L.A. businesses have scored a victory in the battle with bureaucracy as City Hall has dropped plans to tighten restrictions for on-site business signs.

Instead, the city is considering a proposal from business groups and the sign industry to levy a fee on all business owners with sign permits. The money would go to hire more inspectors to target thousands of business signs without permits.

“This is a victory for the business community,” said Carol Schatz, chief executive of the Central City Association, which represents business interests primarily in the downtown L.A. area.

However, Schatz, other business leaders and some business owners remain concerned about one element that remains on the table as part of an overhaul of sign regulations: the right of citizens to sue sign owners if they find a proposed or existing sign objectionable. Such lawsuits could hurt the ability of new or recently relocated businesses to attract customers.

“Anybody could take issue with any sign and that could be a hardship, especially for small businesses like ours,” said Malissa Hallenbeck, co-owner of Phil’s Diner in North Hollywood, which is moving around the corner and just received city approval for a new sign.

Some business leaders also said that the fines proposed for sign owners found to violate existing codes would be excessive. For a violation involving a 20-foot-by-20-foot sign, the proposed fine would be $6,000 for the first time, $12,000 for the second, and $24,000 for the third and all subsequent cases.

But city officials contend that such large fines would be a crucial component of the enforcement program. They say they want to give the program about two years to see if it would halt the proliferation of business signs.

If not, some council members said that they will revisit the business sign restrictions.

Onerous restrictions

New restrictions were first proposed two years ago as part of a sweeping overhaul of the city’s outdoor sign regulations. While much of the effort was aimed at billboards and building-covering supergraphics, city administrators also included restrictions for signs on business premises.

New signs would have been shrunk to about 30 percent smaller than most existing signs, many on-site electronic message signs like those next to Walgreen Co. stores would have been banned, as would new shopping-center pole signs taller than 25 feet.

At the time, business groups testified that these restrictions would so severely limit their ability to advertise their presence in the local community that customer traffic would fall and they might have to close.

Faced with growing opposition from the business community and threats of legal action from the billboard industry, the City Council decided to temporarily shelve the sign code overhaul.

Council members said at the time they wanted to give newly elected City Attorney Carmen Trutanich a chance to weigh in.

Shortly after taking office in July 2009, Trutanich aggressively pursued building owners and companies responsible for putting up supergraphic signs, even sending one building owner in Hollywood to jail.

Last week, the Business Journal learned that the outdoor sign ordinance is to come back to the City Council for consideration next month, but mostly to target billboards and supergraphics, without new restrictions on business signs.

Los Angeles City Councilman Ed Reyes, chairman of the council’s Planning and Land Use Committee, said that addressing billboards and business signs separately was the best way to achieve the city’s goal of improving the visual landscape.

Businesses relieved

Business owners, especially those seeking sign permits, were relieved to learn that the city is dropping the proposed business sign restrictions. They had been concerned that the restrictions would have prevented them from installing signs they consider vital for their survival in tough economic times.

Take the case of Gene Berg Isuzu Truck in Van Nuys, which sells and services medium duty trucks. For years, the dealership sold and serviced General Motors Corp. trucks. But when General Motors declared bankruptcy in June 2009 and stopped making many of its models, Gene Berg had to find another truck manufacturer to survive. The company signed up with Isuzu North America Corp.

Once the switch was made, the dealership needed to apply for a city permit to change its huge GMC/Chevy sign to an Isuzu sign. Even though the new sign is slated to be only one-third of the surface area of the previous one and only 30 feet high instead of 42, the company was concerned that the regulations the city were considering would have required the sign to be even smaller. The new affiliation is posted on a temporary sign.

“It would be devastating for us if we were not allowed to put up a sign or if the sign was too small to be seen,” said Peder Moller, general manager of Gene Berg. “If the sign can’t be seen, we might as well just close up shop.”

Moller, who is still waiting for a city permit to install a permanent sign, said he is relieved the proposed regulations have been set aside. He also endorsed the enforcement fee, as long as the cost is not too high.

While city officials have yet to set the fee level, industry sources tracking the process said it is likely to be only about $25 a year for each business location.

The fee is widely viewed as preferable to the proposed sign restrictions, which would have hit businesses seeking to expand, move or to replace aging or damaged signs.

Hallenbeck at Phil’s Diner recently had to get city permits for two signs because she and her husband, Casey, are moving their 85-year-old dining car and restaurant a couple of blocks away to make way for a redevelopment project. They are set to open at their new location in a few weeks.

Hallenbeck said she was concerned last year that they might have difficulty in getting their sign permits approved because of the proposals for sign restrictions.

“Without proper signage, it’s difficult for businesses to make their presence known,” she said.

The signs for the restaurant were approved, with the most recent permit coming earlier this year.

Illegal signs

The success of the business-backed enforcement program will be key to the effort to prevent the city from reconsidering business sign regulations. While no official figures exist for the number of unpermitted business signs in the city, estimates run as high as 50 percent of all signs on business premises. City inspectors have not given priority to enforcing rules on such signs; in recent years, their efforts have focused more on illegal billboards and building-covering supergraphics, which have generated the most complaints from local residents.

But illegal business signs have become so commonplace that they have drawn the ire of business groups and antibillboard activists. Business groups say illegal signs clutter the landscape, making it tougher for legitimate signage to stand out. Antisign activists say they create too much visual blight.

“It makes sense to try to get rid of illegal signs first and have an effective inspection program running before taking up changes to the existing regulations,” said Dennis Hathaway, president of the Coalition to Ban Billboard Blight.

However, Hathaway said he wants to see the city immediately take up regulation of digital electronic signs on business premises. He said some digital signs are too bright, posing traffic safety concerns for commuters and light pollution problems for neighbors.

Business groups are more concerned about the right to sue. While this was inserted into the proposed ordinance primarily to give citizens a way to challenge digital billboards, business groups contend these lawsuits could also target regular business signs.

If a lawsuit prevents a new or relocating business from putting up a sign letting the community know of its presence, few customers will come, the business groups say.

“While we believe the current draft ordinance is a major improvement over the original, we still have concerns about this private right of action proposed in the current draft,” said Stuart Waldman, chief executive of the Valley Industry and Commerce Association, which promotes local business interests. “This could place a brutal burden on local businesses and kill local jobs.”