Local governments with police powers can regulate land use in nearly any way they want. If that land use regulation forces a change in its current use, well, they “amortize” the change over a few months or years, as in they delay the effective date of the new zoning. If the new zoning regulation reduces the fair market value of the land itself, the city must pay the landowner for that reduced value. That’s a “taking.” But government can still totally regulate land use.
Think about this for a moment. If, for example, your business owns the land on which it sits and operates, and the governing authority, a city perhaps, decides they want to have something else there instead, then they can change the zoning of the land and force your business to move or just shut down. This can cost some serious money that cannot be recovered. Do you sell the real property to a developer so they can build to the new specs, or do you do it yourself? Do you just shut down the business, or do you buy or rent another tract of land and relocate? Decisions, decisions, and none of them particularly good choices. Talk about getting stripped down.
Standing in the way of such extreme power is the First Amendment “freedom of speech.” If you can fit your land use into freedom of speech, or perhaps freedom of religion, then you have a chance to overcome the massive governmental zoning power. Sexually Oriented Businesses (SOBs) support free speech, in fact the more the….well, less. The lesson of this case is that if the government can do it to an SOB, you can be relatively sure they can do it to any other type of business. At the end of this article I have some practical suggestions for how to deal with land use regulation disputes and negotiations.
Houston first began its attempts to regulate SOBs in 1977 with city ordinances. Now, keep in mind that Houston does not have a full blown, formal zoning code. Cities are required by state law to follow a specific procedure to draft and enact “zoning regulations”. While these ‘97 SOB regulations have the effect of a zoning ordinance, they’re not part of a comprehensive land use plan. This is a mere city ordinance that governs SOBs, and no more.
Why do I mention this? Because the SOBs argued that these ‘97 regs were “zoning ordinances”, and as such were illegal because Houston didn’t follow the right process in writing and enacting them. The Court just said, in effect, “the regs may look like a duck, walk like a duck, and talk like a duck, but that doesn’t mean they’re a duck.” It’s the least persuasive part of the whole opinion. But then all of us professionals get stumped when we have to deal with “land use” in the city of Houston.
Well, twenty years after its first regulations, Houston was still at it. These ‘97 Houston SOB regulations amendments:
1. Increased the minimum distance from 750 feet to 1,500 feet between an SOB and a protected land use (e.g school, church);
2. Added public parks to the list of protected land uses;
3. Added amortization provisions (forced change in land use within a certain period of time)
4. Added requirements regarding interior lighting, design and layout; and
5. Required the licensing (and conspicuous display of same) of entertainers and managers.
As you might guess, the clubs, their owners, the managers and entertainers all saw these new regulations as decreasing the amount of money there was to make in this highly lucrative industry, and forcing them to incur costs to comply with these new rules. Plus, for the entertainers, where in the world are they supposed to wear their license? “Houston, we have a problem.”
But for the existence of the First Amendment, all of these new regulations are perfectly legal and enforceable. So if you own a piece of real estate, the government can make you do all of these things with your land, including requiring you (or your tenants) to operate in particular ways at particular locations.
Now, here at the outset, let’s look at some of the creative names these SOB joints use. I mean, this is just too much fun to pass up. There’s “Dee & Dee Enterprises, Inc.”, for the well endowed (if it was a cattle brand, we’d call it the “Double D”–see how this works?), there’s “BJ’s 24 Hour Newsstand”, with more stimulation and stamina than Viagra, “The Trophy Club” for sportsmen, or perhaps the place where former trophy wives perform, “Studz News”, lest we think women are the only ones working, “Dong Kyong Modeling Studio”, enough said, and finally, making this list by international reputation alone, it’s “Trumps, Inc., d/b/a/ Rick’s Cabaret.” Ever wonder what suit is trumps? Maybe it’s the lack of a suit in this instance.
Let’s start with the most controversial part of this, the so-called amortization provision. Houston generously gave the businesses affected by the new distance regulations a whopping 180 days following the adoption of these new regs, to move to a new location that was in compliance. Six months, that was all. And the Fifth Circuit said “we don’t see a problem there, especially considering this litigation has given them a longer time period anyway” and didn’t really discuss it in more detail. Now THAT’s power.
More substantively, the legal test for these sort of “free speech” restrictions has three parts:
1. Is the ordinance a time, place and manner regulation?
2. Is the ordinance aimed at (A) the content of sexually-oriented speech (content based) or (B) the “speech’s” secondary effects on the community (content neutral)?
3. Is the ordinance designed to serve a substantial governmental interest, leaving open reasonable alternative avenues of communication?
In this case the answers were “yes”, “B” and “yes,” resulting in “Houston, you’re good to go.”
These new regulations affect the time, place and/or manner of the regulated acts. BUT they are not censorship. They don’t restrict what the entertainers and managers can, and cannot, do. This is a critical conclusion, because if the regulations were “content based,” they would be subjected to much greater court scrutiny.
What are the “secondary effects” of SOBs, you ask? Well, this is the key that opened the Pandora’s box of success for all of the modern era SOB regulation. It started with a 1995 U.S. Supremes case that came out of Los Angeles, no less. There, the city conducted formal studies of all sorts of factors, most importantly including crime rates and property values in different areas of the city. LA was able to “show,” through cold statistics, the hot influence of strip joints and other SOBs. Crime rates were higher in the areas around them, and they caused property values to decrease.
Both of these are “bad”, and government has a legitimate reason to reduce crime and protect its citizens’ property values, and so SOB regulations designed to do that are A-O-K. Cities don’t even have to show that the regs actually work as thought, just that they really think they will work. Cities are even allowed to experiment, and to change the rules in the course of experiments until something does work. Imagine owning a business being the subject of an experiment. Apply a constantly changing set of rules, with all the costs the changes impose, and you can see that SOBs may have a legitimate gripe on this particular point.
And so LA forced SOBs to disperse throughout the city. After that decision allowing LA’s SOB regs to stand, other cities followed LA’s example, including Houston. In fact the Houston ordinance also asserts that SOBs “can exert dehumanizing influences on churches, schools and day care centers…”, and they added auto theft, opportunities for prostitution, transmission of sexually transmitted diseases, and neighborhood blight, as additional causes for legitimate city concerns.
Next, we come to the “substantial governmental interest” and “alternative avenues of communication” test. This where things get a bit interesting. As for alternative avenues, the SOBs claimed that these new regs were designed to put them out of business because “there’s just no place to move.” But Houston countered with some statistics of its own. It could show that when the ‘97 ordinances were enacted, there were 128 SOBs in Houston, and under the ‘97 ordinances, there were at least 1,362 actual conforming SOB sites. ‘Nuff said.
Now for “governmental interest,” and here is where it gets really interesting. Houston’s new rules required entrances to “entertainment rooms” to be free from obstacles or obscurities, including doors. How in the world could there be a governmental interest in keeping sight lines good in a strip joint? The SOBs were legitimately upset about this because doors are needed to maintain a “different musical ambience in each of the rooms….The purpose of the door is thus to minimize ambient noise.” But said the Court:
the First Amendment protects topless dancing from clothing, not musical accompaniment from ambient noise.
And finally, of course, the SOBs objected to having their entertainers and managers wear their licenses. Houston won on this too, because the Court bought the argument that Vice Cops need to be able to determine quickly, from a distance, and without being intrusive, whether entertainers or managers had licenses or not, and who (if any) was engaging in or permitting any illegal behavior.
If the occurrence of illegal behavior in SOBs is more of a revelation for you, consider the testimony of some of Houston’s finest Vice Cops in support of these regs. Apparently, dancers ask patrons (including Vice Cops, it turns out) to give them money to tip the staff in the area of the club, so the staff/management will literally look the other way while they do their table or lap dance. That way, they can get a little more carried away with their “performance” than the law allows. Doors and other obstructions aid their desire for privacy.
And a couple of Vice Cops got dang near assaulted in these joints. One testified that 2 dancers had a conversation right in front of him about whether the manager was “cool” with their moves, and it was settled by the manager himself, who assured them all of his hipness. Then, the 2 dancers “were willing to perform sex acts on me at the club”–right then and there. “They wanted to go through with it. I had to get out of it and did not want to go through with it.” That was his exact testimony.
Yet another Vice Cop said he watched as a couple of dancers “along with another dancer engaged in sex with one another as well as [indicating they were] willing to engage in sex with [individuals] who they thought were my business partners, but were other police officers.”
You just gotta feel for the lack of luck on the part of these entertainers, don’t you? In any event, this sort of bad behavior also supports the “no doors, obstructions or obscurities” policy as well. And so, now there are just no secrets inside a Houston SOB anymore. Everything’s out in the open. Literally.
And Houston Vice can now walk in, quickly check the licenses without obstruction, catch the 9:30 show, and be out by………midnight. All in a hard day’s work. And that’s the naked truth about a very lengthy 64 page court opinion. If the government can do it to SOBs, they can do it to your business.
How do you counteract this power? Well, I’ve been there and done that (with mainstream businesses, not strip clubs). I’ve testified before planning commissions, P&Z boards, and city councils. There are three rules. First rule: pay attention to politics. Not just local networking, but understanding the goals of the political bodies and persons with whom you have to deal. Get to know the city’s agenda for land use and development. Develop and emphasize the positives of your operation, like its creation of employment and payment of wages. Show the positive impact your business will have on their tax base, just to name a couple of specific examples.
Rule No. 2. If you are not a seasoned veteran at this, hire one.
And Rule No. 3: on the front end, before you buy or lease property, check the zoning to make sure the land use will be compatible with current regulations. Every major Texas city other than Houston has a master plan for land use. Many of them are available online. Get it and review it. Condition purchases and leases on obtaining appropriate zoning to allow you to do what you want how you want (or use a feasibility period to figure this out).
Bottom line, zoning regulations are negotiable–their drafting, figuring out how they apply, and in the enforcement. It’s all negotiable. And while zoning power is almost absolute, there are limits to the exercise of that power, both procedural and substantive, and there are times when you may be entitled to compensation for the government’s actions.
Land use is one of the hottest, most rapidly growing areas of the law. It will continue to be, as cities and suburbs try to fight urban blight and suburban and exurban sprawl. And anytime you get involved in a land use dispute, remember Rule No. 2.
N.W. Enterprises, Inc., et al. v. City of Houston, Case No. 98-20255, U.S. Court of Appeals for the 5th Circuit, November 25, 2003.