TITLE:  Case Law Pertaining to Constitutionality of Billboard Amortization by State and Local Governments, B-302809, November 12, 2004
BNUMBER:  B-302809
DATE:  November 12, 2004
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   B-302809

   November 12, 2004

   The Honorable Mike McIntyre

   U. S. House of Representatives

   Subject: Case Law Pertaining to Constitutionality of Billboard
Amortization by State and Local Governments

   Dear Mr. McIntyre:

   This responds to your request for an update of our February 6, 1991
opinion to Senator Chafee, B-239187 (Enclosure 1), summarizing case law
regarding the permissibility of billboard amortization under the U.S.
Constitution.  At the time of our 1991 opinion, the vast majority of cases
had upheld the ral practice of amortization as constitutional; some courts
also addressed, on a case-by-case basis, whether a particular amortization
practice was constitutional.  As discussed below and in Enclosure 2, the
small number of additional cases involving billboard amortization decided
since 1991 have likewise upheld this practice, ruling that billboard
restrictions which provided for an amortization period did not rise to the
level of a "taking" triggering constitutional compensation obligations.

   Background

   The Takings Clause of the Fifth Amendment to the Constitution prohibits
the federal government from taking private property for public use unless
the government provides "just compensation."  The courts have long imposed
these same obligations on state and local governments through the
Fourteenth Amendment.  See, e.g., Chicago, B. & Q. R.R. v. City of
Chicago, 166 U.S. 226 (1897).  Under the government's inherent "police
power," the use of private property may be reasonably regulated and
restricted through zoning or other land use laws, as long as the
regulation bears a substantial relationship to the public health, safety,
convenience or general welfare.  See, e.g., Penn Central Transp. Co. v.
City of New York, 438 U.S. 104 (1978).  The Supreme Court has specifically
applied these principles in the context of billboards, holding that a
local ordinance excluding billboards (among other things) from a village
residential district was a permissible exercise of municipal power. 
Village of Euclid v. Ambler Realty Co., 272 U.S. 365 (1926).  When such
regulations effectively take the billboard owner's property, however, by
eliminating or severely restricting the owner's reasonable
investment-backed expectations, they may rise to the level of a so-called
regulatory taking and require compensation under the Takings Clause.  See,
e.g., Penn Central, above.

   State and local laws restricting or prohibiting billboard use are an
example of such public welfare regulations.  In a number of cases, the
restrictions are mitigated by inclusion of a phase-in period, allowing the
billboard owner to continue using the billboard for a specified period
after which it is considered a non-conforming use and must be removed. 
This phase-in is referred to as amortization.  Billboard owners have
argued that the restrictions constitute a taking of their property and
that the taking is unconstitutional because the government has not paid
them monetary compensation.  Governments have responded that the
restrictions do not rise to the level of a taking, because of the effect
of the amortization, or that even if there is a taking, amortization
constitutes just compensation.  In either case, the governments believe,
amortization is constitutional.
    
Our 1991 Opinion and Subsequent Case Law
    
Our 1991 opinion reviewed a number of cases in which billboard
amortization was challenged on constitutional grounds.  These cases,
representing the decisions of three federal appellate courts and 17 state
courts, and amortization periods ranging from one year to 10 years,
uniformly rejected the argument that amortization was a per se violation
of the Takings Clause.  As we explained, however, in deciding whether a
particular amortization scheme was reasonable and constituted just
compensation, courts were required to carefully weigh a number of factors
reflecting public and private interests. [1]

    A 

   As identified in Enclosure 2, there have been only five additional cases
reported since 1991 ruling on the constitutionality of billboard
amortization as a general practice, none of which has held that an
ordinance's amortization feature rendered it unconstitutional. [2]   None
of the courts we cited in 1991 has repudiated its earlier analysis; none
of the billboard decisions has been overruled by a higher court; and the
U.S. Supreme Court has declined to review one billboard amortization case.
[3]   Courts have continued to evaluate the constitutionality of billboard
amortization laws based on the reasonableness of the amortization period
and other factors discussed in our 1991 opinion. [4]   In Outdoor
Graphics, Inc. v. City of Burlington, 103 F.3d 690 (8th Cir. 1996), for
example, the United States Court of Appeals for the Eighth Circuit joined
the Fourth, Fifth, and Tenth Circuits, whose opinions we cited in our 1991
opinion, in rejecting a constitutional challenge to the use of
amortization.  The billboards in City of Burlington had been purchased at
a "bargain price" after a billboard ban with a 5-year phase-in
amortization period had gone into effect.  Under these circumstances, the
court ruled, the billboard owner had no reasonable investment-backed
expectation that it could continue using its non-conforming billboards
indefinitely, so there was no taking triggering the constitutional
compensation requirement.

   In the only significant development in the amortization arena since 1991,
one of the few courts that had previously found amortization to be
unconstitutional*in a

   non-billboard context*has changed its position.  In Board of Zoning
Appeals v. Leisz, 702 N.E.2d 1026 (Ind. 1998), the Indiana Supreme Court
overruled its 1983 decision in Ailes v. Decatur County Area Planning
Comm., 448 N.E.2d 1057 (Ind. 1983), cert. denied, 465 U.S. 1100 (1984), in
which the court had ruled that amortization is unconstitutional per se
under the Fifth Amendment.  The Leisz court recognized that its earlier
decision in Ailes was inconsistent with the decisions of other state and
federal courts:

   With the sole exception of this Court's decision in Ailes, state courts
that have found amortization provisions unconstitutional have done so on
the basis of their state constitution.  We can only conclude that Ailes,
in holding that amortization provisions are unconstitutional per se,
incorrectly decided an issue of federal constitutional law. No issue has
been raised and we express no opinion as to any state constitutional
point.

   Leisz, 702 N.E.2d at 1032 (citations omitted).  Thus, Indiana has now
joined the other state and federal courts that have found amortization to
be constitutional under the Fifth Amendment.

  A 

   It is useful to understand the broader context in which billboard
regulations have been enacted, to explain why there have been relatively
few decisions addressing the permissibility of billboard amortization
under the U.S. Constitution.  One reason is that the practice is often
expressly prohibited by state statute, meaning that courts in those states
are not called upon to rule on whether it would be constitutional.  More
than a third of states have enacted such legislation. [5]   In Eller Media
Co. v. Montgomery County, 795 A.2d 728 (Md. Ct. Spec. Apps. 2002), for
example, the court ruled that a Maryland state law requiring that just
compensation be made in the form of a monetary payment superseded a local
ordinance providing for an amortization period.  The court stated that
"[f]air compensation, as defined in [Md. Code Ann. 25-122E(a),] must be
paid even if a reasonable amortization period was provided for in the
ordinance."  Id. at 739.  A second reason for the small number of
billboard amortization constitutionality cases is that courts sometimes
strike down state amortization laws under state constitutions, rather than
the U.S. Constitution, so the question of their status under federal law
is not reached.  See generally Pa. Northwestern Distributors, Inc. v.
Zoning Hearing Bd., 584 A.2d 1372 (Pa. 1991) (local non-billboard
amortization ordinance violated Article I, section 1 of Pennsylvania
constitution).

   Finally, in practice, certain provisions of the federal Highway
Beautification Act have prompted states to prohibit localities from
providing billboard amortization as a way of compensating owners for lost
use of their property, again meaning that courts are not called upon to
address the constitutionality of this practice.  As amended in 1978, the
Highway Beautification Act requires that states exercise "effective
control" of billboards located along federal interstate or primary
highways.  A state that fails to do so faces the loss of 10 percent of its
federal highway funds.  23 U.S.C. S 131(b).  The Act permits certain
informational or historic billboards, 23 U.S.C. S 131(c), as well as
billboards maintained pursuant to agreement with the U.S. Department of
Transportation, 23 U.S.C. S 131(d), but all other billboards must be
removed and states must contribute 25 percent of the resulting requisite
"just compensation" (the federal government pays the remaining 75
percent).  23 U.S.C. S 131(g).  Thus while the statute does not directly
prohibit amortization, it creates a "powerful incentive" for states to
prohibit local governments from using amortization as a means of
compensating for billboard restrictions.  See National Advertising Co. v.
City of Ashland, Ore., 678 F.2d 106, 107 (9th Cir. 1982).  As one
commenter has explained, the practical effect of the Act has been to serve
as a shield, protecting billboards covered by the statute from removal by
state and local governments who would otherwise use amortization.  See
Floyd, footnote 5 above, 3 Wash. U. J. L. & Pol'y at 375. 

  Conclusion

   The overwhelming majority of court decisions addressing the permissibility
of billboard amortization under the U.S. Constitution, both before and
since our 1991 opinion, have upheld this practice, either because
ordinances incorporating amortization have been found not to constitute a
taking or, if the ordinances are deemed takings, amortization has been
found to constitute just compensation.  There have been relatively few
billboard amortization decisions overall, however, for a variety of
reasons, including that some states prohibit localities from using
amortization, some state constitutions have been interpreted as
prohibiting amortization, and the Highway Beautification Act has had the
practical effect of limiting localities in some states from using
amortization as a means of compensating for billboard restrictions. 

    
If you have any questions regarding this opinion, please contact Susan D.
Sawtelle, Associate General Counsel, at (202) 512-6417, Doreen S. Feldman,
Assistant General Counsel, at (202) 512-8264, or Barbara R. Timmerman,
Senior Attorney, at (202) 512-8265.A 

   Sincerely yours,

   /Signed/

   Anthony H. Gamboa
General Counsel

   Enclosures - 2 [PLEASE REFER TO THE PDF FILE FOR THE ENCLOSURES]

   ------------------------

   [1] For purposes of context, our 1991 opinion also summarized cases
involving amortization for non-billboard uses.  In response to our 1991
opinion, Senator Chafee asked whether we had considered four particular
1987 Supreme Court decisions in our analysis.  By letter dated May 17,
1991, we explained that we had considered those cases but found them
inapplicable.  The cases addressed whether various takings had been for a
public versus a private purpose, rather than whether takings for a public
purpose were compensable by amortization rather than monetary payment. 

   [2] There have also been cases, not included in this letter or enclosures,
addressing the reasonableness of a particular amortization period.

   [3] See Naegele Outdoor Advertising v. City of Durham, 803 F. Supp. 1068
(M.D.N.C. 1992), aff'd, 19 F.3d 11 (4th Cir. 1994), cert. denied, 513 U.S.
928 (1994), discussed in footnote 4 below.

   [4] In our 1991 opinion, we identified the 15 factors listed by the Fourth
Circuit in Naegele Outdoor Advertising, Inc. v. City of Durham, 844 F.2d
172 (4th Cir. 1988), as typical of the case-by-case inquiry required by
the courts.  The Fourth Circuit remanded the Naegele case for factual
development regarding the amortization ordinance at issue, following which
the district court found the ordinance did not constitute a taking because
the billboard owner retained some economically viable use of its
property.  See Naegele Outdoor Advertising, Inc. v. City of Durham, 803 F.
Supp. 1068 (M.D.N.C. 1992), aff'd, 19 F.3d 11 (4th Cir. 1994), cert.
denied, 513 U.S. 928 (1994). 

   [5] Billboard amortization bans have been passed in at least nineteen
states.  See Charles F. Floyd, "Evolving Voices in Land Use Law: A
Festschrift in Honor of Daniel R. Mandelker, Part III, Zoning Aesthetics,
Chap. 5, The Takings Clause and Signs:  The Takings Issue in Billboard
Control," 3 Wash. U. J. L. & Pol'y 357 (2000) at 376.  North Carolina
passed a temporary anti-amortization statute last year, in effect through
December 31, 2004, prohibiting local governments from enacting any new
ordinance amortizing off-premises outdoor advertising or extending or
expanding any existing ordinance amortizing off-premises outdoor
advertising.  N.C. Sess. Laws 2003-432.