Billboard companies consider litigation a cost of doing business. Just Google “billboard litigation” to see that billboard companies are constantly involved in lawsuits with municipalities across the country.
Accordingly, it’s time for city officials to acknowledge that getting San Jose into the billboard business is a risk that could ultimately cost the city much more than the revenue otherwise realized from a cut of outdoor advertising.
How much risk? Let’s break it down.
Back in September 2018, the City Council quietly amended the city’s sign ordinance (Chapter 23.02 of Title 23 and Council Policy 6-4) to allow new billboards on public property. This action overturned a 33-year ban on new billboards. Part of that policy includes a rule which requires an outdoor advertising company to take down some conventional billboards within the city in order to put up new digital billboards.
The problem is that this is an exclusionary policy that prevents new entrants and limits competitive bidding. If a company does not already have a billboard in San Jose, then they have nothing to offer for a swap as part of a take down requirement.
What does that lead to? Lawsuits by companies claiming unfair competition referencing a host of city policies that purport to promote open competitive bidding.
In February 2021, the City Council created another conundrum when it tabled allowing billboards on private property due to overwhelming public opposition, but then directed staff to continue pursuing opportunities on public property.
Unfortunately, the city will face almost certain litigation from the billboard industry on the grounds that a municipality cannot go into the billboard business while denying that opportunity to others on private property. Such action will be challenged as a violation of the anti-competitive provisions of federal law as explained in “The San Jose Problem,” a 2018 article in Billboard Insider, an industry publication.
Once the first digital billboard goes up, the city may find itself in court, probably lose and face any of the following consequences:
- Be forced to open public property to competitive bids from all billboard companies, thereby negating the requirement to take down existing billboards in return for each new digital one;
- Rescind the ordinance allowing new billboards on public property and take down the new digitals costing millions of taxpayer dollars to compensate billboard companies for lost future revenue, as mandated by state and applicable federal cash compensation laws;
- Open private property to digital billboards. If this occurs, it would allow at least 75 digitals on private property, in addition to the 22 proposed for pubic sites, permanently defacing the landscape of San Jose.
If you think such litigation against the city is unlikely, San Jose has already been in court for years waging an expensive legal battle to take down illegal, unpermitted digital billboards on private property adjacent to both Highway 87 and the Highway 880/101 interchange. Ironically, the city is fighting in court to prevent new digital billboards on private property on the one hand, while at the same time spending millions in taxpayer money and countless hours of city staff time to allow new digital billboards on public property.
Some outdoor advertising companies will knowingly put up an unpermitted billboard, even though they will lose in court, because the billboard being litigated is often permitted to generate advertising revenue until the court reaches a decision, as is the case of illegal billboards in San Jose. According to nonprofit Scenic America, “The billboard industry is one of the most litigious in the country…”
Fortunately, the San Jose Airport Commission voted a second time to recommend the City Council—which has final say—to abandon the proposed airport billboards and to reconsider the ill-advised rule that permitted them.
The council would be wise to follow the Airport Commission’s recommendations in a timely manner due to recent threats from the repeated appearances of Outfront Media before both the City Council and the Airport Commission.
Outfront alleges the city unlawfully applied an existing 2007 in-terminal advertising contract with Clear Channel, awarding it the right to construct new billboards at the airport rather than issuing a request for proposals and soliciting competitive bidding. Clear Channel, were it to lose the amended 2007 agreement to construct digital billboards at the airport, has implied it would sue the city for restoration of the existing contract.
Case in point, according to The Argonaut, a Los Angeles based publication, when the company was reprimanded for code violations, “Clear Channel Communications warned Los Angeles city officials not to take down any of its digital billboards or it would file a $100 million legal action.”
In the face of such trigger-happy litigants, the San Jose City Council has a fiduciary responsibility to its stakeholders, the residents, to heed these legal warning signs in evaluating the total cost-benefit to our community in pursuing digital billboards.
We urge the council to enact a moratorium on new billboards and conduct a study session of Council Policy 6-4. It’s time to review the inequities and deficiencies of this flawed policy, and consider replacement or repeal. Better yet, if the council has any doubt where the public stands on this, they can put the billboard policy question on the 2022 ballot too!
Jason Hemp, Les Levitt and John Miller are founders of No Digital Billboards in San Jose.