Heard, considered and decided by the court en banc.
For purposes of regulation of billboards, a municipality's public facilities district that designates municipal land for public uses is neither a "business area" under Minnesota law nor a district "most appropriate for commerce" under federal law.
The opinion of the court was delivered by: Blatz, Chief Justice.
Dissenting: Hanson, J. and Gilbert, J.
Dissenting: Anderson, Paul H., J.
Appellant Minnesota Department of Transportation denied Respondent Eller Media Company's application for six permits to construct revenue-generating billboards on a municipally owned golf course in the City of Mounds View. The denial was based on a determination that the locations requested were not suitable under the Minnesota Outdoor Advertising Control Act. Following a contested case hearing, an administrative law judge reversed that determination and recommended issuance of the permits. Pursuant to Minn. Stat. § 14.63 (2002), the Minnesota Department of Transportation (MNDOT) filed exceptions to that decision, and all parties requested oral argument before the Commissioner of MNDOT (commissioner). The commissioner denied the application for permits.*fn1 Eller Media and Mounds View appealed, and the court of appeals reversed and directed MNDOT to issue the requested permits. Because we conclude that the commissioner's denial was supported by substantial evidence, we reverse the court of appeals and reinstate the commissioner's findings of fact, conclusions of law, and order denying the permits.
In 1982, Mounds View adopted a comprehensive zoning plan. The comprehensive plan did not allow for billboards in any of the city's zoning districts. In 1984, the large majority of city-owned property was rezoned into Public Facilities (PF) districts. As defined by Mounds View, the purpose of a PF district was "to provide for land areas, waterways and water areas owned, controlled, regulated, used or proposed to be used by the City." Mounds View, Minn., Mounds View Zoning Code § 1118.01 (2000). Permitted uses in the district were limited to:
public buildings and uses public parks, playgrounds, athletic fields, parking areas, and golf courses public sewers, water lines and water storage areas public streets, easements and other public ways, highways and thoroughfares treatment and pumping facilities and other public utility and public service facilities.
Id. at § 1118.02. A portion of city-owned property that would later become part of the golf course inadvertently remained zoned "Industrial" (I).
In 1988, the State of Minnesota conveyed land to the City of Mounds View via a quitclaim deed. The deed contained a provision that the property deeded would revert to the state if it was not used by Mounds View for a public purpose. At the time the land was conveyed, the state property was zoned as a Conservancy, Recreation, and Preservation (CRP) district. On this property Mounds View opened a municipal golf course, The Bridges, in 1995. The property was located north of Highway 10 and was financed by a revenue bond in the amount of $3,090,000. Although the golf course was profitable, it was unable to make its full debt payment in 1998 and 1999, necessitating the use of general fund revenue to supplement golf course revenue.
As established in the record, when The Bridges was developed it was similar to for-profit golf courses in Minnesota. Its golf fees were equal to or higher than comparable area golf courses and it was advertised as a "scenic executive length course in [a] nature park setting." Pictures included in the advertisements typically showed picturesque tree-lined views and one of the signature bridges giving the course its name. One of the main purposes of the golf course, as adduced by the ALJ at the contested case proceeding, was to be a revenue producer for Mounds View. Golf course revenues were kept separate from general city funds.
Following difficulty with making bond payments solely from golf course revenue, Mounds View began consideration of whether to allow billboards on the golf course. The Mounds View City Council first discussed this possibility at the March 8, 1999 city council meeting. The minutes of that meeting note that revenue from the billboards could offset the bond payments and reflect the city council's view that "some type of zoning action from the planning commission would likely be necessary" to allow billboards on the golf course property.
At the May 10, 1999 city council meeting, one council member mistakenly reported that the golf course was in a PF district rather than its correct location, a CRP district. The city council minutes note that the PF district "requires a MNDOT permit to erect billboards [b]ut generally, MNDOT only approves permits if located in a commercial or industrial district. So a Code amendment would be needed to obtain a permit from MNDOT."
Several months later, at the September 13, 1999 meeting, a member of the planning commission reported that the planning commission had researched the billboard proposal. The planning commission discovered that Mounds View's current sign code did not allow any signage within the PF or CRP districts. In apparent response to the planning commission's concerns, the Mounds View City Attorney stated that if the code was amended, the city could place billboards on the golf course and still remain within the "public purpose" restriction of the granting deed. Finally, one council member stated that any ordinance allowing billboards should include a provision for the removal of the billboards once the bonds were paid off.
In order to facilitate the placement of billboards on the golf course property, a series of ordinances were introduced to amend the city code. On September 13, 1999, Mounds View had a public hearing and first reading of Ordinance 637. Ordinance 637 sought to amend the city code to allow signage, including billboards, within the CRP and PF zoning districts. Similarly, the first reading of Ordinance 644, which created a limited-use district along Highway 10 where billboards would be permitted, occurred at a November 22, 1999 meeting. In discussing this second proposed ordinance, a planning commission member stated that portions of the golf course were zoned CRP and PF, and the current ordinance would not allow any signage in those districts. He further noted that billboards were not allowed in any district in Mounds View*fn2 and that the planning commission had unanimously approved a resolution recommending that the city council deny Ordinance 644 for the following reasons:
Large billboard signs are not appropriate uses of property within CRP and PF zoning districts. These districts are intended to provide recreational opportunities, open space and protect the natural environment where possible. Large advertising signs are not consistent with that intent and are more appropriate to commercial and industrial zoning districts.
Large billboard signs can be visually distractive * * *.
The City Attorney has advised city staff that the city cannot limit billboards to city-owned properties only.
A permit will be required from the State of Minnesota to locate billboards along state and federal highways. State statutes restrict such signs to commercial and industrial zoning districts only. The contemplated sites for additional billboards are not zoned commercial or industrial.
The city council, recognizing that Mounds View was faced with "escalating bond payments," approved the first reading of Ordinance 644, creating the limited use district along Highway 10.
A second reading of the same ordinance, now amended to include an automatic termination date for the billboards at the bond payoff date, was approved at the Decemberá13, 1999 meeting. Before voting for adoption of the ordinance, the mayor explained that the billboards were for "the specific purpose of raising additional revenues for the period of time during which the bonds are outstanding." Some city council members voiced concern about the existence of billboards after the bonds were paid off. In deference to the concern raised, the city attorney explained that the city council could allow billboards as an interim use only, and require that the use expire after fifteen years or upon the expiration of the lease, whichever occurred sooner. One council member spoke in opposition to the billboards, noting that Mounds View was "doing well in eliminating the billboard located on the Rent All facility on Highway 10, and the city was attempting to eliminate the billboard located across the street from City Hall."*fn3
After the final approval of the limited-use ordinance, Mounds View solicited proposals for billboards on the golf course. In January 2000, Eller Media submitted a proposal to Mounds View and at the February 14 city council meeting, a motion passed to authorize staff to negotiate an agreement with Eller. At the same meeting, the city council again considered Ordinance No. 637. Ordinance No. 637, as originally introduced, proposed to permit billboards in the PF and CRP districts. During the course of the meeting, the ordinance was amended to allow billboards in Planned Unit Development (PUD) districts. The amendment was made at the urging of the city attorney, who advised that the addition of the PUD district was needed to ensure that Mounds View "was not singularly zoning one piece of property, in order to avoid concerns regarding 'spot zoning.'" In addition to Ordinance 637, Ordinance 644—which limited the billboards to the area north of Highway 10 where the golf course was located—was also finally adopted.
A third ordinance, No. 655, was discussed and adopted at the March 27, 2000 city council meeting. That ordinance rezoned the golf course from a mixture of I-1 (an industrial zone designation) and CRP zones to PF. The minutes of various city council meetings reflects that throughout the discussion regarding billboards, council members had been mistakenly assuming that at least a portion of the golf course was zoned PF in addition to the CRP.*fn4 This mistake required an ordinance that effectuated the rezoning of the golf course in its entirety to PF. Ordinance 655 expressly stated that Mounds View had determined that the previous "zoning classification of certain parcels associated with [T]he Bridges Golf Course [were] inconsistent with the zoning code and the proposed Comprehensive Plan."
The city council minutes of March 27, 2000, reflect that council members discussed the outstanding debt on the golf course ($3.1 million) and the potential revenue from 15 years of billboards ($5 million). At that same meeting, the city council passed two additional ordinances authorizing Mounds View to require and to issue interim permits for billboards. The city council also approved an interim use permit for Eller Media's proposed billboards on the golf course.
In May 2000, Eller Media submitted six permit applications to Michael Constant, the MNDOT employee in charge of advertising control for the west metro area. The application requested permits for installation of billboards in the Mounds View PF district that now encompassed the whole of the golf course. On June 9, 2000, Constant denied Eller Media's applications for billboard permits on the basis that the proposed billboard locations did ...