Ignoring Stop Sign?

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What is a city doing in the billboard business? That’s been a question since Los Angeles adopted a ban against new billboard construction in 2002 exempting itself and certain large companies.

Two lawsuits that accuse the city of Los Angeles of abusing the ban are the latest salvos in a long-running battle.

The suits argue two common points: First, that while the city has maintained a general ban against new billboard construction since 2002, it has granted numerous exemptions to favored companies. Second, the city itself enjoys the unfettered right to erect new outdoor ads on its property while prohibiting competitors from doing the same.

In April, LA Outdoor Advertising Inc. filed a suit to invalidate the ban. The main argument rests on constitutional freedom of speech. But the suit also alleges that “the city has exempted certain individuals from the ban on signage where the city finds it economically advantageous to do so.”

In August, Summit Media LLC, another billboard company, filed a suit to invalidate a 2007 settlement the city reached with CBS Outdoor and Clear Channel Communication, the two dominant players in L.A.’s billboard market. The settlement was made after CBS filed suit against the ban because it breached an earlier agreement it had reached with the city. The settlement essentially allowed the companies to upgrade old signs and put second signs on existing sign towers, and granted them exemptions from the ban in certain spots.

The Summit suit contends that settlement gives the big companies an unfair advantage.

Supporters of the ban said fewer signs would help the city’s overall appearance and improve traffic safety by eliminating distractions. However, the Summit suit said: “The fact that the city has no objection to off-site signs erected on its own property only demonstrates that the general ban of off-site signage was not motivated by any concern for aesthetics or traffic safety, but for some other reason, such as the desire to maintain a monopoly on off-site signage.”

Another motive the suit cites is “the desire to bestow valuable entitlements upon certain favored developers and sign companies by granting them signage rights in development agreements.”


Exemptions issue

Paul Fisher, the Newport Beach-based attorney who filed the LA Outdoor suit, said the city has developed a method for granting exemptions to favored companies through the city’s Community Redevelopment Agency. The fees can run into the hundreds of thousands of dollars per sign, and the city often grants exemptions.

Fisher lists CBS, Clear Channel and Hollywood developer CIM Group Inc. as among the favored companies.

The lawsuits have been filed by smaller players in the market, who feel they’ve been excluded from the market as the result of the ban and the exemptions, which can be expensive. Fisher’s client, LA Outdoor, has about 12 billboards in the city of Los Angeles, compared with 3,300 boards controlled by CBS and Clear Channel.

“It’s these massive companies that are bringing lots of money into the city,” he said. “The circumstantial evidence is that’s the reason they get the exemptions.”

Frank Mateljan, a spokesman for the City Attorney’s Office, would not address specifics of the exemptions.

“We disagree with this argument and are currently fighting these suits, on behalf of the city, in court,” he said. He wouldn’t discuss the accusations of monopoly power, either.

The recent suits delve into the economics of advertising.

One advertising agency executive who asked for anonymity said billboard prices have increased about 10 percent annually for the last five years in Los Angeles, based on increasing demand and lower supply. Lately, however, prices have slumped about 20 percent because banking, auto and mortgage companies have canceled contracts.

“There is a lot of impact on the outdoor industry from the economy,” the executive said.

On the other hand, David Angelo, president of ad agency David & Goliath LLC in El Segundo, said that the city needs to generate revenue, and charging for exemptions or renting space to advertisers is a reasonable strategy.

“We’re in a really tough economy, and I think anything the city can do to raise additional revenue is a good thing,” he said.

But the ban “is a monopolistic model, and we know that this model creates big profits for the monopolists,” said Christian Tregillis, a forensic accountant in the Los Angeles office of consulting firm LECG.

Also, Fisher said the city conducted no study on the question of billboards creating traffic distractions. In fact, “no study has ever shown a billboard to be the main cause of an accident in Caltrans records,” he said.

And if aesthetics are a real issue, Fisher asks why a company can pay a fee and make the issue disappear.

“If you are exempting people because they pay money, it calls into question the rationale in the first place,” Fisher concluded.

“I’d like a level playing field.”

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