Tips for Drafting City Licensing Ordinances

Cities license certain businesses and activities to protect the public health and welfare. Often a licensed activity is hazardous in its own right or may be harmless on its own, but prone to hazardous side-effects.

An example of a direct hazard relates to dog licensing - cities license dogs to prevent roving animals that bite and spread diseases (particularly rabies). In contrast, cities regulate massage parlors to prevent harmful side-effects. Nothing about massage is inherently dangerous, but certain criminal activities related to prostitution and human trafficking are frequently associated with massage parlors. Such side-effects can pose a danger to participants, encourage criminality and create neighborhood blight.

Cities also regulate certain businesses, because state law mandates licensing. Liquor licensing is an example of mandated licensing. Cities may opt to be completely “dry” and not have liquor for sale at all within their boundaries. But all “wet” cities, who choose to allow liquor sales must license retailers. State law goes even farther to establish the types of licenses and even some fees.

Conversely, state law prohibits city licensing in other instances. For example, most cities are not permitted to license plumbers anymore. Generally, when city licensing is prohibited, a state license is available. In these instances, the state has expressed an interest in creating uniform standards for statewide licensing. Before drafting a licensing ordinance, it is important to verify that city authority to license exists. A good place to check for authority would be Minn. Stat ch. 412 and the LMC Handbook for Minnesota Cities chapter on licensing: http://www.lmc.org/media/document/1/chapter11.pdf

Once an activity is deemed hazardous, licensing serves one or all of the following purposes:

 Alerts the city that someone in the city is engaged in the hazardous activity or business;

 Allows the city to conduct background checks on persons conducting the business;

 Allows the city to impose reasonable rules on the activity that are a condition of the license;

 Requires the licensee to carry insurance adequate to protect the public from harm resulting from the business of activity.

Drafting Suggestions

When drafting a licensing ordinance, emphasis should be placed on finding language that addresses the hazards posed by the business or activity. The following questions can serve as a “checklist” to help you draft licensing provisions.

 Does state law require specific provisions or language in our local ordinance? For example, state law sets numerous criteria for city tobacco license provisions. See Minn. Stat. § 461.12.

 What type of hazards does this type of activity pose to the community? What nuisance side-effects can it potentially create? This will probably be the lengthiest part of your ordinance. For example, liquor establishments can create noise, litter and light pollution nuisances. Specific provisions should be drafted to address these issues. See our previous entry on drafting city liquor ordinances at: http://lmccodification.blogspot.com/2010/09/is-your-liquor-ordinance-tight-enough.html

 Would a background check on the persons conducting the business increase public safety? For example, background checks are required by the state for liquor licensees and common for massage parlors, pawn shops and door to door peddlers.

 Are there persons who should be exempt from the licensing requirements? For example, it may be unnecessary to require a dog license for the city police dog. In addition, state law exempts blind persons from tobacco licensing fees.

 How will we recover our costs in administering the ordinance requirements? For example, through licensing fees or reimbursement for background check costs.

 What penalties do we want to impose for ordinance violations? In addition to criminal penalties, are administrative sanctions authorized or required? For example, administrative sanctions are required for tobacco and liquor licensees.

 Would insurance requirements increase public safety? For example, state law requires liquor licensees to carry dram shop insurance. Insurance may also be a good idea for public dances, dangerous dogs and body art technicians.

Finally, every licensing ordinance should contain procedures for imposing penalties, revoking licenses and dealing with bad conduct by licensees. Establishing procedures provides licensees with due process – a fair chance to be heard and dispute claims against them. This may reduce conflict and litigation related to licensing. This section of the ordinance should provide at minimum:
 A process for notifying the licensee that the city is considering revoking their license or imposing a penalty (for example, notice sent by mail 10 days before consideration of the matter);

 A process to allow the licensee to request a hearing on the matter where they may dispute statements made against them;

 A hearing process before a disinterested party (before council or city staff);

 A process to inform the licensee of the final decision on the matter (for example, a written summary mailed to the applicant within 20 days of the hearing).

Conclusion:

Licensing is an important tool for all cities to limit hazardous activities and their secondary effects. Licensing is often an area involving an interaction of local ordinance and state law, so ordinances must be drafted with care. However, once state law requirements are met, ordinance drafting should focus on the harms posed by the activity and mitigating those dangers.

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