Retailers revolt over road expansion
Facing displacement, businesses unite to fight as Katy Freeway widens

Tanya Rutledge
Houston Business Journal
From the January 26, 2001 print edition

For 15 years, Ciro Lampasas and his family have been "rolling meatballs" at Ciro's restaurant on the Katy Freeway. But like many retailers along the busy thoroughfare, the restaurateurs are preparing to pack up their rolling pins to make way for the wrecking ball that will extend the freeway right though their dining room. The Lampasases are one of a few dozen Katy Freeway tenants and land owners that have banded together to fight for the limited rights they have in the fast-approaching widening process. More than 30 have hired local law firm Vinson & Elkins to represent them in negotiating for their land and for tenant settlements.

As a result of the project, hundreds of Katy Freeway businesses from just inside Loop 610 to Katy will be displaced over the next eight years. The freeway, also known as Interstate 10, will be widened to a minimum of eight regular lanes (four in each direction), four high-occupancy-vehicle lanes (two in each direction) and six lanes of frontage roads (three in each direction). The entire project is projected to take at least eight years, with utility work beginning as early as this year. The state will acquire as much as 100 feet of right-of-way on both the north and south sides of I-10 from just inside West Loop to Beltway 8. Between Beltway 8 and past Highway 6, less right-of-way will be necessary, according to the Texas Department of Transportation.

Meanwhile, the retailers are bracing for the worst. "We know this is progress, and we can't get in the way, but we feel like we're a really small fish and they're getting ready to squish us," says Lampasas, who is faced with the decision of relocating his restaurant when his lease is up in a year or staying until his building is displaced.

Little legal recourse
Starting this summer, the Texas Department of Transportation will start making monetary offers to landowners for the cost of their land and tenants for their relocation expenses along the Katy Freeway. Already, TxDOT has settled on a price with dozens of homeowners and the Westside YMCA for the land that will be condemned to make way for a widened highway. The YMCA is leasing back their land from the state until construction begins. The remaining businesses don't have much recourse when it comes to settling with the state, largely because the widening program is considered an improvement project that is being executed for the greater good of the city. In such a case, the state has the right to invoke eminent domain and to condemn whatever property is necessary for completion of the project. Still, the state isn't expecting the process to be without legal action.

"There will be quite a few displacements," confirms Jim Heacock, a project development engineer with TxDOT. "We obviously hope to settle each individual case before it gets to the point of a jury trial." Heacock, who served as the project manager on preliminary engineering for the project, admits that it's likely that some of the cases will go to trial. TxDOT is not yet able to estimate which end of the Katy Freeway will go under construction first, a point which has also raised the ire of retailers. "The most upsetting part is that there is no vision of how the whole process will take place," Lampasas says. "A lot of people are shrugging their shoulders, while all we can do is wait." Landlords are also suffering, as tenants -- pointing to the uncertainty of the situation -- begin to request lower rental rates as their leases come up for renewal. Other tenants are declining to renew their leases at all, according to Vinson & Elkins attorney Dixon Montague, who is representing many of the tenants and landlords in their negotiations with the state.

Once the tenants and landowners receive an offer from TxDOT, they have the right to make a counter-offer. If the two parties still don't agree, the case will go before a land commissioner's court made up of three impartial, randomly selected Harris County property owners that will decide on what they think is a fair settlement. The last resort would be a jury trial, which both sides typically try to avoid. "The truth is that there's not much legal protection for these people," Montague says. "But many of them have no idea what they're going to do or how they're going to do it. The bottom line is that if they relocate, they're going to lose customers. A lot of people are going to suffer."

Rising values
One of the more high-profile displacements will be the newly constructed Marq-E entertainment center on I-10 and Silber. Opened just over a year ago, the Edwards Marq-E Stadium 22 Cinemas theater will be losing some of its parking as part of the widening process. Further west, the newly opened Lowe's Home Improvement center -- which is part of the new Centre at Bunker Hill -- will see a highway running through its outdoor garden center. The owners of the Marq-E and the Centre at Bunker Hill did not return telephone calls. In fact, almost every retailer and office building along the freeway will be permanently affected by the project. Once construction actually starts, customers are likely to experience headaches getting in and out of the businesses, which can often be the death knell for retailers. But TxDOT's Heacock points out that the state is doing everything it can to keep the disruption to a minimum. He says none of the businesses' access to the frontage roads or freeway will be cut off during the process. Heacock also points out that tenants and landlords that hunker in to weather the storm will likely reap the benefits once the project is completed in 2008 or 2009.

Indeed, property values along I-10 don't seem to be adversely affected by the pending project. Statistics compiled by land brokerage firm McDade, Smith, Gould, Johnston & Co. indicate that land along the freeway is trading at a minimum of two and a half times higher than it was five years ago. Land along I-10 between Loop 610 and Beltway 8 was trading at an average of about $4 per square foot five years ago, compared to average values in the high teens today, according to the real estate firm. Bill McDade, a principal in McDade Smith, says most retailers believe they must have a presence along the busy freeway if they are to be considered a major player in Houston. "It's the most phenomenal thing I've ever seen," he says. "You announce the shutdown of a freeway and there's a flurry of activity to get a position there. The pending construction hasn't done anything to negatively affect property values. Retailers understand that they have to be there in the long run."