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Local News

August 18, 2013

City attorney: Ordinance needs to be changed

GREENVILLE — The City of Greenville will have to change a portion of its controversial “Alternative Financial Services” (AFS) ordinance, which leaves the city open to civil litigation.

City Attorney Daniel Ray intends to meet with the Planning and Zoning Commission Monday to draft a version of the ordinance which will be considered by the City Council.

The ordinance would strike the language which currently prevents a payday loan company or similar business from opening in the same location where another AFS operation closed.

In a memo to the Commission, Ray notes that the measure has been found to be illegal.

“The purpose of this section was to ultimately reduce the number of Alternative Financial Service businesses that could legally operate in certain areas of the city,” Ray said. “However, this manner of terminating non-conforming uses is not recognized as valid under Texas law.”

The Commission is scheduled to meet for its first regular session since March when it convenes at 5:30 p.m. Monday in the Municipal Building, 2821 Washington Street. A public hearing is set prior to the Commission voting on whether to recommend approval of the revised ordinance to the Council, which will consider the issue August 27.

Ray referred to the section of the Alternative Financial Services ordinance, approved by the city three years ago, which was designed to prevent another AFS from locating in the same building where one of the services closed.

“Effectively this section means that an ‘Alternative Financial Service’ business (i.e., businesses engaged in the practice of short-term loans and auto-title loans) may not sell their businesses to another owner, occupant, tenant, or business if they are a ‘non-conforming use’ – which in this case means that they are located within 1,000 feet of another Alternative Financial Service.,” Ray said. “If they do sell, the new owner, occupant, tenant, or business must obtain a new Certificate of Occupancy under other regulations, which will automatically terminate the privilege to continue operations.”

Ray said the section terminates a owner’s property rights in a manner not recognized by Texas Courts and without providing an avenue for appeal.

Ray is recommending the Commission and Council agree to remove the section of the ordinance entirely.

“The ordinance change is not a loosening of the restrictions on Alternative Financial Services,” Ray said. “It will not allow new businesses in that category to move in, and the 1000-foot spacing requirement will remain in place.  The removal of the illegal section will simply allow the legal transfer of Alternative Financial Service businesses from one owner to another.”

Ray said the city could be on the hook financially if it does not remove the section of the ordinance.

“The City Attorney’s office has advised the City Council that failure to remove the illegal language will subject the city to clear civil liability – liability for which there is no insurance coverage,” Ray said.

 “In addition, one business in the Alternative Financial Services category recently sold to a new owner. The Greenville location of that business was one of approximately 20 stores that were part of that sale, but due to the Zoning Ordinance restrictions, $850,000 of the sale proceeds have been kept in escrow. If the City fails to change the Zoning Ordinance, the owner of that store will lose his right to operate the store as well as the money in escrow, and will sue the city for constitutional violations.  The city could (and probably will) be liable for the total amount of the lost sale proceeds and legal costs – likely totaling more than $1,000,000 of taxpayer money.”

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