Monday, February 14, 2005

Condemnations begin: "I'm gullible. I trusted these guys."

Texas 130 land buys take toll on owners

State calls offers fair, but many feel squeezed and find that condemnation brings better price

Austin American-Statesman
Copyright 2005

They lost more than their land to make room for Texas 130.

People along the 49-mile route gave up their homes, the fruit trees they had nursed from seedlings, the shaded spot where kids had buried family pets.

They gave up part of themselves.

The state Department of Transportation cannot make up for the sweat and memories as it doles out the $304 million set aside to purchase right of way for the ambitious $1.5 billion toll road. With final offers made for about two-thirds of the 400 or so pieces of land needed, the department says it is paying each owner a fair price.

But some of the landowners don't see it that way.

The swath that will be Texas 130 is already cutting through eastern Travis and Williamson counties, and the first pavement was poured just more than a year after the October 2003 groundbreaking. As highway construction goes, that is breakneck speed.

Left in its wake is a trail of frustrated landowners who claim that in its rush to get the highway done, the state is trying to squeeze them out of their land on the cheap.

The frustration is evident in the 44 percent of landowners along Texas 130 who, through December, had rejected the state's offers for their property, forcing the state to pursue legal condemnation proceedings.

That figure is more than three times the condemnation rate seen on U.S. 183-A, a similar toll road under way in southern Williamson County.

Landowners and the state disagree on one critical point: how much land prices in the area would be rising with or without the tollway.

The state says it is not obligated to pay higher amounts if the tollway itself is driving up values.

But John McClish, a prominent condemnation lawyer, said the state's independent appraisers "refuse to recognize that this is an area that's in transition, and because of that, values are going up."

Some landowners who accepted the state's initial offers are seeing their neighbors get far more money by fighting.

A review by the American-Statesman of eight side-by-side tracts that share critical characteristics -- size, road access, land use, location -- shows that court-appointed panels awarded on average 71 percent more to the landowners of four condemned tracts than was paid to those who took the state's offers.

Though variations are not unusual, such significant increases over the state's first offers are, lawyers and consultants versed in condemnation say.

The disparities have left some feeling as if they had been taken for a ride.

"The hindsight hits you, and you realize those guys . . . didn't have all their cards on the table," said Nathan Honeycutt, whose neighbor got about $317,000 more than Honeycutt for a nearly identical piece of land near Pflugerville.

State officials bristle at the suggestion that landowners are being shortchanged.

"Are property owners upset?" said Don Toner, the right-of-way administrator overseeing Texas 130. "Isn't everybody upset when they have to sell their land? When they think it's worth more? When they planted the tree? When they built the fence?"

It is a common refrain heard up and down every road project: that landowners are being lowballed, Toner said, noting that the state must walk a fine line between justly compensating landowners and minding the public's money.

"I've got an obligation to every single property owner we encounter to pay them every penny I can, that they're entitled to," Toner said. "On the other side of that, I've got a responsibility for every other taxpayer in the state of Texas not to pay them one penny more than they're entitled to."

The state expects to build more toll roads, and build them quickly. If Texas 130 is a fair portent, that means more condemned land and more unhappy landowners.

That is the price paid for doing business with a ticking clock.

Taking the fast lane

With each passing second, state officials say, the $2.2 billion in bonds sold to build the entire Central Texas Turnpike Project -- Texas 130, Texas 45 North and the extension of Loop 1 -- accrues an estimated $3.60 in interest.

When the first pennies of interest started accumulating in August 2002, the state Transportation Department did not have one square inch of the 4,700 acres needed to build Texas 130.

It did, however, have a contract with Lone Star Infrastructure LLC, the private consortium formed to design and build the tollway and launch Texas into a new era of highway construction.

All eyes are trained on Texas 130 because seemingly everything about it is big and new.

It is currently the largest highway project in the country, and part of the first Texas project paid for with debt.

The lump-sum contract with Lone Star Infrastructure, worth nearly $1 billion, requires the tollway to be finished by December 2007, or heavy penalties kick in.

Responsibility for virtually everything the state once did -- such as engineering, design and land acquisition -- has been put into private hands, a streamlined approach intended to get traffic and tolls flowing earlier.

Observers from as many as 30 other state transportation departments and several foreign countries have come to gawk at the effort, a breed of public-private partnership never tried before on a state highway in Texas .

It is how major projects -- such as the planned 4,000 miles of the Trans -Texas Corridor -- are supposed to be built in Texas from now on: big and bold, fast and lithe.

That means acquiring land quickly.

Slowing for land buys

Getting hundreds of landowners to sell can be a plodding, unwieldy and time-consuming process, even when most landowners are resigned to give up their land.

On other projects using the streamlined approach, including U.S. 183-A, the state has largely acquired the land before the clock starts.

Not so with Texas 130.

To speed up the process, the state turned over management, but not the cost, of right-of-way acquisition to Lone Star Infrastructure. The state retains some control by holding the purse strings and reviewing all appraisals and offers. Only the state has the authority to condemn land.

The government's powers of eminent domain work pretty much the same whether a landowner has 1 acre or thousands, which developers John Lloyd and Tim Timmerman each hold along the route.

There are always savvy landowners with enough time, land and money to eke out the best deal for themselves. But most landowners, particularly those losing a home or business, say they just want the issue resolved so they can move on with their lives.

The challenge is arriving at a figure agreeable to both sides. The state makes an offer based on an independent appraisal. The landowner can counter.

If the two sides can't agree, the state must condemn the land.

A judge appoints a panel of three "disinterested" landowners called special commissioners, drawn from a pool assembled by the court. Real estate expertise is not a requirement to serve, but many commissioners are familiar with the industry and have served on condemnation panels for years.

The panel hears arguments from lawyers and dueling appraisers and decides how much should be paid for the right of way and economic damage to remaining land.

Either side can object to the award and ask for a jury trial. But as long as the state deposits the money with the court, it is free to take the land at that point and start work. Jury trials have been requested, primarily by the state, in about half of the Texas 130 condemnation cases so far.

Condemnation is not intended as an "us against them" process, Toner said, even though research shows that condemnation usually indicates a landowner's dissatisfaction and can lead to higher acquisition costs.

"It's worth what it's worth," Toner said. "And our job is to determine what that value is either through an appraisal or through a fact-finding group like a special commissioners hearing or a jury. It doesn't matter to us."

A business detour

It mattered to Anthony Dobias.

Dobias, 45, runs a precision machining shop, A.R. Machining Inc., that makes components for heavy equipment used for oil drilling and military aircraft repair.

In the late 1990s, Dobias wanted to build a new shop on the east side of FM 685. The final route of Texas 130 had not been set, but Dobias knew it could end up somewhere nearby.

State officials repeatedly assured him that his new location was safe, he said.

But shortly after he started construction, Dobias was told that the highway would be going through his land to avoid the golf course across the road.

Dobias' business wound up in limbo.

In 2003, the state offered $1.38 million for his property. The state's independent appraiser later testified during the condemnation hearing that he never even entered the building, which constituted 87 percent of the property's total value, said Dobias' lawyers, John McClish and Dan Foster.

Based on that testimony and his own appraiser's work, Dobias won $1.9 million from the court-appointed panel, about 38 percent more than the state offered.

But that's not the end for Dobias. The state has objected to the award and is taking his case to a jury. He used the money to pay off his old property, buy new land and once again rebuild his shop. What happens if a jury says his property is worth less?

"I guess I thought since they were the state I live in, they'd be fair and honest," Dobias said. "It doesn't work that way."

Property appraisal is an art, not a science, that is highly subjective. Critics say the choices made by the state's appraisals are flawed and are fueling the landowner frustration.

"We have seen some consistency in the appraisals and the offers that have been made based on those appraisals," said McClish, whose law firm represents about 50 landowners along Texas 130. "The offers are consistently low."

Appraisers from Allen, Williford & Seale Inc., the Houston firm responsible for appraising all the Texas 130 properties from north of Georgetown to U.S. 290, have testified that they have limited experience in the high-growth, rapidly changing markets of Williamson and Travis counties and have worked only for the Transportation Department in this area, McClish said.

They have also been churning out comprehensive reports, one appraiser testified, at the rate of 1 1/2 per week since they started.

One of the biggest issues for McClish is the comparable property sales used as the primary basis of the appraisals. They do not reflect the market, he said, because the sales are too old and from areas where rapid growth is not constantly changing the market.

The appraisal firm referred a call for comment to the Transportation Department.

The department "can put me out of business tomorrow," McClish said, if it makes fair offers and does "the right thing."

Toner defends the appraisals and the offers, which he said reflect the value of property before the incoming Texas 130 started driving up prices.

The landowners "always have a vested interest in increasing," Toner said, adding that neither he nor the independent appraisers, who have followed the industry standards, have such an interest. "What else would the property owners complain about? They only have one way that they want to go."

But the criticism is coming from other corners as well, from people without a dog in the hunt.

John Pfluger, a real estate broker for 40 years, said he helped about 10 landowners negotiate better prices because the first offers were below the market value.

"They tried to buy them as cheap as they could," Pfluger said. "To me, I don't think it's fair."

So he helped people such as Nathan and Melissa Honeycutt.

Raising red flags

With two children heading to college and a mortgage, the Honeycutts did not have time for a prolonged legal battle over their land. If they had to move, they needed the state's money to do so.

"It's different when you've got a family and you need a place to live," said Nathan Honeycutt, the manager of a propane company.

Honeycutt wanted to cooperate but found the state's first offer for his 5-acre home site laughable, less than what another buyer had offered two years earlier.

The state accepted Honeycutt's counter-offer but warned him that he was "pushing the envelope" by asking for more, he said.

"I'm gullible. I trusted these guys," Honeycutt said. "They made me believe that that was as much as anybody was going to get."

Then he learned that his neighbor was awarded 60 percent more for a similar property. The neighbor, Hal Kuempel, had refused the state's offer, and his property was condemned.

The difference held true in a review of eight adjacent, same-sized tracts in Honeycutt's rural subdivision: Different condemnation panels awarded between $741,683 and $847,489 for the four condemned tracts. The neighbors who took the state's offers were paid between $461,927 and $530,000.

The state did not object to any of the awards granted by the condemnation panels.

Toner said the awards in these early cases raised red flags. His office re-evaluated its procedures and found nothing that needed changing. In the end, he could not explain the discrepancy.

"We have a situation where we've created some inequalities there," Toner said, though he added that this scenario "is probably not indicative of the entire project."

McClish said his clients are typically getting much higher awards from the condemnation panel, sometimes twice the state's offer. They pay the law firm an hourly fee or a contingent fee between one-quarter and one-third of the difference between the state's offer and the final award.

How the property awards changed along the entire route could not be confirmed because the attorney general's office rejected a public information request for the appraisals of all the properties that had been taken so far through condemnation.

The Honeycutts did all right in the end. They found the "ugliest home you ever saw" on 12 acres near Manor and made it home.

Before they sold, all the haggling and waiting had eaten at Nathan. But he was at ease with his decision, until he was told what his neighbor got.

"It's not the money. It's the principle," Honeycutt said. "You don't know all the laws and the little details that they know. . . . You just do the best with what God gave you."; 445-3618

(from box)

Top landowners along the Texas 130 corridor


Holdings: About 3,000 acres

Locale: Hutto, Pflugerville, Manor, Del Valle

History: Lloyd has developed land along the corridor since the late 1980s.

Development: Wild Horse Ranch, Hutto Exchange, Hutto Square, Hutto Park, Hutto Highlands, Interport South


Holdings: Between 2,500 and 3,000 acres

Locale: Pflugerville, Hutto

History: The Timmerman family has been in the area since the community's inception. Tim Timmerman oversees development of the holdings.

Development: Star Ranch, Forest Creek Estates


Holdings: About 2,000 acres

Locale: South of Manor along FM 973

History: First of the parcels was bought in the mid-1980s.

Development: TXI, the largest producer of cement in Texas , operates several sand and gravel quarries in eastern Travis County.

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