New York City- A lawsuit over the city's sex industry dragged on for eight years before finally going to trial - allowing a glut of porn shops and peep shows to open in Sunset Park.

Residents charged in the suit the shops contribute to prostitution and keep the neighborhood from improving.

But the shops aren't breaking any laws because a city effort to regulate them has been tied up in court since 2001. The case went to trial in Manhattan Supreme Court this month.

In that time, the number of sex shops in Sunset Park has grown from a handful to about 25.

"Our community has been dumped on," said Community Board 7 Chairman Randolph Peers, noting sex shops began to flock to Sunset Park when the city cleared them out of Times Square.

"We have a prostitution problem," he said. "We're bringing in the customer base with all these sex shops."

Under Giuliani-era regulations, adult businesses are confined to mostly industrial areas and can't be located within 500 feet of a school, place of worship, or another adult business.

But the rules don't apply to businesses where 40% or less of the merchandise is "adult" - which doesn't count sex toys or lingerie.

In 2001, the city tightened the rules to include porn shops that offer peep shows, exclude minors, or tout racy material in their window displays. Two lawsuits were filed opposing the new rules.

"Mothers can't bring their children to school without exposing them to things they shouldn't see," said Gloria Hidalgo, 70, one of 200 Sunset Park residents who signed a petition calling for the shops to be closed.

But shop owners say they're protected by the First Amendment - and aren't doing any harm.

"The true test of free speech is enduring the speech we hate," said Herald Price Fahringer, lawyer for a coalition of businesses challenging the rules.

He said the stores already have "radically modified their inventory" to comply with the 60-40 rule, often carrying mainstream movies like "Saving Private Ryan" and "Rocky III."

"The regulations are so strenuous, so severe that to comply with them means you couldn't survive," he said, challenging the city's claim that they are trying to regulate sex shops, not put them out of business.

Gamage Prabath, an employee at Midland Video, at Third Ave. and 41st St., argued the shops are actually a boon to the community.

"They arrive at their sexual satisfaction here, so therefore the children and the ladies on the street are safe," he said.

Prabath questioned the wisdom of a morals crackdown in a time of recession.

"If they close these [shops], it will contribute to more severe unemployment," he said.