Mississippi circuit court upholds amortization of signage, but could this tragedy have been prevented?
By Dr. R. James Claus
Thomas A. Claus contributed to this article. He is completing studies at Portland (OR) State University and will begin attending the Northwest School of Law at Lewis & Clark College, Portland, OR, this fall.
On March 12, 1999, the Circuit Court of Madison County in Canton, MS, upheld a Ridgeland, MS, sign ordinance that deems a five-year amortization period sufficient as just compensation for the removal of legal, non-conforming signs.
On Jan. 2, 1991, Ridgeland passed a sign ordinance that restricted ground signs to a maximum of 50 square feet and a height of 12 feet, except for those businesses that extend within 300 feet of the interstate right-of-way. These standards are in force for four-lane roads, including the main thoroughfare of County Line Rd., on which a Shoney’s restaurant is located. As the name of the road suggests, the other side of the road is Hinds County, which includes the state capital of Jackson, where the sign code is much more liberal, reports Wayne Maner, Realty Sign Service, Ridgeland.
For three- and two-lane roads, the size and height limitations shrink to 40 square feet and 10 feet, and 32 square feet and 8 feet, respectively. Interstate signs can have 40-foot-high signs and a size of 160 square feet. Total signage area, including ground signs, for interstate businesses is 500 square feet.
Shoney’s, the primary appellant, has a 60-foot-high structure with a sign face that exceeds 300 square feet. Although it is visible from 1-55, it does not qualify as an “interstate” sign because it is more than 300 feet away from the interstate right-of-way.
Most importantly, the sign ordinance contained language that established a five-year amortization period, meaning that all signs that didn’t comply with the 1991 standards would have to be removed or bought into conformance. The Fourteenth Amendment to the U.S. Constitution provides that just compensation must be paid for the taking of private property for public use. The concept of amortization was created as a form of non-cash compensation, and it applies to the retroactive application of the newly enacted law, which is exactly the scenario here.
The Court cited City of Fayetteville v. McIlroy Bank and Trust (1983) in quoting from the American Law Institute’s 1976 Model Land Development Code: “Amortization regulations were established on the principle that a property owner should be able to recoup his investment in an existing land use within a particular period of time, but that after that time he could reasonably be forced to discontinue that use without payment [emphasis added] of compensation. By varying the time period in relation to the landowner’s investment, the proponents of amortization sought to obtain judicial support by comparing the technique to depreciation as used for accounting and tax purposes.”
Next, on Feb. 12, 1996, Ridgeland building official John McCollum advised various property owners that their signs had been deemed nonconforming on February 2, and they had 30 days to remove them or risk being assessed with violations.
Representatives for several businesses – Shoney’s, Bumpers Drive-Ins, Midas Muffler, Red Roof Inns, etc. filed an appeal with the Ridgeland Sign Appeals Board. That appeal was rejected on August 12. The appellants next filed a complaint in the form of a Bill of Exceptions in accordance with Mississippi law. Finally, on September 26, appellants moved for an order of Supersedeas “staying any enforcement of the ordinance pending disposition of the appeal.”
Why the appellants lost
The appellants correctly invoked a precedent case, Lamar Adv. of South Georgia v. City of Albany, 1990, but it turned against them because they didn’t do the same amount of legwork as did Lamar. The court decision reflects this: “The Lamar case is distinguishable from this action in that the Court in Lamar held that the ordinance would destroy the business of the company. From a reading of the case, this would be possible since the Lamar Co. would loose [sic] the majority of its business if the ordinance was enforced. It is the opinion of this Court that the Lamar case is not applicable, in this action, because no claim has been made by any appellant that, as a consequence of enforcement, they would suffer destruction of their business.”
The concept of amortization was created as a form of non-cash compensation, and it applies to the retroactive application of the newly enacted law.
The appellants also erred in not contesting the ordinance sooner. The Memorandum Opinion and Order states: “The Court notes that the Appellants took no action to contest the validity or constitutionality of the sign ordinance until five years after its effective date.” The memorandum’s conclusion adds, “Moreover, this five-year period has been prolonged for the three years of this appeal. The eight-year period is more than reasonable.”
The appellants had the perfect opportunity to have the economic value of their signs appraised by licensed professionals. Had they shown the damaging effects that would occur as a direct result of removal or downsizing of their signs, the outcome might have been much different. Instead, the appeal mostly questioned Ridgeland’s right to require sign removal at all. This is also reflected in the Court’s decision when it references Art Neon Co. v. the City and County of Denver (1973). This decision states: “The challenged provision does not prohibit [emphasis added] the use of signs, but requires conformance to specified types of in specific places.” The Madison County Court concludes that Ridgeland “engaged in a valid exercise of it’s [sic] police power.”
What could have been
The appellants could have contested the ordinance much sooner and could have made the effort to document the presumably debilitating economic effects of losing/downsizing their signs. Numerous examples have been spelled out in this magazine over the past two years: Caddy’s, February 1998, page 23; Best Buy, March 1998, page 52; Michael’s, December 1998, page 64. In the latter two cases, the matters didn’t make it to court. Faced with compelling data, the affected parties agreed to increased compensation outside of court. General guidelines for such appraisals were described in a two-part series in this column in September and October 1998.
“The Lamar case is not applicable, in this action, because no claim has been made by any appellant that, as a consequence of enforcement, they would suffer destruction of their business.”
The magic language that nearly always triggers compensation or injunction against enforcement is “substantial damage to business revenues or land value, or both.” Some courts may require a minimum 50-percent diminution in revenues or land value to be considered a compensable taking. A lesser percentage may be sufficient to achieve a monetary award or injunctive relief. By injunctive relief, a city would enforce its code against the majority but be prevented from enforcing it against specific parties, based on the documented damages that would result.
In somewhat parallel fashion, a Ridgeland business called the Village Mall kept its oversized (according to the 1991 sign code) double-pylon sign because it’s a conditional part of its lease, reports a local sign company. Regardless, in my 30+ years of dealing with sign-code issues, I have never seen a regulatory takings case won on pure constitutional issues. The winners always demonstrate harm; the loser, only theory. Without proper research and expert testimony that establishes economic harm, sign users cannot defeat an amortization clause.
Dr. R. James Claus, a licensed appraiser and sign-legislation expert, serves as executive director of the Signage Foundation for Communication Excellence, a non-profit organization dedicated to equitable sign codes.