What Does Amortization Mean for Signage?

Amortization concerns the compensation for a sign that is no longer in compliance when a sign code changes. The theory is that, if a sign is allowed to exist for a certain period of time, the owner of it will recoup their investment before the sign has to be removed, which is a way of circumventing the “just compensation” portion of the 14th Amendment. The fallacy of this is explained in the following article, written by certified planner Richard Bass, that appears in The Signage Foundation website’s Research Library. http://www.thesignagefoundation.org/Portals/0/SFI%20Amortization%20Explained.pdf

An example of appropriate argument for just compensation occurred in Richfield, Michigan with regard to a Michael’s crafts store. Its rooftop on-premise sign, which functioned like a billboard, had been built in the 1950s by the prior tenant. In 1987, Richfield banned rooftop signs. A 10-year amortization was included in the sign ordinance, and the Michael’s sign was ordered to be removed in 1998.

For “just compensation,” three valuation methods were used: cost of replacement, the income approach and a market comparison. Estimates were that Michael’s would need to spend $825,000 annually to replace the advertising value of its rooftop sign. Factoring in a 10% annual return on investment, this would mean the cost of replacing the sign’s advertising value would be $8.25 million.

As for income, the sign was calculated to account for 20-30% of the store’s sales. Conversely, the loss of the sign would mean a 20-30% decrease in sales. This would account for $200,000 less profit annually. Given the additional loss of investment income, the potential loss was calculated at $2 million.

As for replacement cost, based on a square-foot lease rate for a different use, the loss was calculated to be $56,000 annually. With a 10% investment revenue, this would mean a los of $560,000. Faced with this evidence, the court determined Richfield would have to pay cash compensation. A settlement occurred out of court. A full report on these proceedings appeared in the December 1998 issue of Signs of the Times magazine.

Conversely, others have failed to show an economic loss due to amortization. One instance occurred in Ridgeland, Mississippi in 1999. The city passed a sign ordinance that restricted ground signs to 50 square feet and a height of 12 feet, with exceptions for signs located within 300 feet of the Interstate highway. The ordinance included a five-year amortization period, which meant that legally erected signs, which would now become illegal with the passing of the sign ordinance, could stay up for another five years. But then they would have to be taken down, and that time period would suffice as just compensation.

Five years later, numerous businesses — Shoney’s, Midas Muffler, Red Roof Inns — filed an appeal to keep their signs. They invoked the precedent case of Lamar Adv. of South Georgia v. City of Albany (1990). The appeal process lasted three years, but the sign ordinance was upheld. The appellants erred in not documenting the economic ramifications of their signs being taken down, which is something Lamar had done when it won its appeal. This case is detailed in the June 1999 issue of Signs of the Times magazine.

As of November 2016, exactly half of the U.S. states (and the District of Columbia) recognize amortization as a legitimate form of just compensation, and the other 25 do not.

Where Can I Find a Model Sign Code?

Several model sign codes have been published, and many can be viewed in their entirety. Here are a few of them.

From The Signage Foundation http://www.thesignagefoundation.org/Portals/0/OnPremiseSignRegulations.pdf

From the United States Sign Council http://www.usscfoundation.org/USSCModelOn-PremiseSignCode.pdf

From the International Sign Association https://www.signs.org/Portals/0/PDF/pdf2016/Model_Sign_Code_Legal_Tech_Exploration_On-Premise_Sign_Regs.pdf

Gemini Grants $100,000 Scholarships to Incoming Univ. of Minnesota and Michigan Students Wade Swormstedt May 12, 2016

Gemini Inc. (Cannon Falls, MN) has awarded two $100,000 Ross Wagner Engineering Scholarships. The four-year scholarships will go to Matt Moskal, a senior at Cannon Falls High School, who will attend the Univ. of Minnesota. Bjorn Pearson, also a Cannon Falls senior, will attend the Univ. of Michigan.

For the full story, go to http://www.signweb.com/content/gemini-announces-ross-wagner-scholarship-recipients

Can a $500 Sign Generate $1.9 Million in Additional Revenue for a Health Clinic?

A Sarasota, Florida health-care clinic had a great suburban location, demographically. However, due to its location at the end of a two-story complex surrounded by oak trees, its fascia signage simply wasn’t visible from the interstate (0.2 miles away) or the four-lane frontage road with a median. The owner had a dozen other clinics, so he knew something was wrong with the amount of business the clinic was conducting.

The owner subsequently placed a very simple 10 x 24-inch. sign in plain site, with only the clinic’s name and the words “urgent care.” Within 24 hours, the number of clients nearly doubled. Over the course of a year, this increase would equal nearly $1.8 million in additional revenue. To read the full story, go to http://www.nxtbook.com/nxtbooks/STMG/sott_201411/index.php#/110

How Does the Americans with Disabilities Act Regulate Signage?

Undoubtedly, no aspect of any kind of signage regulations is more exacting, or likely to be altered, than those governed by the Americans with Disabilities Act (ADA), which was originally enacted in 1990. Primarily, this concerned access for people with disabilities, such as wheelchair ramps, railings, handicapped parking, etc. But it also included stipulations for signage, specifically braille signage for people with limited or no vision. These regulations are outlined in ADA Accessibility Guidelines (ADAAG). Most of these regulations have been contentious, and they are changed often. The most recent iteration went into effect March 15, 2012. The following article outlines some of these specifics. http://www.nxtbook.com/nxtbooks/STMG/sott_201201/index.php#/68

Overall, on September 15, 2010, the U.S. Department of Justice published “2010 ADA Standards for Accessible Design,” a 279-page document. http://www.ada.gov/regs2010/2010ADAStandards/2010ADAStandards.pdf. The most sign-specific section (703) begins on page 190. Here is a link to it. Note that the link is for all the 700 sections (700 – 708), but the sign-specific information is all in Section 703.

https://www.access-board.gov/guidelines-and-standards/buildings-and-sites/about-the-ada-standards/ada-standards/chapter-7-communication-elements-and-features

What are Some Recommendations for Regulating Temporary Signage?

Writing sign codes can be challenging for city planners and administrators who have had no formal training abut the nuances of on-premise signage. But a sub-category of this task, writing regulations specifically for temporary signage, presents an even more perplexing problem.

Wendy Moeller, a Cincinnati, Ohio-based planner (AICP), who recently served as president of the Ohio chapter of the American Planning Association, wrote a treatise of recommendations for temporary signage for the research-oriented Signage Foundation, for which she also serves as a board member. The full report, which includes assessments as to how temporary-signage regulations have and will change in lieu of the landmark Reed v. Gilbert SCOTUS case decided in July 2015, can be read at http://www.thesignagefoundation.org/Portals/0/SFI%20Analysis_State%20of%20Sign%20Codes%20After%20Reed.pdf.

Duke University Economic Professor Applies “Game Theory” to Signage

David McAdams, an economics professor at Duke University, has authored a paper entitled “The Economics of On-Premise Signs” in conjunction with the United States Sign Council. In it, he contrasts the philosophies and ramifications of sign codes in Henrietta and Brighton, New York — two communities with similar demographics, both of which are near Rochester, NY. Henrietta’s sign code will allow up to 80 square feet of signage, while Brighton limits it to 30 square feet.

In the paper, McAdams assesses the Strategic Rationale, which suggests that, if one company benefits from a larger sign, other businesses will suffer. This has also been referenced as a “zero net gain.” McAdams counters, however, that better signs will encourage other businesses to acquire better signs, which will create more business for everyone, and benefit the town in the form of higher tax revenue.

An overview of the McAdams paper can be read at http://www.nxtbook.com/nxtbooks/STMG/sott_201512/index.php#/92. The full study is available from the United States Sign Council website, http://www.ussc.org/USSC-publications.php

How Big Do the Letters on Signs, Parallel to the Road, Need to Be?

As noted elsewhere on this website, “visual acuity” and “conspicuity” and “cone of vision” are very important for signs, because motorists must be able to detect signs, read them and then react to them in a few seconds. So how much does the visibility change when a sign directly faces the driver (perpendicular to the road) versus one that may be flat against a building fascia (parallel to the road)?

The Larson Transportation Institute at Penn State University studied this phenomenon in 2006 through a grant from the United States Sign Council. Much of the work involved a literature review of prior, related research.

Several factors impact the necessary minimum size for letters, so that they can be detected and read quickly enough for the driver to react:

  • Number of lanes of traffic
  • Distance from the road to the sign
  • The motorist’s speed
  • The angle at which the sign can be read

USSC has published a chart that ranges from a sign that’s 10 feet from the road when the motorist is in the curb lane, versus a five-lane road in which the sign is 400 feet from the road. In the first instance, the sign’s letters need to be at least 4 inches tall. In the latter instance, the letters need to be a minimum of 90 feet tall.

This study, entitled “On-Premise Signs: Parallel Sign Legibility and Letter Heights, may be accessed at www.ussc.org.

Texas A&M Studies EMCs and Traffic Accidents

In 2012, Texas A&M University’s Texas Transportation Institute conducted a study to see if EMCs cause traffic accidents. Research included data from the FHWA’s own Highway Safety Information System (HSIS),a comprehensive database of crash records from several states. They identified 135 cites in which EMCs had recently been erected. Researchers used the empirical Bayes method to perform a before-after statistical analysis of the safety impacts of what was called the on-premise digital signs.

The research team used digital-sign installation information provided by sign manufacturers to identify locations in selected states where digital signs had been installed in the 2006–2007 time frame (this time frame was selected to provide adequate numbers of crashes in both the before and after periods).

HSIS data was studied two years before and two years after the on-premise digital signs were installed. For example, if a sign was installed in 2006, the “before” period was calendar years 2004 and 2005, and the “after” period was calendar years 2007 and 2008. The surveyed area was 528 ft. (0.1 miles) before and after the signs. HSIS data was available for California, North Carolina, Ohio and Washington.

The researchers wrote: “The results of this study provide scientifically based data that indicate that the installation of digital on-premise signs does not lead to a statistically significant increase in crashes on major roads. The overall results show that there is no statistically significant increase in crash frequency after installing the on‐premise digital sign. Based on the analysis performed for this research effort, the authors are able to conclude that there is no statistically significant evidence that the installation of on-premise signs at the locations evaluated in this research led to an increase in crashes.”

For the full report, go to http://www.thesignagefoundation.org/Library.aspx.

Also, to read about the Federal Highway Administration’s study of EMCs and traffic accidents, go to:

https://fasi.squarespace.com/config#/pages|/rhetorical/2016/4/15/electronic-message-centers-dont-cause-traffic-accidents

How Can the Value of an On-Premise Sign Be Calculated?

Richard Bass is a certified appraiser in Sarasota, Florida. During his more than 30 years in business, he has testified in court as to how a sign’s value can be appraised. In a presentation for The Signage Foundation, bass outline three case histories where the absence of a sign could be measured economically. Planners, Signs and A Community’s Economic Well Being (Powerpoint) – Rick Bass

In a 1995 case in Decatur, Georgia, a Days Inn was allowed to use an electronic message center for four years that was actually situated on a third party’s property. Property ownership changes occurred, so a payment needed to be determined. Three approaches were used: comparable sales, income and cost.

For the “comparison” method, the sign was compared to a billboard, Based on outdoor-advertising prices, for the 49 months, the price was calculated to be approximately $1.6 million.

The “income” approach examines Days Inn’s income for the same time period: $8.4 million. The percentage of this attributable to the sign was calculated at 25%, which made it $2.1 million. Because half of the guests already had reservations (which meant the sign didn’t draw them in), the figure was reduced to $1.050 million. Adding a 10% for interest earned, the final figure became $1.2 million.

The “cost” approach considers how else the property could be used. based on 238 units, the value of each motel room was set at $31,765. If they were all converted to apartments, their value would be $25,000 each. The value difference, $6765, multiplied by 238, becomes approximately $1.6 million.  The full story, with detailed calculations, appeared in the April 1999 issue of Signs of the Times magazine.