Land Use Update

Off-Premises Billboards and On-Premises Signs

Land Use Update Editor: Daniel R. Mandelker, Stamper Professor of Law Emeritus, Washington University School of Law, St. Louis, Missouri.

This Land Use Update explains the zoning problems of manufactured housing and recommends changes in the zoning system that can make manufactured housing more available.

One of your clients has a problem. The city rejected his application to put up a billboard because the sign ordinance prohibits off-premises signs like billboards but permits on-premises signs. He believes this distinction is unconstitutional. What would you advise?

The Off-Premises vs. On-Premises Problem

Thousands of sign ordinances have prohibited off-premises and allowed onpremises signs since the early days of sign regulation. How this difference in treatment originated is unclear, but it may have been due to differences between these sign types in the early years of sign regulation. Off-premises billboards originally were free-standing wooden structures, while on-premises signs were attached to walls. These differences have disappeared. Today, for example, tall pole signs often serve as on-premises signs, raising the same aesthetic problems as offpremises billboards that are placed on tall poles.

The 1965 federal Highway Beautification Act (HBA), 23 U.S.C. § 131, also allows different treatment. It requires states to prohibit billboards within 660 feet of federal interstate or primary highways but exempts on-premises signs. States may exempt “signs, displays, and devices advertising the sale or lease of property upon which they are located” and “signs, displays, and devices . . . advertising activities conducted on the property on which they are located.” About two-thirds of the states have similar exemptions. The HBA preempts local sign ordinances, except in states where they can be different from the federal law.

Different rules for off-premises and on-premises signs are questionable because they undercut the aesthetic purposes of sign regulation. A sign ordinance can prohibit billboards but must allow on-premises signs that may also be aesthetically offensive unless they are regulated, which the off- vs. on-premises distinction does not require. The different treatment of off-premises and on-premises signs has survived, but its place in modern sign ordinances is doubtful.

The Constitutional Issue

Distinguishing off-premises and on-premises signs presents an equal protection problem unless there is a satisfactory explanation for the distinction. There may not be one, because on-premises and offpremises signs can both present aesthetic problems.

Court decisions were favorable despite this problem. All but one state court held the off-premises vs. on-premises distinction constitutional. One court held that the business purpose of on-premises signs justified different treatment because it distinguished them from off-premises signs. Another court held that a city could reasonably classify on-premises and offpremises signs differently to minimize sight pollution. This holding sounds like the relaxed equal protection that courts apply to social and economic laws.

State and federal courts that considered on-premises sign exemptions in the federal Highway Beautification Act were also favorable. They accepted the different treatment of off-premises and on-premises signs in highway beautification statutes, accepted exemptions allowed under state laws, and accepted state laws allowing commercial and noncommercial on-premises signs. They held that the avoidance of economic hardship and the unique nature of business signs were reasons for allowing on-premises signs. They rejected free speech objections, an issue that became more troublesome later.

Review Under the Free Speech Clause

The legal problems faced by the different treatment of off-premises and on-premises signs deepened after the Supreme Court decided that the free speech clause protects commercial speech. Sign ordinances regulate commercial speech. In Central Hudson Gas & Electric Corporation v. Public Service Commission, 447 U.S. 557 (1980), the Court adopted a four-factor test for the regulation of commercial speech. If the speech concerns lawful activity and is not misleading, then the asserted governmental interest must be substantial, the regulation must directly advance the governmental interest asserted, and it must not be more extensive than necessary to serve that interest.

Courts hold that the Central Hudson factors provide an intermediate standard of judicial review, which is more demanding than the rational basis standard of judicial review that courts apply to economic laws, like sign ordinances. Nevertheless, in Metromedia, Inc. v. San Diego, 453 U.S. 490 (1981), a plurality of the US Supreme Court easily upheld a ban on billboards and rejected problems presented by the Central Hudson factors. This decision, now treated as a majority opinion, is the leading Supreme Court case on the intermediate judicial review of billboard regulation under the free speech clause.

The Metromedia Court also upheld the different treatment of off-premises and onpremises signs that were included in the San Diego ordinance. It accepted traffic safety as a legitimate governmental interest for prohibiting billboards, but the sign company claimed that “the city denigrates its interest in traffic safety and defeats its own case by permitting onsite advertising and other specified signs.” An occupant of property, the company argued, can use billboards to advertise goods and services offered at his location, while identical billboards, “equally distracting and unattractive,” are prohibited if they advertise goods or services available elsewhere.

The Court rejected these arguments, after noting that all courts had explicitly or implicitly rejected them. It held that prohibiting offsite advertising was directly related to traffic safety and aesthetic objectives and that this relationship was not changed even though “the ordinance is underinclusive because it permits onsite advertising.” The city may believe that offsite advertising is a more acute problem because of its periodically changing content. The Court then held that the city could decide that commercial interests in advertising could outweigh the city’s interests. It does not follow because “the city has concluded that some commercial interests outweigh its municipal interests in this context that it must give similar weight to all other commercial advertising.” Applying but not mentioning one of the Central Hudson factors, the Court concluded that the off-premises vs. on-premises distinction did not fail “directly to advance substantial government interests.”

Metromedia applied a balancing test that weighed commercial interests in on-premises advertising against the city’s traffic and aesthetic interests, while at the same time recognizing the more serious aesthetic problems of off-premises advertising. The Central Hudson factors do not authorize this kind of balancing, although it is consistent with the Court’s deferential treatment of the billboard prohibition in the sign ordinance.

The Content Neutrality Requirement

Metromedia did not end the legal problems for the off- vs. on-premises distinction because laws that regulate free speech must not be content-based. Content-based laws receive strict judicial scrutiny and are presumed unconstitutional. This is a high barrier, as strict scrutiny often is strict in theory but fatal in fact.

Sign ordinances that include the offpremises vs. on-premises distinction create a content-based problem because they define both types of signs by their content. They define an off-premises sign as a sign not advertising goods and services sold on the premises, and they define an on-premises sign as a sign advertising goods and services sold on the premises. These definitions escaped judicial attention for years until some federal courts held that the HBA definition of off-premises signs was contentbased, under-inclusive, and not narrowly tailored.

City of Austin v. Reagan National Advertising of Austin, LLC, 142 S. Ct. 1464 (2022), ended the content-based threat. The sign company attacked Austin’s sign ordinance as content-based because it allowed the digital conversion of on-premises signs, but not the digital conversion of off-premises signs, and defined off-premises signs with the typical content-based definition.

Justice Sotomayor’s opinion rejected the content-based trap. She held that message content in the definition of an offpremises sign mattered only to the extent that it provided information about “the sign’s relative location” and that locationbased regulation does not require strict scrutiny. She also upheld the off-premises sign definition by relying on the extensive historical use of this definition in sign ordinances and the HBA. I discuss the City of Austin case in my Land Use Update, The Supreme Court Speaks on Billboards, Prob. & Prop., Sep/Oct 2022, at 58.

Court Decisions Applying City of Austin

The Supreme Court’s decision in City of Austin ended the content-based threat but not the case. Justice Sotomayor remanded the case back to the Fifth Circuit to decide whether there was evidence of impermissible purpose or justification and whether the sign ordinance failed intermediate scrutiny because it was not narrowly tailored to serve a significant governmental interest.

This instruction is surprising because narrow tailoring is not one of the Central Hudson factors the Court applied in Metromedia to uphold the off-premises vs. on-premises sign distinction. Instead, narrow tailoring is one of several factors courts apply when reviewing time, place, and manner (TPM) regulations, which can include sign ordinances, although the Supreme Court has not indicated when TPM factors apply and when Central Hudson factors apply. The Seventh Circuit attempted to clarify this problem by holding that narrow tailoring “aligns” with the intermediate judicial review applied in Metromedia. Adams Outdoor Advertising Ltd. Partnership v. City of Madison, 56 F.4th 1111 (7th Cir. 2023). This conclusion is debatable because there are significant differences between the TPM and Central Hudson factors.

On remand, the Fifth Circuit in Reagan National Advertising of Austin, Inc. v. City of Austin, 64 F.4th 287 (5th Cir. 2023), explained that the plaintiffs did not assert an impermissible purpose or justification but that the court had to decide whether the ban on digitizing existing off-premises signs was “narrowly tailored to serve a significant government interest.” The court discussed Metromedia’s decision upholding the off-premises vs. on-premises distinction and held that the Austin sign code was supported by the “same logic.” The problem is that Metromedia did not apply the narrow tailoring rule the remand was supposed to consider.

The sign company also argued that the court should not allow an exemption for onpremises digital signs because the Austin sign ordinance did not include any limits on their display. The court held that this argument was factually incorrect, perhaps implying that a sign ordinance can exempt on-premises signs only if it limits their display.

In Adams Outdoor, the ordinance banned billboards but allowed digital signs in a few locations subject to strict limits. Following the US Supreme Court in City of Austin, the Adams Outdoor court held that the off- vs. on-premises sign distinction was contentneutral, and that Adams Outdoor had not “meaningfully argued” that the digital sign ban “flunks” intermediate scrutiny. Prohibiting digital signs serves significant governmental interests in promoting traffic safety and preserving visual aesthetics.

Conclusion

It is not clear whether the survival of the off-premises vs. on-premises distinction means that courts will provide only a limited judicial review of sign ordinances, or only that they will not interfere with a historic regulatory distinction. This distinction is anachronistic, unnecessary, and should be eliminated. Constitutional problems can be avoided, and sign ordinances made more effective, if based on the type of sign that is regulated, not its message. An ordinance can specify size, height, area, and other regulations to decide what type of sign is permitted at each location where signs can be displayed. Definition by message is not necessary.

Update on Manufactured Housing

I have published a working paper, Getting Zoning for Manufactured Housing Right (2023), https://tinyurl.com/2vy88wpx.