Amortization Schedules

A city's zoning code section amortizing nonconforming uses in the form of adult use establishments was invalidated because it failed to satisfy requirements of a procedural statute. However, the Minnesota Court of Appeals upheld the constitutionality of the regulatory scheme applicable to adult-use establishments in other ordinances.

An article in a university newspaper in St. Cloud, Minn., exposed allegations of high-risk sexual activity in and around the only adult bookstore in town and a link to the spread of AIDS. The city council responded by conducting hearings in which a former bookstore employee and neighboring businesses complained about sexual activity in and around the bookstore. The city council enacted a zoning ordinance regulating high-risk sexual conduct.

The city health department inspected the bookstore and cited ordinance violations, noting evidence of dried human semen on the interior of the store's private viewing booths. Around this time, the city council conducted further hearings on citizen complaints of cruising and sexual solicitations around the bookstore. The city council also studied case law and the Minnesota Attorney General's report on regulating sexually oriented businesses. The city council considered and adopted another ordinance allowing adult entertainment businesses to be located only in areas zoned industrial and no closer than specified distances from schools, churches, and property zoned residential.

The city council referred to the planning commission another ordinance which required that nonconforming adult-use establishments be phased out over a two-year amortization schedules period. The commission did not recommend the ordinance but referred it to a subcommittee for study. Less than a month later, the city council held a public hearing and adopted it without the study or the commission's recommendation.

DI Mia Corporation, the operator of the adult bookstore; Malcolm Inc., the owner of the bookstore property; and Compel Corporation, the former operator of a failed non-alcoholic nightclub featuring nude dancing (which police had raided under the ordinances), challenged the adult-use ordinances. The plaintiffs claimed the ordinances were unconstitutional and violated state law. They sought declaratory, injunctive and money damages relief. The trial court ruled in the city's favor.

On appeal, the plaintiffs argued that the ordinances infringed on their constitutional rights and violated state law, specifically Minn. State 462.357, in enacting the ordinances. The plaintiffs argued that the city council violated 462.357 subd. 4 which provides that zoning amendments should either be initiated by the planning commission or referred to the commission for review.

The city council cannot act on an amendment until either the commission recommends the amendment or 60 days have elapsed since it referred the amendment to the commission. In this case, the appellate court noted that the commission had not recommended the amortization amendment and 60 days had not passed from the time the city council referred it to the commission to the time the city council passed the amendment. Therefore, the appellate court found the amortization ordinance invalid for failing to comply with state law.