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HomeMy WebLinkAboutZ-7518 Staff AnalysisOctober 30, 2003 ITEM NO.: 20 NAME: LOCATION: OWNER/APPLICANT: TYPE OF ISSUE: STAFF REPORT: FILE NO.: Z-7518 Sobel, Inc. Time Extension 3820 West 65th Street Sobel, Inc./Lacy J. Kennedy, IV Time extension to allow continued operation of a sexually oriented business. On January 17, 1989, the Little Rock Board of Directors passed Ordinance No. 15,629 defining sexually oriented businesses and establishing criteria regulating the location of such businesses. The ordinance established the following classifications and location criteria for sexually oriented businesses: SECTION 3. Classification. Sexually oriented businesses are classified as follows: (1) adult arcade; (2) adult bookstores or adult video stores; (3) adult cabarets; (4) adult motion picture theaters; (5) adult theaters. SECTION 4. Location of Sexually Oriented Businesses. (1) A person commits an offense if he operates or causes to be operated a sexually oriented business within 750 feet of: (a) a church or other religious facility; (b) a public or private elementary, secondary or post -secondary school; (c) a boundary of a residential zone (R-1, R-2, R-3, R-4, MF -6, MF - 12, MF -18, MF -24, R-5, R-6, R-7, HR, MR, HDR or PRD or any single family or multiple family residential use; (d) a public park; (e) a hospital or other medical facility; or (f) properties listed on the National Register of Historical Places or local Historic Districts as identified by in the Arkansas Historic Preservation Program. October 30, 2003 ITEM NO.: 20 (Cont.)FILE NO.: Z-7518 (2) A person commits an offense if he causes or permits the operation, establishment, or maintenance of a sexually oriented business within 750 feet of another sexually oriented business. (3) For the purposes of Subsection (1), measurement shall be made in a straight line, without regard to intervening structures or objects, from the nearest portion of the building or structure used as part of the premises where a sexually oriented business is conducted, to the nearest property line of the premises of a church or public or private elementary or secondary school, or to the nearest boundary of an affected public park, residential district, residential lot, hospital or other medical facility, or properties listed on the National Historic Register or local Historic Districts as identified by the Arkansas Historic Preservation Program. (4) For the purposes of Subsection (2) of this section, the distance between any two sexually oriented businesses shall be measured in a straight line without regard to intervening structures or objects, from the closest exterior wall of the structure in which each business is located. The Ordinance defined a sexually oriented business as: an adult arcade, adult bookstore or adult video store, adult cabaret, adult motion picture theater, or adult theater whose inventory, merchandise, or performances are characterized by a preponderance of "SPECIFICED SEXUAL ACTIVITIES" or "SPECIFIED ANATOMICAL AREAS". On December 3, 2002, the Board passed Ordinance No. 18, 791 amending the definition of a sexually oriented business and clarifying the amortization period for such uses to relocate or to change the nature of its operation after an annexation or an amendment to the code. The definition was amended to read as follows: (9) Sexually oriented business. An adult arcade, adult bookstore or adult video store, adult cabaret, adult motion picture theater, or adult theater which: (a) Devotes a significant or substantial portion of its stock -in -trade or interior floor space to; (b) Receives a significant or substantial portion of its revenues from; or (c) Devotes a significant or substantial portion of its advertising expenditures to the promotion of; 2 October 30, 2003 TEM NO.: 20 (Cont. FILE NO.: Z-7518 the sale, rental, viewing (for any form of consideration) of inventory, merchandise, or performances that are characterized by "specific sexual activities" or "specified anatomical areas." An establishment may have other principal business purposes that do not involve the offering for sale, rental or viewing of materials, or performances, depicting or describing "specified sexual activities" or "specified anatomical areas", and still be categorized as an adult arcade, adult bookstore or adult video store, adult cabaret, adult motion picture theater, or adult theater. Such other business purposes will not serve to exempt such establishment form being categorized as a sexually oriented business so long as the provisions of this definition are otherwise met. The Ordinance established a 90 day amortization period for any sexually oriented business found to be in violation of the provision of Section 17-214 or any amendment thereof. During that 90 day period, the sexually oriented business may file for a two year time extension from the Planning Commission. The Ordinance states: However, any sexually oriented business covered by this subsection whose activity involves the investment of money in leasehold or improvements that cannot be used for any other purpose other than those defined in section 17-212, and a longer period of time to operate is necessary to prevent undue financial hardship, are eligible for a prompt review by the planning commission for a reasonable extension of the nonconforming status, provided that the extension shall not be increased by more than a period of two (2) years from the effective date of the annexation, or of the amendment to section 17-214 which rendered the business nonconforming. The Emergency clause of Ordinance No. 18,791 also stated the Board of Directors interest in adding licensed day care centers to the list of businesses that should be included in the setback requirements of Article VII. On August 4, 2003, the Board passed Ordinance No. 18,906 adding day care centers to the list of uses from which sexually oriented business must maintain at least a 750 foot setback. In late 2002, Sobel, Inc. applied for and was approved for a privilege license to operate sexually oriented business on the C-3 zoned property located at 3820 VVest 65t Street. The zoning was appropriate for the use and the property complied with the then separation requirements of Ordinance No. 15,629. A day care center was located approximately 150 to 200 feet away from the site, at the northwest corner of Scott Hamilton Drive and Wall Street. At that time, day cares were not included in the separation requirements. When Ordinance No. 18,906 was passed on August 4, 2003, the business was rendered nonconforming and the 90 day amortization period began. On September 3, 3 October 30, 2003 ITEM NO.: 20 (Cont.) _ FILE NO.: Z-7518 issued, building permits were approved and Arkansas Health Department approval had been received; that the applicant had complied with all regulations and the City then changed the rules. Mr. Kennedy stated some financial records cannot be released due to privacy issues but the applicant would provide some numbers. He stated the issue was whether or not there would be an undue financial hardship. Mr. Kennedy stated the lease included a clause requiring the lease to be paid in full if it is broken. He asked the Commission to look at the City's zoning map. He surmised that it could be exceptionally difficult to find another location for the business. Referring to the handout, Mr. Kennedy stated the lease was for 3 years. He estimated the remaining lease payments at $30,000 - $40,000. Mr. Kennedy stated all leasehold improvements would go to the landlord. He estimated the cost of those improvements at over $100,000. Mr. Kennedy stated there were additional costs including display cases, shelves and video equipment. He stated there was a 3 year lease on the equipment that included acceleration provisions adding up to $10,000 - $12,000 that would be immediately payable. Commissioner Floyd commented that every lease he had seen included a "suitability and severability clause". He noted the building permit for the major renovation was obtained after the December 2002 Ordinance was passed. During the ensuing discussion, it was stated that the January 2003 building permit to enclose the former drive-through canopy area was obtained after the December 2002 Ordinance but prior to the August 4, 2003 Ordinance. Mr. Kennedy stated the map showing areas available for S.O.B.'s changes with the opening of each new day care center. He stated the City won the Ambasador Books case with 5.1 % of the City being shown as available for such uses. Commissioner Rector asked Mr. Kennedy to focus on the issue. Mr. Kennedy stated the rules changed midstream and the fair action would be to grant the requested two-year extension. Commissioner Allen stated he agreed that it appeared the rules changed. He asked what the balance was; what profit has been made versus what the expenses were. Mr. Kennedy responded that the business was still non- profitable; that they have not yet recouped their investment. Commissioner Allen asked Mr. Kennedy if the applicant could submit financial records corroborating that statement. Mr. Kennedy stated the Commission was libel to the state's Freedom of Information Act and asked if the information could be submitted under seal. Deputy City Attorney Dawson responded that it could not. Commissioner Muse asked how much was needed to recoup the investment. Spencer Elmen, of Sobel, Inc., responded that $150,000 was needed to recoup the investment. Commissioner Muse asked how much could be recovered in the requested 2 years. Mr. Elmen responded that he expected to make a profit in 2 years. 5 October 30, 2003 ITEM NO.: 20 Cont.) FILE NO.: Z-7518 2003, Sobel, Inc., through its attorney Lacy J. Kennedy, IV, filed a request for Planning Commission approval of a time extension. It is the applicant's contention that Sobel has a three year lease on the facility and equipment and has made substantial renovations to conform the building to its purposes. The property at 3820 West 65th Street is zoned C-3 General Commercial. The site contains a one-story building that formerly housed a bank. The drive through canopy was enclosed to create additional floor space for the business. There are 33 parking spaces on the site. The Planning Commission is to determine if it is appropriate to grant Sobel, Inc. an extension for a period not to exceed two years from August 4, 2003. PLANNING COMMISSION ACTION: (OCTOBER 30, 2003) The applicant was present. There were numerous objectors present. Numerous letters of opposition had been received. Dana Carney, of the Planning Staff presented the item and gave a brief history of the various S.O.B. ordinances. Deputy City Attorney Cindy Dawson clarified the issue as a "fact -driven inquiry"; stating the Commission should apply reasonableness when deciding the issue. Commissioner Rector asked if obligations under a lease contract should enter into the decision. Ms. Dawson responded that leasehold investments can be considered. Jim Lawson, Director of Planning and Development, stated the Commission is to determine what amortization period is appropriate to amortize the investment if site improvements cannot be used for any other use. Chairman Nunnley stated he did not know how the Commission could consider that. He questioned who would locate a bookstore on 65th Street for any other purpose. Commissioner Faust stated it was unclear in Ordinance No. 18, 791 what was intended by the phrase "the investment of money in leasehold or improvements..." Ms. Dawson responded that the Commission clearly could look at both the lease and the improvements. Commissioner Faust noted that the Commission could look at any extension up to 2 years from August 4, 2003. Chairman Nunnley informed the audience that the Commission was not going to consider the merits of the ordinance or the appropriateness of S.O.B.'s; that the discussion was to focus on the merits of granting the time extension. Lacy Kennedy, attorney for Sobel, Inc.; addressed the Commission. He presented a hand-out which included a summary of investments and a portion of the lease on the property. Mr. Kennedy stated a privilege license had been 4 October 30, 2003 ITEM NO.: 20 (Cont. FILE NO.: Z-7518 Commissioner Rahman asked the applicant if he had looked at other sites. Commissioner Rector stated that was not an issue. Commissioner Rahman withdrew his question. Commissioner Rector asked the applicant if the $150,000 investment could be amortized in 2 years. The applicant responded that it could. Chairman Nunnley asked the applicant if he had business interruption insurance. The applicant responded that it would not apply to this issue. Phyllis Day, operator of the day care located at 6320 Scott Hamilton Drive, stated crime in the area had increased since the opening of the S.O.B. She asked the Commission to deny the time extension. Rev. James Alexander of 5603 Fisher Street asked that the time extension not be granted. He asked the Commission to grant only a minimum extension, if one was granted. Pat Gee, president of the Upper Baseline Neighborhood Association, showed a petition which she stated contained 477 signatures of persons asking the Commission to uphold the Ordinance. Staff did not receive this petition. Ms. Gee voiced her opposition to the time extension. Ms. Gee stated a sex offender had been arrested in the area in possession of child pornography. Deputy City Attorney Dawson asked Ms. Gee if there was any evidence that the material had been purchased at this site. Ms. Gee responded that there was not. Nan Howard, of 3 Hogan Drive, spoke in opposition. Alene Watson, of 4 Hogan Drive, stated the business' parking lot was "packed". She surmised the business must be making money. Herbert Dicker, president of Meadowcliff Neighborhood Association, vice president of Neighborhood Connections and Secretary of SWLR United for Progress, spoke in opposition and asked the Commission to consider how much money the nearby day care center has lost since the S.O.B. opened. Deputy City Attorney Dawson commented that the 8th Circuit Court has upheld similar ordinances with amortization periods to either relocate or change the nature of the business. She stated the business could have merchandise other than that of a sexual nature. Ms. Dawson stated she did not believe the applicant had proven that investments were such that they could only be used for this specific use. October 30, 2003 ITEM NO.: 20 (Cont. FILE NO.: Z-7518 During the following discussion, Commissioner Rector stated that the City Attorney had told the Commission they could also include leasehold in considering the extension. He stated leasehold refers to "the thing" not just the obligation of rent. Janet Berry, president of SWLR United for Progress, stated the membership of her organization had voted to oppose the requested time extension. She stated the applicant had made investments and improvements after December 2002, when the Board of Directors had expressed its intent to include day care centers in the list of protected uses. Mr. Kennedy stated leasehold absolutely referred to the premises. He stated the question was strictly one of financial hardship and asked the Commission not to let the use cloud the issue. Chairman Nunnley told the applicant that he, the applicant, had decided his right of financial privacy exceeded the Commission's right to know. Commissioner Meyer asked the applicant what his monthly sales tax expense was. There was no response. Commissioner Muse asked the applicant if he could make a guess what a good day was as far as net profits. Mr. Elmen responded that he could not. Commissioner Muse stated he needed to know those numbers. Commissioner Rector commented to the applicant that he was asking the Commission to figure out what was a reasonable time to amortize the investment without giving the Commission any numbers to work with. Mr. Elmen responded that he had competition in Little Rock and had reasons not to release the numbers. Commissioner Muse stated that based on the figures stated earlier by the applicant that it seemed $238 a day in net profit was needed to recoup the investment. He asked the applicant if he could recoup the investment in 12 months. Mr. Elmen responded that 18-21 months would be more reasonable. Commissioner Langlais asked Mr. Elmen if he realized that he would be out of business in 21 months, assuming the Commission granted the extension, even if his lease was not up. Mr. Elmen responded that his attorney might disagree. Mr. Kennedy stated some investments had been made that cannot be used for any other purpose. Deputy City Attorney Dawson and Director of Planning Lawson both stated at this point that it was not the City's intention to put the applicant out of business; that the business could modify its operations or relocate. 7 October 30, 2003 ITEM NO.: 20 (Cont.) FILE NO.: Z-7518 Commissioner Rahman shared his personal experiences in having to pay out a lease after having had a business close. He stated he saw this as an issue of a business trying to recoup its investment. He commented that this was a legitimate business and the City changed the rules. In response to a question from Commissioner Meyer, Ms. Dawson stated the applicant was in the midst of a 90 -day amortization period and had asked for additional time. Commissioner Rahman commented that there was an issue of fairness; that a business cannot recoup its investment in 90 days. Ms. Dawson responded that the applicant was not willing to provide the information that the Commission needed to arrive at a different time frame. Jim Lawson stated the Commission should vote on the 21 -month extension as requested by the applicant and, if that motion fails, a motion could be made for a shorter time. Commissioner Faust stated she was surprised that the applicant and his attorney showed up unprepared; without complete information. She stated she was not comfortable with making a decision with such information. Commissioner Rahman stated he understood the applicant not wanting his competition to know his financial figures. Commissioner Muse asked what the Board of Director's reasoning was in setting the maximum extension period at 2 years. Jim Lawson responded that the City Attorney's Office had arrived at that time frame. Ms. Dawson interjected that there had been cases where a 90 -day amortization period had been found to be reasonable. Mr. Lawson stated part of the problem was that the Commission did not know the specific numbers (financial figures). Ms. Dawson asked the applicant if the lease specified that use of the building was to be limited to this use. Mr. Kennedy responded that the lease, as it is written, does so. Chairman Nunnley suggested voting on the application as filed and then having further discussion if it fails. Commissioner Faust commented that she was not comfortable with that proposal. After further discussion, Commissioner Faust asked if there was anything in the ordinance that precluded the Commission granting an extension and then revisiting the issue at a later date, up to a total of 2 years. Ms. Dawson responded that there was no language in the ordinance permitting bringing the item back. L October 30, 2003 ITEM NO.: 20 FILE NO.: Z-7518 Commissioner Rector stated he saw a two -fold problem. First, the Commission did not have enough information to make a hard and fast decision on amortization; and second, since the Commission was confused on the issue, it was no wonder the applicant did not know what information to bring. He stated he was grasping at how to vote on the issue without that information. Mr. Lawson read the applicant's request and stated it was his interpretation that the applicant was asking for the maximum allowable time extension. Chairman Nunnley stated this was a unique circumstance brought on by a unique action of the Board. He stated he was willing to vote on the issue. Ms. Dawson stated there was nothing to prevent the Commission from asking the applicant if he was willing to provide additional information. In response to that question from Commissioner Rector, Mr. Kennedy stated the applicant would have to consider the request. Commissioner Faust asked the applicant if he was willing to come back before the Commission to make his case and to make it more clear. Chairman Nunnley stated the applicant had made the case he wanted to make. He stated it was up to the Commission to take the information they had and to vote. Commissioner Floyd commented that this Ordinance had been drafted to emulate Ordinances that had withstood court action. He stated the applicant had made his presentation and the Commission should vote. Commissioner Rector stated there had to be some period of time that was reasonable. A motion was made and seconded to approve a 21 -month time extension from August 4, 2003. After a brief discussion, a vote was taken. The vote was 5 ayes, 3 noes, 2 absent and 1 abstaining (Meyer). The motion failed. A motion was then made and seconded to approve a 9 -month extension from August 4, 2003. After a brief discussion, the motion and second were withdrawn. 9