1/31/2005

Metro mixes rail and real estate — Houston (TX) Business Journal, 1/30/05

New initiative raises questions about use of eminent domain

By Jenna Colley

Under a new Metro real estate initiative, owners of land within a 1,500-foot radius of a light rail station could stand a higher chance of having their property condemned by the transit agency.

The power of eminent domain first granted by the Texas Legislature and approved by local voters in 1978 authorized Metro to seize vacant land, homes and businesses following payment of a "fair market price."

Thirty years later, use of eminent domain in construction of the initial 7.5-mile segment of rail followed the original intent of the state legislation by keeping private property interests from blocking public rail.

Now, Metro is taking a more active role in stimulating real estate development along rail corridors....

As a result, development activity within the 1,500-foot limit could extend the transit agency's influence far beyond the actual tracks.

Metro's eminent domain reach covers a span of five football fields in any direction. The surroundings of a single urban rail station can encompass several square blocks occupied by scores of buildings.

The potential for more property condemnations not directly related to rail has some local property rights groups concerned.

While Metro prepares to implement the plan with an inaugural project in the Texas Medical Center, opponents of the new policy argue that properties blocks away from the rail stations could be potential targets of speculative real estate deals transacted by transit officials.

Metro Board Chairman and real estate developer David Wolff says there is no set policy in place regarding the condemnation of land for development purposes.

"I feel it's a discussion that would be best for the Metro board of directors and management — and just for land around stations," Wolff says.

He sees the use of eminent domain as a last resort.

"If you have a large tract of land around a station and one piece is needed, then it might happen that it could go to condemnation," Wolff says. "But we would try to negotiate first."

Todd Mason is equally cautious on the issue of condemnation.

The principal of McDade Smith Gould Johnston Mason + Co., who was recently hired to handle Metro's real estate portfolio, says he encourages development on property already owned by the transit agency, but could make additional purchases as needed.

"We are considering buying additional land where it's appropriate," Mason explains.

"It's sort of 'in the eye of the beholder' as to what's appropriate," he adds. "I'm going to be very conservative with the public's money here in the beginning."

Like Wolff, Mason emphasizes that condemnation should be directly related to Metro operations.

"Philosophically, I'd have a little bit of a hard time condemning somebody's property to put it in some private developer's hands," Mason says. "I don't have any problem condemning a property if we need it for Metro operations."

But Mason says he can imagine an exception to the rule, for instance, if the owner of a small parcel of land was holding up a larger development.

"I could conceive that that would happen, but we're really going to try and avoid that type of situation," Mason says. "It's not my intention to condemn somebody for development purposes."

Metro's emphasis on widening the scope of a 30-year-old condemnation power to stimulate new development raises even more red flags than usual for veteran anti-rail crusader Barry Klein.

The president of the Houston Property Rights Association argues that the concept can't be economically justified.

"There is no real evidence that rail enhances development," says Klein.

On Dec. 6, the executive committee of the Harris County Republican Party adopted a resolution pushed by Klein claiming voters should have a say in Metro's decision-making process regarding real estate development.

Klein and his organization are now hoping the issue will be pushed by like-minded legislators in Austin during the current session of the Texas Legislature.

The condemnation pendulum
Condemnation was confined to the proposed rail route when Metro mapped out the initial 7.5-mile line now up and running between downtown and the Texas Medical Center area.

Property owners in the path of the first rail segment were represented by Houston-based Lewis Realty Advisors.

Lewis Realty consultant Matthew Deal says the property owners were less angry over the fact that Metro wanted to condemn their property than they were with what they considered to be too low of a price for their land — a common argument in eminent domain cases.

Lewis Realty has worked both sides of the track in public projects involving the use of eminent domain. The firm represented Metro in the transit agency's acquisition of property for the West Park Tollroad, and negotiated on behalf of the Harris County Sports Authority in acquiring property through condemnation for the downtown baseball stadium.

Deal says, as a whole, more public entities are pushing the limits on their ability to use condemnation.

"If you are going outside of pure transit and you want to condemn land to do some mixed-use development, that's something that the court would have to decide whether you have the power to do that," says Deal.

Several current cases before the U.S. Supreme Court deal with the right of public agencies to buy property for real estate development.

But the tides are always turning on the issue of eminent domain, Deal says, sometimes in favor of public agencies and sometimes against.

"The pendulum is always swinging," he says.


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