Permitting Issues In Outdoor Advertising
by Timothy F. O’Leary

The most difficult obstacle which companies must overcome when they seek to enter the outdoor advertising industry, or obtain locations from an operating outdoor advertiser, is insuring that each location has obtained valid, local and state permits. Understanding permitting issues is essential to preserve the value of the asset for the customer who advertises products on the locations and any company which might wish to add the location to its inventory.

Permits are subject to local (i.e., city and/or county), state, and federal regulations. The federal government generally has delegated enforcement of its regulations to the states. In California and most other jurisdictions, if the advertising structure is visible and within 660’ feet of a federal freeway or highway, the sign must comply with state permitting and registration requirements. Visible means that it can be seen, and not whether the print is legible.

It is not always clear what a "federal" highway or freeway is. Maps of federal highways and freeways are on record at state regulatory agencies. Outdoor advertisers are sometimes surprised to discover that a "surface street" (i.e., located within a busy intersection) was originally built with federal funds many years ago (Van Ness Avenue in San Francisco is an example), and is thus subject to state permitting regulations.

The only thing more difficult than obtaining state permits for outdoor advertising is obtaining local permits. Most jurisdictions throughout the United States prohibit the construction of new outdoor advertising structures, such as billboards. In those jurisdictions, all outdoor advertising structures are "grandfathered" if they were properly permitted when the structure was initially constructed. Those structures can remain despite the existence of legislation which prohibits the construction of new structures.

If a municipality requires that an outdoor advertiser remove a structure, the municipality must pay the "fair market value" of the sign that is removed. Some jurisdictions, most recently the City of Oakland, have enacted "amortization" legislation designed to gradually terminate the advertising structures without the payment of just compensation. Such legislation is based on the theory that because the outdoor advertiser has utilized the benefits of the location for a significant amount of time, no compensation is owed.

Though nearly every jurisdiction prohibits the construction of new billboards, some cities, including San Francisco, Oakland, and certain cities in Southern California, allow outdoor advertisers to paint "wallscapes." Unlike a billboard, which sits on an advertising structure mounted on a roof or embedded into the ground, wallscapes are painted directly on the wall. The jurisdictions that allow wallscapes allow them in certain parts within the city (generally commercial districts). If the wallscapes are not located along federal highways, then a state permit is not required. If the state permit is not required, then the outdoor advertiser need not register as an outdoor advertiser pursuant to state law. As long as a local building permit is obtained, the outdoor advertising is permitted.

In dealing with permitting issues at the local level, outdoor advertisers also must recognize the differences between "off-premise" and "on-premise" advertising. "Off-premise" advertising is more valuable because the advertiser can sell the space to a variety of customers, but is subject to state and more rigorous local regulations. "On-premise" advertising is limited to advertising products or goods of customers who have an office at that location. While most ordinances tolerate "on-premise" advertising more so than "off-premise" advertising, the local ordinance must be reviewed carefully to determine whether a substantial part of the customer’s business must be performed at the location to qualify for on-premise advertising. A sign that only has been used for "on-premise" advertising may need state and local permits before it can be used for off-premise advertising.

If an advertiser wants to build value in its business, ensuring that the locations are properly permitted under local and state law will bring the type of long-term returns which enhance the value of a sign location for the company and its customers.