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Lawsuit claims Baltimore billboard tax unconstitutional

A Texas-based outdoor media company claims that Baltimore is limiting the company’s commercial speech by taxing billboards.

Baltimore plans to start collecting taxes on billboards in January, City Solicitor George A. Nilson says.

Clear Channel Outdoor Inc. argues that a city law passed in June, imposing an annual regulatory fee on outdoor ads, violates the First and Fourteenth Amendments. The lawsuit, filed Wednesday in U.S. District Court in Baltimore, names Mayor Stephanie Rawlings-Blake and the City Council as defendants.

The law, which went into effect July 20, charges $15 per square foot of an electronic outdoor display that is 10 square feet or larger and changes images more than once a day. For non-electronic outdoor displays of 10 square feet or larger, the fee is $5 per square foot.

The Baltimore City Law Department insists the ordinance is a constitutional revenue measure that does not regulate the content of signs, according to a letter the office wrote to the mayor and City Council in April.

Clear Channel, which has lobbied against an outdoor sign tax in the city for years, owns several hundred outdoor signs in Baltimore — in fact, the company estimates it controls 95 percent of the non-governmental billboards in the city. The tax does not impact billboards owned by the government.

Because it owns so much of the private billboard market, Clear Channel insists it is being specifically targeted by the law.

City Solicitor George A. Nilson, however, said Clear Channel’s percentage of the billboard market does not mean the city is singling the company out for a tax.

“We didn’t do that,” Nilson said. “We just said all of this billboard, communication, advertising stuff is taxable and we levied a tax on them. … We are just taxing a particular form of communication.”

Clear Channel’s attorney, Benjamin Rosenberg of Rosenberg Martin Greenberg LLP in Baltimore, deferred to Clear Channel when asked to discuss the litigation.

“Because Baltimore’s recently approved budget imposes a targeted fee on constitutionally protected speech, we believe this legislative action hinders our ability to provide valuable services to local businesses and the community in which we live and work — and violates our First Amendment rights,” Clear Channel said in a statement.

A spokesman for Rawlings-Blake said the mayor was not surprised by the lawsuit and intends to defend the tax.

Clear Channel claims the tax will cost the company $1.5 million every year and that, based on square footage 90 percent of the money the city collects from the tax will come from Clear Channel.

The city’s revenue estimates are lower; it estimated the tax will bring in $1 million annually. Clear Channel lobbied aggressively against the bill this spring, even offering to give the city $1 million in free advertising in place of the tax.

In its lawsuit, Clear Channel asks the court to declare the ordinance unconstitutional and issue an order stopping the city from enforcing it.

“The Ordinance unconstitutionally burdens Clear Channel’s speech because it is not narrowly tailored to serve a compelling state interest, fails to advance a substantial government interest, and reaches further than necessary to accomplish its purported objective,” the lawsuit states.

Nilson said Clear Channel has lobbied against the tax over the years. Similar legislation was proposed in 2010, but never came to a full vote. The bill was introduced again in 2012 but the council voted against it.

“Throughout the process, Clear Channel Outdoor has participated in a close working relationship with the City and its leadership for a number of years including suggesting creative ways to help close the budget deficit while avoiding these new fees,” Sara Lee Keller, executive vice president and general counsel at Clear Channel, said in a follow-up statement.

The City Council passed the bill on June 17 and Rawlings-Blake signed it into law. The law claims billboards endanger public safety and hinder the city’s ability to collect revenue through other sources.

Clear Channel contends there is no evidence that billboard signs cause traffic accidents.

Nilson, however, said the city is not required to provide documentary evidence when levying a tax on communications outlets.

“Billboards, while they create less visual clutter in the city than they used to, they still create visual clutter,” Nilson said.

Clear Channel also argues that its signs do not weaken the city’s ability to collect other revenue, and that the signs often post messages from nonprofits and public-service notices like Amber Alerts for child abductions.

“This potential financial loss will affect our bottom-line and have a detrimental impact on how we offer public safety and non-profit organizations gratis public service announcements,” Keller said in her statement.

Collections on the tax do not begin until January, Nilson said.

“At the end of the day, they haven’t dissuaded us,” Nilson said. “We think the bill is constitutional.”