case study : policy

ADULT BUSINESSES IN ALTA VALLEY

John W. Ostrowski, Professor Graduate Center for Public Policy and Administration

California State University 1250 Bellflower Blvd. Long Beach, CA 90840 Phone: (562)985-4178

Email: John. [email protected]

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Adult Businesses in Alta Valle

The City of Alta Valle faces a serious decision on the revision of their adult

business ordinance. The previous ordinance was declared unconstitutional by the State

Supreme Court last year. The Court granted a one-year stay on the approval of new

business licenses for adult-oriented businesses in Alta Valle. That stay will expire in

three months and the City still hasn’t been able to act on a replacement adult business

ordinance. The issue is both complex and controversial in the community but a new

ordinance must be proposed soon or the City will not be able to provide any regulation

for adult businesses.

The City

Alta Valle is a mid-size city of about 200,000 population located near the

southern coast of a western state. Historically, Alta Valle developed as an agricultural

shipping port. The advent of the railroad brought an end to that industry in the city. In

the 20th century, Alta Valle developed as a resort destination and, later, into a

community with a large number of retirees. In 2002, the U.S. Army reactivated a moth-

balled supply depot just east of the City as a joint-forces training center. This brought

many military families to live in the City. In the late 1990s, The Coalition for Family

Values relocated their national headquarters to Alta Valle and is now one of the City’s

largest single employers. During the mid-2000s, a consortium of developers bought up

several of the existing (old) resort properties in the City and redeveloped them into a

large convention center, entertainment/retail complex and several resorts. This complex

is the largest employer in the City and provides over 40% of local government revenue.

The population of the City is divided into three distinct groups: older retirees, families

primarily employed by the Coalition for Family Values or the Convention Center

Complex and younger members of the military and military families. Traditionally,

conservative politics have been dominant in the City although two younger, more liberal

city council members have been recently elected.

The ordinance

For many years, Alta Valle had an extremely restrictive ordinance on the opening

of adult businesses. The ordinance was very specific in banning certain types of

businesses from the City, including:

 Massage parlors

 Tattoo parlors

 “Head” shops

 Lingerie/adult novelty stores

 Adult bookstores/video stores

 Adult movie theaters

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 Topless or nude bars or cabarets

 Private clubs

And more. The result effectively banned any adult businesses from operating within the

Alta Valle city limits.

A side effect of the law was that it prevented a number of organizations from using

the convention center for exhibitions or conventions. For example, Convention Center

use permits were refused for:

 Reggae Fest

 Tattoo Con

 Adult Con

 U.S. Hemp Association convention

 Indie Film Fest

 Solstice Bacchanalia

The City Finance Director, responding to a query from one of the newly-elected council

members, estimated that the City lost as much at $15 million a year in potential revenue

from the banned convention activities. It needs to be noted that the convention center

has yet to turn a profit due to limited use.

In 2010, the Convention Center Consortium owners filed suit against the City to

permit a broader variety of activities to be scheduled in the Center. That case, essentially

challenging the City’s adult business ordinance, was initially lost in local court but

eventually overturned by the State Supreme Court. That decision produced the current

issue confronting the City. The stay on permits for adult businesses allowed in the Court

decision will expire in three months. If Alta Valle does not have a new ordinance,

acceptable to the Court, the City will lose its ability to provide any regulation of adult

businesses.

The community

There are strong emotions in the community relating to a new adult business

ordinance. While the traditionally conservative philosophy of the city’s residents would

seem to make the development of an ordinance as restrictive as acceptable to the Court

a foregone conclusion, there are other strong interests who favor a more liberal

business-oriented approach to the issue. This divergence in outlook is causing

substantial conflict both within the city government and the community.

The Coalition for Family Values is clearly the strongest supporter for a very

restrictive ordinance. The Coalition counts the mayor of Alta Valle as a board member

and two council members are also senior officials in the Coalition. Together, these city

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council members have so far been successful in preventing the city council from even

hearing any staff proposals for other than the most restrictive of ordinances. The

Coalition has promised to legally challenge any ordinance that they feel does not meet

their interests. As an ultimate response, the Coalition is threatening to move their

headquarters and annual convention to another city if Alta Valle allows “depraved and

immoral” businesses to locate in the City. This would cost the City as much as $7 million

a year in revenues and the loss of over 1,000 jobs directly tied to the Coalition

headquarters.

The consortium of developers that own the convention complex provided the,

ultimately successful, challenge to the old ordinance. Their position is that denying

permits for convention center use to organizations that are readily accepted in other

convention cities simply makes it impossible for the convention center to turn a profit,

thereby threatening the financial solvency of the center itself. To reinforce its desire for

a less restrictive ordinance, the consortium has been actively soliciting more business-

friendly candidates for city council and both the planning commission and zoning

board. Their financial support was instrumental in securing the election of two new

council members who are strongly on the side of a less restrictive ordinance. The

developers are providing very significant financial backing for two more city council

candidates and several potential planning commission and zoning board members for

the election to be held later this year (after the ordinance grace period expires,

however.) The consortium is claiming that without significantly more business for the

convention center, they will be forced to declare bankruptcy and shutter the entire

convention center complex. This would result in the loss of several thousand jobs in the

city and eliminate the single largest source of city tax revenues at a time when Alta Valle

finances are marginal at best.

The executive side of the City government, led by the new City Manager and the

Finance Director, see the ordinance conflict as potentially devastating to the City’s

finances. The Finance Department recently released a report detailing the revenues

provided by the convention center complex and the potential revenues lost over the last

five years through denial of permits for convention center use. In sum, the report

estimates a loss of over $15 million per year in potential revenues, just from the

convention center. If Alta Valle adopted an ordinance similar to that in force in many

similar-sized cities in the state, the City could expect an additional $2 to $3 million in

tax revenues. The report estimated that Alta Valle would increase its commercial

business occupancy rate by up to 15% and could add as many as 1,500 new jobs.

According to the Finance Director, the new revenues would effectively end Alta Valle’s

financial problems and put the city in a far more stable financial situation.

The perspective of the City Attorney is also one of serious concern. While the City

Attorney’s office has not raised any legal objections to a less restrictive ordinance, she

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has two concerns: First, the City’s legal reserves were completely drained in the last legal

battle. If the new ordinance is challenged in the courts, for any reason, the City will not

have the money to defend it. Second, the City Attorney, citing the case-loads from cities

with less restrictive adult business ordinances, foresees a significant increase in her

office’s workload from both increased crimes (mostly misdemeanors) and code

enforcement cases. She is concerned her office will not be provided the financial

resources or manpower to deal with the increase.

The local Chamber of Commerce is also dealing with internal conflicts on this

issue. Several members who are owners of retail/commercial buildings with low

occupancy are pushing for a much less restrictive ordinance. It is their view that a less

restrictive ordinance would encourage more business to open in their buildings,

increasing occupancy and income. Other members are opposed to allowing adult-type

businesses in the community.

The Council of PTAs for the local schools, the various scouting organizations in

the community and all of the “fraternal” organizations (e.g. Lions, Masons, etc.) are

siding with the position of the Coalition for Family Values in opposing any adult

businesses.

In a recent poll taken by one of the local TV stations, an almost perfect 3-way

split was found concerning adoption of a less-restrictive adult ordinance. In favor: 34%,

opposed: 35%, no opinion: 31%. To the surprise of no one, many supporters were found

to be younger, better educated and more liberal in their politics in general. What was

surprising was the substantial support for a less restrictive ordinance from the retiree

population, where overall support was a little over 52%.

The New Ordinance

Since the State Supreme Court ruling, the City Planning Department and City

Attorney’s office have been working to produce an ordinance that will be acceptable to

all sides of the conflict. This has not been easy. Extensive research was conducted on

existing and model adult business ordinances (see Appendix A for sample URLs.) It

became clear early in the process that there was a clear bias in published model

ordinances favoring a very restrictive approach. City planners continue to have a very

difficult time finding an “adult business” ordinance that is not designed to be severely

restrictive. Cities that are more permissive to adult businesses often have no specific

ordinance but regulate such businesses as part of the normal business licensing and

zoning procedures. (See Appendix B for sample URLs.) Clearly, the city of Alta Valle

faces a complex and politically explosive task in dealing with this issue. This is made all

the more critical by the short, three month period remaining in the Court’s stay of

license approvals. If the City desires to provide any direct regulation of adult businesses,

a new ordinance must be developed and adopted quickly.

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While no specific ordinance proposal has yet been heard by City Council, the

analysts from the City Planning Department and City Attorney’s Office have developed

several alternative strategies that could be pursued:

Most restrictive.

The most restrictive option would be a modification to the previous ordinance that still

seeks to ban most adult businesses from the City. This approach would specifically

define all the types of adult business that would be prohibited or restricted. While the

State Supreme Court made it clear that banning all adult businesses from a city was not

acceptable, no mention was made of severely restricting the issuance of multiple

business licenses for the same type of adult business. This approach would restrict both

zoning and the number of licenses that could be issued. Zoning would confine any adult

businesses to very limited areas in industrial parks, prevent any advertising and limit

the issuance of more than one license for the same type of business. This strategy would

continue to prohibit the convention center from booking adult-oriented exhibits and

conventions since the center itself would not be in the adult-zoned area. While this

approach is favored by the Coalition, the City Attorney is afraid it would immediately

generate lawsuits that the City could not afford to defend. Following this approach

would add very little to the City’s revenue.

The “Red-light District” approach.

This approach essentially confines adult businesses to a specific “red-light” district and

prohibits any from locating outside of the special zoning area. This approach has been

documented over the years and used in cities such as Amsterdam, Boston, Toronto and

Chicago. Once a popular way of controlling adult businesses, the red-light district has

fallen out of favor with most urban planners and many cities once host to such districts

(such as Boston and Washington, D.C.) have seen the businesses move from the cities to

less zoning-restrictive suburbs. One difficult point in attempting to adopt this approach

in Alta Valle is the convention center. The Consortium has made it clear they will not

accept any ordinance that includes the convention center complex in a special red-light

district. This approach is also opposed by the Chamber of Commerce and the Coalition.

The value to City revenues is difficult to calculate since much would depend on the

location chosen.

Exclusionary Zoning

One approach that can be used to both limit and disperse adult businesses within a city

is the use of exclusionary zoning practices. In this approach, the zoning code is modified

to prevent the location of adult business within a certain distance of “sensitive” sites.

These sites usually include schools, churches, parks and sometimes, hospitals. By

creating no-permit zones around these sites, the City is able to significantly restrict

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where adult businesses may open. Different cities employ different buffer zones. For

example, the zone may be 1,000 feet from a school, 500 feet from a park or church or

vary by specific topography. The common use of GIS systems makes establishing these

zones very easy and cities can use GIS to simulate multiple buffer zone options until

they find one that works. This approach would clearly get around the State Supreme

Court ruling while still offering substantial control of business location. Of course, no

business are banned outright under this approach but each application must pass

extremely stringent location testing that effectively limits the issuance of business

permits. The Coalition for Family Values opposes this approach since it would allow

some adult businesses in the City. Local business owners fear it would be too restrictive

and would not offer much aid in filling empty stores. The Convention Center

Consortium faces a problem since the convention center is located very close to a park,

an elementary school and two churches. Employing exclusionary zoning would likely

catch the convention center as well, unless a specific exemption is granted. In recent

years, exclusionary zoning practices are coming under increased legal pressure (see

Appendix C) and may prove extremely difficult and expensive for the City to defend.

No Ordinance

The approach most favored by the Convention Center Consortium, local business real-

estate owners and potential adult business owners is simply treating adult business

applications like any other business permit application. In this approach, there is no

need for an adult business ordinance since each permit is considered on individual

merits. This approach has the support of the Zoning Board since it would essentially

give the Board final say. The City Finance Director estimates that the City would

significantly improve its revenue base under this approach. The estimates are between

$12 million and $18 million per year. This would effectively eliminate the City’s current

financial crisis and prevent further service cutbacks or employee layoffs. The Coalition

for Family Values has threatened to move their headquarters and national convention to

a more “moral” city if this approach is adopted.

Clearly, this is a critical issue for Alta Valle, with serious consequences whichever

way the City decides to go. The issue is further complicated by the short time remaining

for the City to act.

Discussion Questions:

1. What is the central policy issue in this case study? What are the

dimensions/boundaries of the issue? Is this more of an economic or political

issue? Why?

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2. Who are the key stakeholders for this issue? What are their positions, degree of

influence and preferred policy outcome?

3. What are the policy alternatives proposed in the case study? Are there worthwhile

alternatives that were not presented? If so, what are they and what positions

would the key stakeholders take on the new alternatives?

4. How significantly should the threats posed by the Consortium and the Coalition

be taken by the City in arriving at a final policy solution?

5. What would be a good analytical strategy for the City to use in assessing each of

the proposed policy alternatives? Which solution is most likely to be chosen?

Why?

Appendix A: Model Adult Business Ordinances

1. www.ohioattorneygeneral.gov/adultentertainmentestablishments.aspx

2. www.pittcountync.gov/bcc/ordinance/planning/2.pdf

3. http://naturistaction.org/Local_Issues/Thousand_Oaks/1KOaks_memo_re_ad

ult_businesse/1KOaks_Adult_business_ordinanc/1koaks_adult_business_ordin

anc.html

4. http://www.co.cass.mn.us/ordinances/200001_adult.pdf

5. http://www.maine.gov/spo/landuse/docs/techassist/AdultEntertainmentEstabli

shments.pdf

Appendix B: Planning and Zoning Regulation of Adult Businesses

1. http://www.moralityinmedia.org/full_article.php?article_no=324

2. Linda Kimbell, First Amendment: Zoning of Adult Business No Cure-All, 6 Loy. L.A. Ent. L. Rev. 183 (1986). Available at: http://digitalcommons.lmu.edu/elr/vol6/iss1/14

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3. http://articles.baltimoresun.com/2010-07-06/news/bs-md-co-adult-business-

ban-20100706_1_adult-businesses-tattoo-and-body-piercing-shops-family-

facilities

4. http://www.wave3.com/story/14383024/clarksville-town-council-approves-

new-adult-businesses-zoning-guidelines

5. http://learningstore.uwex.edu/Zoning-and-Adult-Entertainment-Businesses-

020211-P1564.aspx

6. http://cama.ctbar.org/2_5_10_7.pdf

7. http://www.twosheds.com/detroitOrdinance/documents/20110222-

plaintiffs_response_to_motion_for_judgement_on_the_pleadings/C-2.pdf

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Appendix C: Exclusionary Zoning for Adult Businesses

1. http://lawprofessors.typepad.com/land_use/2011/03/smith-and-bailey-on-

restrictive-zoning-for-adult-usessexually-oriented-businesses.html

2. http://www.directessays.com/viewpaper/95321.html

3. http://www.ga-lawyers.pro/Zoning/A-Survey-of-Recent-Federal-Zoning-

Cases.pdf

4. http://ir.lawnet.fordham.edu/cgi/viewcontent.cgi?article=4782&context=flr&sei

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