Analysis

Topic: Adult Entertainment

Sponsors:

Committee: House Constitutional Law and Ethics

Position: The Department of Consumer and Industry Services does not support the bills.

Background: Adult entertainment is a mutli-billion dollar enterprise in the United States. Adult businesses may include movie theaters, bookstores, escort agencies, massage parlors, and topless/bottomless bars. Such enterprises are reportedly highly profitable. Adult entertainment is an $8-10 billion industry in the United States. One national distributor of pornography in the 1980's is reported to have earned almost $1 million per day. Although control of adult entertainment businesses has in recent years become more diversified, there is record in the past of organized crime involvement.

Local units of government throughout the United States have a long history of regulation in this area. These regulations include zoning and location requirements, licensing, limits on the hours of operation, restrictions on conduct and health regulation. Much of this regulation has focused on the secondary effects of adult entertainment establishments on neighborhoods and communities. These secondary effects have been identified in studies in many states and include high crime rates and property value deterioration. Over the years state courts and the United States Supreme Court have addressed the issue and have permitted local regulation of these businesses.

Description of the Bills: The bills add a new article 17A to the Occupational Code to license and regulate adult entertainment establishments and massagists. Within 90 days of the effective date of the bills, a person engaging in either of these activities would have to be licensed by the department. The bills provide penalties for unlicensed activity which would be separate from those provided in Article 6 of the Occupational Code.

The Department of Consumer and Industry Services would be required to maintain records of individuals and businesses licensed under the new article. These records would include the full name, a picture, any nicknames or aliases, residential and business address, social security and driver's license number and the name and address of all banks where accounts are maintained. The department is authorized, but not required, to request a federal criminal records check on each applicant.

A license issued under the new article would not be transferrable. If a licensee changes the location of the business during the license period, the license is revoked and a new license application is required. An adult entertainment establishment may not operate more than one adult bookstore, relaxation establishment, adult show, adult theater, or massage establishment in the same building or in separate buildings less than 1,500 feet from each other. Each license must be conspicuously displayed. The bill provides penalties for violation of these requirements in addition to those prescribed in Article 6.

The bill would establish a minimum educational equivalent of a twelfth grade education for licensure as a massagist. An examination and occupational course work consisting of at least 1,000 hours of continuous training are also required. A license may not be issued to a person who has been convicted of certain crimes or local ordinance violations. A person whose license has been revoked within two years of the application would also be ineligible to be issued a license.

An applicant for licensure as a massagist would be required to file a sworn application containing personal information, a photograph taken within 30 days of the application, a sworn statement that the applicant has never been convicted of a crime or violation of certain local ordinances, a letter or certification from a physician that the applicant is free of communicable diseases and a fingerprint sample. The department would be authorized to require other information, forms or documents with the applicant.

Similar application information is required for adult entertainment establishments, including the names and addresses of all who have an interest or involvement in the proposed business. The department may not accept an application or issue a license to operate an establishment at a location if an application to operate such an establishment at that location has been denied within 6 months.

The department may not issue a license unless the applicant appears personally before the director. The applicant is required to sign the application and affix his or her social security number in the presence of the director. The applicant is also required to swear that the application is the applicant's act and deed and that the facts stated in the application are true.

The bill establishes a list of prohibited activities for massage establishments. These prohibitions relate to activity that is sexual in nature. Establishments are also required to maintain records of employees. A massage establishment may be inspected periodically by the Department of Community Health. Reasonable notice of the intended inspection is required.

The hours of business of an adult entertainment establishment are regulated by the bill Such businesses may not be open on holidays or Sundays. Business hours on Monday through Saturday would be from 10 a.m. until 10 p.m. Operation on Sunday or legal holidays would be prohibited.

A massage establishment would be subject, upon reasonable notice, to periodic inspection by the Department of Community Health to prevent the spread of communicable diseases. Law enforcement officials would also be permitted to inspect the premises at any time..

Contract employment would be prohibited. All persons engaged by an adult entertainment establishment to provide entertainment, massage, or other services must be employees of the establishment.

Arguments FOR: Local zoning has been insufficient in regulating this industry. In some communities adult entertainment establishments have been placed across the street from schools, adjacent to residential neighborhoods and in other places where the zoning ordinance would otherwise restrict them. State regulation is needed. The bills are based on a similar program in Delaware.

There are serious problems in certain areas, often older commercial areas, with the proliferation of adult entertainment establishments and massage parlors. These providers of sexual services contribute to the deterioration of older urban areas and are even spreading into rural areas. They bring with them crime and communicable diseases that local ordinances and enforcement are ill-equipped to handle. State licensure and enforcement is the only effective means of regulating such businesses.

Adult entertainment establishments are not limited to older commercial areas. One Lansing area township official described in committee how an establishment opened across from a school. Although such a business was not permitted by the zoning ordinance, the name of the establishment did not suggest that this was an adult business. There are zones in the township where such establishments are permitted, but this business chose to use subterfuge to establish itself.

Arguments AGAINST: This bill would impose a substantial administrative burden and large financial cost on the department. There are literally thousands of individuals and businesses around the state which will be required to be licensed. The proposed fees are not nearly sufficient to offset the costs of administering such a licensure program. The department, or the Department of Community Health, could not possibly hire a sufficient number of people to handle the inspections and process the paperwork which would be required by such a licensure program. Whatever financial resources would be allocated to such a program could be much more profitably used elsewhere.

Some of the businesses which would be licensed under the proposed bills apply to establishments already licensed by the Liquor Control Commission. The bills would impose an unnecessarily duplicative and costly burden on these establishments.

The bill deals with issues which are more appropriately a local police matter. Many local police agencies are dealing quite adequately with the criminal justice problems associated with adult entertainment establishments and massage parlors.

With respect to massage, the state has had a licensure program once before, and the experience was not a good one. A law was enacted in 1974 and later incorporated as Article 17 into the Occupational Code. It was enacted for the same reasons that the current bill has been proposed. The law was unenforceable, and it was finally repealed in 1995. There is little reason to expect that the current effort will turn out better.

Massage therapy is a legitimate health service and is currently offered in wellness centers and medical centers as part of physical therapy, stress relief programs or other health services. Certification is obtained through the American Association of Bodywork and Massage Professionals. There is training for these health professionals available in programs approved by a national accreditation organization. There is also a national examination. There is no need for a state regulatory program for these individuals, and the proposed bill would impose an unnecessary burden on this health profession.

There is a fundamental problem in these bills' apparent recognition of activities which are currently illegal. The definition of adult entertainment establishment is broad enough to encompass activities which are currently illegal. Counting illegal activity in the gross revenue of a business to determine need for a license should never be permitted. It is inappropriate for the state, or any other governmental entity, to be licensing illegal activity.

Supporters:

Opponents:

Financial Impact: Revenue to the department would be increased by imposing a licensing requirement on a new profession. The increase in revenue would likely be substantial but no precise estimate is available. The bill would also substantially increase the workload for department staff. The bills would have a significant fiscal impact on the Departments of Consumer and Industry Services and Community Health. It is estimated that the cost of this program to the two departments will be $3-4 million.

The State License Fee Act is amended by House Bill 5125 to establish fees for the new licensed categories. Although it is difficult to project how many adult entertainment establishments exist or whether licensees will pay the fees, it seems unlikely that fees will be sufficient to cover the cost of the program.

Administrative Rules Impact: There may be no authority to promulgate rules related to this program. There is no rule promulgation authority in the new Article 17A. Although there is general rule promulgation authority in Article 3 of the Code, that authority is limited to boards. Article 17A creates no board.