Freeport ground zero in court: Houston (TX) Business Journal, 6/16/06

Legal dispute between city, family business tests landmark ruling on eminent domain

By Jenna Colley

The fate of a 56-year-old family shrimping business in Freeport has become more momentous as a New Orleans federal court weighs oral arguments made last week in a dispute over eminent domain.

Western Seafood Co. filed a lawsuit in 2003 against the City of Freeport to protect against seizure of company-owned property. The city responded by invoking the power of eminent domain to pave the way for development of a waterfront theme area by a Dallas firm.

After losing in U.S. District Court in Galveston, the company filed with the U.S. Court of Appeals in New Orleans, which put the case on hold last year pending a U.S. Supreme Court ruling in the case of Kelo v. City of New London.

The high court's June 2005 decision enabling cities to seize private property through power of eminent domain for commercial development purposes sent shock waves of controversy across the country.

Western Seafood stands to absorb a lot of this shock. The City of Freeport gets added impetus to advance existing plans for a waterfront marina and additional development along a stretch of the Old Brazos River.

On June 7, the New Orleans appeals court heard oral arguments, and both sides now await judgment day.

Lee Cameron, director of economic development for Freeport, says the city used eminent domain only after Western Seafood rejected a buyout offer and filed suit.

Western Seafood spokesman Wright Gore III, grandson of the company's founder, says the business has spent $400,000 on legal fees.

Says Gore: "It's been an enormous financial and emotional burden. This was never about money. We simply want the right to remain in business."

Interest in the eventual outcome extends beyond Freeport, seen as the first significant test of the Kelo decision.

Keeping especially close watch is Matt Deal, a partner with Houston-based Lewis Realty Advisors.

His clients include both government entities trying to acquire land through eminent domain and private owners being approached by government entities.

Says Deal: "Everyone in the eminent domain arena is watching this."

Strategic tracts
The Freeport economic development group has been working with Dallas-based Freeport Waterfront Properties LP since 2002.

The company run by H. Walker Royall and partner John Powers pursued plans to develop a private marina with capacity for 475 private yachts on about four acres of land.

The city already controlled some land, but two of the three remaining strategic tracts are owned by Western Seafood.

Trico Seafood Co., owner of the third, initially resisted but agreed to a settlement offer where the city will rebuild the company's facility at a different location.

Cameron says the cost will be about $250,000.

The city initially offered $400,000 for the pair of Western Seafood tracts, he says, but now an amount of only $269,000 is on deposit in an account for purchase of the land.

Freeport economic developers hope the plan will revitalize the small community by attracting tourism and additional projects.

Cameron estimates the marina and subsequent retail, restaurant and hotel development will create between 100 and 150 new jobs. The initial marina will generate 18 jobs.

As part of the deal with Freeport Waterfront Properties, the city has agreed to loan the Dallas company $6 million toward the marina project through the Freeport Economic Development Corp.

In order to collect, however, Royall and partner Powers have agreed to invest $1 million in the project and contribute a portion of land valued at $750,000.

The city also has granted the developer a seven-year, 100 percent tax abatement and plans to assist the company in getting a similar tax break from the county.

Cameron calculates an eventual 10-fold return on the city's $6 million investment based on financial indicators compiled by The Brookings Institution.

Figures from the nonprofit research think tank, Cameron says, indicate a yield of $60 million in subsequent investments due to stimulated economic development.

The only remaining hurdle is Western Seafood. But Cameron says he's optimistic that the appellate court will rule in the city's favor.

He says Western Seafood indicated early support for the project before negotiations broke down and set off the legal actions.

Says Cameron: "When it got time to sit down and give us an amount, it went south. That's when they filed a lawsuit. If they hadn't filed a lawsuit, we never would have filed eminent domain."

Western Seafood's Gore reiterates that his family's fight isn't about money.

Says Gore: "We don't want to sell any of the property. We want the developers and city government to quit ganging up on us and leave us alone. We don't want to sell and we don't want their money. It's really just that plain."

Houston Business Journal: http://www.bizjournals.com/houston