $50,000 were made in July 2021 and March 2022.
During an interview last month, White would not comment on the payments made to the town, saying they were confidential. He said the company has about 75 employees in Hancock. (Among them is the former town manager. Past employees include a former town councilman and the former police chief who ran security.)
White said along with direct payments, the town has benefited from the company’s support of “the ecosystem (restaurants, gas stations, etc.) that keeps a small town like Hancock alive.”
But private negotiations have broken down this summer over profits. A Trulieve spokesperson did not answer requests for comment about the negotiations. Faith said Hancock is still happy to have the company in town but the two are involved in an “imbroglio” they are hoping to work out. Hancock, which employs four people to run town hall, and Trulieve, a publicly traded company that operates 186 retail dispensaries in nine states (three in Maryland), are scheduled for mediation on Aug. 30.
As Harvest searched for a place to run its Maryland operations in 2015, it began to home in on the economically depressed town about 90 miles north of D.C. Buy-in from the community would give them an advantage in their applications to the state, White knew.
As he worked to make it happen, White said he was asked a question by a state lawmaker that left him speechless: “What is going to give us confidence that you aren’t going to build up a business and leave like so many before you have done?” White recalled then-Del. Mike McKay (R-Washington) asking.
Many had come before and left. There was the Australian composites maker, the London Fog plant, and the Canadian dairy manufacturer. The hardest hit came 18 years ago when Fleetwood Travel Trailers shut its doors, eliminating almost 300 jobs.
White froze. He didn’t have an answer.
White said it later “hit me” that offering equity was the only way to ensure an enduring relationship.
“The wacky thing is there wasn’t anything that said it couldn’t be done,” said Darryl Carrington, a lobbyist who worked as a consultant on the project, noting that cannabis businesses are federally illegal. “With this, there’s no problem with zoning. No problem with police. There’s no problem, everybody is in on it.”
White made the pitch. Town officials were intrigued.
Hancock would become a nonparticipating equity partner. No one from the town would have a seat on the company’s board and no one would have a say in how the business operated, but the town would get about 5 percent of the company.
Some of the executives and town officials met for dinners to hammer out the idea, including a strategy to sell the town’s conservative residents on the idea of opening a cannabis growing and processing operation near a high school. An education campaign was launched.
About 30 people attended the public hearing, a big showing for a town hall meeting, according to Faith, who wasn’t working for the town at the time but attended the meeting as a citizen.
Trulieve brought in a woman who testified how medical cannabis helped reduce her child’s seizures, allowing her to normalize her life.
“I explained to them this is no different than Bayer aspirin coming in to make a drug,” Murphy said.
Maryland, a state hit hard by the opioid epidemic, embraced the legalization of medical cannabis in 2014 and overwhelmingly backed legalizing recreational cannabis last year, part of a broader cultural shift in acceptance of the plant in nearly half of U.S. states.
Nearly 59 percent of Washington County residents supported the proposal, indicative of the response town officials received when the idea of going into the marijuana business was broached.
Ultimately, several meeting participants said, only one attendee objected to Harvest moving in. Residents involved in the process repeatedly voiced a wish to see the site bustling again.
“I don’t think nothing about it,” Leo Smith, an 86-year-old man who lives a stone’s throw from the factory, said recently of the deal that led Harvest to Hancock. “It brought jobs, jobs, jobs.”
Still, not everyone is on board. Neil Parrott, a former Western Maryland lawmaker whose district was adjacent to Hancock, said recently that he doesn’t support the deal.
“I don’t feel like it’s a good business for government to be involved in producing and selling a drug that we know hurts people,” he said, raising concern about driving under the influence of cannabis. “I do understand private-public partnerships can be positive endeavors, especially in roles that the government has, for instance, transportation, those all make sense. But the government’s role is not to distribute any drugs — especially drugs that are harmful to people.”
Murphy disagreed, arguing that the town knew it was venturing into the “total unknown,” but that it needed it to bring in jobs. But, he acknowledged, the town didn’t have the foresight to know what it would mean to partner with a federally illegal business.
The learning curve for Hancock came with a price tag: $600,000.
That’s what the federal government reclaimed over concerns about commingling federal taxpayer dollars with funds from a federally illegal enterprise.
The partnership raised numerous questions: Could the town deposit the money into a bank? Was the money secured by the Federal Deposit Insurance Corp.? Would the town be able to use the money on projects that also involved federal dollars?
Faith, the town manager, said some concerns have been overblown for the town, which according to local reports has an annual budget of $1.7 million for the 2024 fiscal year, with revenue largely supported by property taxes, federal funds and the anticipated sale of a town-owned building. Faith did not provide a copy of the town budget.
The cannabis money is in a bank but securities have to be purchased to insure it. Hancock received covid recovery dollars without issue, he pointed out, and the block grant was jeopardized because the money was used on a building that would ultimately benefit a cannabis company.
“It’s a little bit of uncharted territory,” McKay said — for everyone involved.
Leaders ran into some trouble getting the first payment from Harvest, recalled former mayor Ralph Salvagno.
“We’re a small town,” he said. “We’re not unsophisticated, but corporate America is a little bit different and the methods of accounting used are a little bit different than what we would normally use. And our understanding may have been a little different than what they anticipated.”
Salvagno said the federal money became an issue because the town used the grant to make repairs to a building that Harvest wanted to use. Stanley E. Fulton, a successful gaming and casino entrepreneur with roots in the town, donated $900,000 to Hancock in 2008 to purchase the Fleetwood plant. The gift allowed the town to lease the space.
After the rehab, a concrete company leased the building but soon closed its operation. Enter Harvest, which wanted to use the building. As part of its deal with Harvest, the town included a rent-to-own agreement for the building. When the partnership became public, Salvagno said, the town was notified.
“The director of that program sort of says, Hey, look, I saw this thing in the newspapers, how you’re doing this thing and good for you,” Salvagno said. “But this is not legal federally and this is a federal grant and you’ve got to pay it back now, plus interest.”
Hancock has a separate account for the money it receives from Trulieve, Faith said.
Over the course of the relationship, White said, the company has experienced layoffs and made adjustments to its agreements as the business climate changed. First Harvest went public, then three years later the company was bought by Trulieve.
White said he’d hoped to replicate the public-private partnership in other municipalities.
But attempts to make other deals have been fruitless. He said most towns are unwilling to take a share of profits. Instead, the response is: “Why don’t we just tax you?”
“Getting other towns to make a bold move, even being second in something like this, has proved to be more challenging than we thought,” he said.
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