Las Manitas and alley law

Thursday we learned, belatedly, that the Las Manitas loan was really about alley rights.  According to Brewster McCracken, the Perez sisters had an "absolute trump card to kill the hotel deal."  (You can listen to his interview with Jeff Ward on KLBJ here. Friday's Statesman had another article.)

Brewster's explanation:  Marriott needs part of the alley closed for its hotel.  According to McCracken (as paraphrased by the Statesman), "under state law, the Perez sisters have property and access rights to the alley and would need to consent to White Lodging [Marriott]using it."  Either Marriott had to forget about having the alley closed or the Perez sisters had to abandon their "property and access rights."  To break the stalemate, the city stepped in and used Marriott's money to buy off the sisters.

Given the furor over the loan -- both before and after the Council meeting -- it is incredible that Brewster and the other loan supporters did not see fit to educate the public earlier.  (Will Wynn's oblique reference during a mid-afternoon council meeting hardly counts.)  The "trump card" explanation, if true, would have dispelled a lot of opposition to the loan.  If the sisters have an absolute right to keep the alley open, then they can sell that right for whatever they can get.   

In fact, if the Perez sisters really do hold the trump card, then the loan would amount to a subsidy of Marriott.  My understanding is that the city is paying the sisters out of fees that Marriott would have had to pay anyway.   If that's right (who really knows at this point), then the city is using city money to buy the sisters' alley rights for Marriott's benefit. The city should have required Marriott to buy off the sisters' alley rights on its own; downtown development -- especially the generic design that Marriott has proposed -- does not need city subsidies. 

But I am skeptical that the Perez sisters have the right to force the alley to stay open.  No, not skeptical:  I think Brewster is flat wrong.  Cities need to close streets and alleys from time to time.  Abutting landowners will not always agree.  It would be unreasonable to allow a single property owner to hold the city hostage.  (According to Austin's loan program director, the Las Manitas loan is not even conditioned on the alley being closed -- a bizarre omission if this was the real reason for the loan.) 

The Perez sisters do have a legal interest in the alley.  But that does not mean they can force the city to keep it open.  The government, through eminent domain, can condemn virtually any property interest, including an abutting landowner's interest in a right of way.  The city does not even have to initiate a formal condemnation proceeding; it can simply close the alley and force the sisters to seek compensation.

For the sisters to force the city to keep the alley open -- Brewster's claim -- they would need an injunction, or court order.  But they cannot meet the standard for an injunction.  An injunction requires the threat of an irreparable injury for which there is no adequate remedy at law.  Landowners can rarely meet this standard when government action is at issue.  The government can take their property as long as it compensates them.  Money will make them whole (as far as the law is concerned); that, coincidentally, is the definition of an "adequate remedy at law."  And an injury is not "irreparable" if it can be cured by money.

Without an injunction, the sisters do not have "an absolute trump card" to block the Marriott deal.  The best they can do is get compensaton from the city.  But even there, they are probably entitled to little or nothing.

A landowner is not entitled to compensation for the closure of an abutting right of way unless the closure "materially and substantially" impairs his access to his property.  And the law is pretty clear about what this means.  If a landowner can access his property from several streets, then the closure of a single street will usually not be compensable.  The fact that the lot owner may be inconvenienced or that he may have to go a more roundabout way to reach certain points is not enough.

It is hard to see how the Perez sisters will be entitled to any compensation under this standard.  If the alley is closed, the Perez sisters will still have access to their building from Third Street and Congress Avenue.  I also assume the alley directly behind their building will remain open, in which case they will have access to the rear of their building from Third Street.  All they will lose is access to Second Street via a narrow alley.  A court is unlikely to find that to be a "material and substantial" impairment.  (They would have a better claim if the city physically blocked the rear entrance to their building.) 

So as I see it, the city does not have to get the Perez sisters' permission to close the alley.  It probably won't owe them any money, either.  And even if it does, it won't be much, certainly a lot less than the $650,000-$700,000 net value of the forgivable loan. 

So what does the alley closure have to do with anything?  Here's my take:  Council does not want to obstruct the Marriott project.  Marriott's made it clear that it needs part of the alley closed.  But this would require Council to close the alley over the Perez sisters' objection.  Council can legally do that, but then it would be in the awkward position of battling the Perez sisters publicly over the amount of compensation they are due (with the city's legal staff probably telling Council that the city owes them nothing).  Council didn't have the stomach for that fight, so it gave Las Manitas the forgivable loan, which some may have wanted to do anyway for reasons of "icon preservation."  The forgivable loan is really just the Council's attempt to buy itself out of a politically awkward spot.

I think Brewster's "new" explanation does focus attention on the city's decision to close the alley.  The city should be willing to close an alley for the right price.  I don't know whether the city got a fair price from Marriott.  I tend to think the city should have used its leverage over Marriott to demand a good design.  Whatever the city got, though, was money it could have used on any project.  Council may have been happy to spend it on Las Manitas, but in my opinion Austin could have gotten a better deal.

Update.  Typepad's freezing me out my own comment section.  Here's my response to a couple of comments by M1EK:

"Public purpose" has a pretty liberal definition, even in Texas, and notwithstanding the Whittington case.  The court of appeals there actually recognized that a parking garage might be a public use "as an abstract proposition."  It reversed a summary judgment for the city because the ordinance authorizing the condemnation failed to specify a public purpose as it should have.  It was a pretty technical opinion, in other words.  (I admit I don't know what evidence was offered at the recent Whittington trial to support the jury's verdict.)

I doubt "public purpose" would be a real obstacle here.  Closing a right of way is not compensable unless the abutting property owner's access rights have been materially and substantially impaired.  City of San Antonio v. TPLP Office Park Props., 218 S.W.3d 60, 66 (Tex. 2007).  One could argue that if there is no compensable taking, you don't even need a public purpose.  But even if a public purpose is necessary, it is not that hard to find one.

I am sympathetic to the anti-Kelo argument.  There have been some real abuses under eminent domain law; the taking upheld in Kelo was benign compared to some others.  If the city were to condemn the sisters' property to hand over to Marriott, everyone would rightly be up in arms.  But an interest in a right of way does not get the same legal protection as an interest in the property itself.  Nor should it, in my opinion, at least not when the landowner still has good access to his property.  The city does lots of things that inconvenience property owners.  It is a bad idea to give each of them a veto unless the inconvenience is for a "public purpose."              

That said, if the city actually was compensating the sisters for their alley rights, it should have made Marriott pay.  Under the deal Council struck, though:  (1) we get stuck with a bad design in a prominent spot; (2) the sisters get a windfall; and (3) the city rather than Marriott will foot the bill (unless Marriott will pay $750,000 more in fees than it would normally pay).  That wasn't a good deal.

Finally, M1EK mentioned that he remembered a tougher standard for alley closures from his days as a Transportation Commissioner.  He remembered right.  For administrative road closures, the standard is whether the road serves "no present or future public purpose."  City Code s. 14-11-73.  That's a very hard standard to meet.  But that standard doesn't bind City Council.

Comments

[Ray]

As I see it, this is a total red herring excuse that McCraken voiced after the fact.

If the Perez sisters had leverage against Marriott, then they should have taken their extortion to Marriott and not the city.

No matter the "spin-of-the-day" the city has no business giving these sisters money.

Are we to believe that they could not have survived without city funds and further believe that a new hotel next door to the million-dollar building they already own is not going to bring them even more business than they've ever had before?

Leffingwell had it correct when he voted it down (which he would not have if the alley was a real issue) and when he basically called BS on the alley excuse in the Statesman article.

This handout is totally inexcusable and should be used against the likes of McCracken when he runs for reelection.

I'd love to see the following bumper sticker all over town:

REMEMBER LAS MANTIAS!
vote Brewster out!

[DSK]

AC, thanks for this great analysis. McCracken's excuse-du-jour sounded somewhat fishy to me, based on my limited education on the relevant law. Seeing a more detailed opinion is a nice public service.

[shilli]

Even if the Perez sisters don't have the right to keep Marriott from building over the alley (I think there may be more to it than general eminent domain law), the city certainly has that right. I don't understand why the city is so interested in accomodating Marriott. There are a bunch of other new hotel projects downtown that look better than Marriott's EIFS POS.

Plus, the city has an interest in keeping the alley in place. Alleys are a good place for parking garage entrances, delivery trucks, dumpsters, etc. (things that restaurants and hotels need). Keep all that shit back there instead of on Congress Avenue. Plus, alleys are much more functional if they go all the way through the block instead of dead-ending in the middle.

[M1EK]

There is a lot of excuse-throwing going around after Brewster et al finally read the political winds and figured out they had pissed off more than just the knuckle-draggers on 590 KLBJ (although he still tries to pretend that it's just a right-wing storm).

Shilli, I agree that closing the alley sucks, but that does not excuse the behavior of the sisters (shameful) and the behavior of the city (spineless and/or unethical). I'd be much happier if the city had just told Marriott to buy them off, or not, and then we'd likely be seeing either:

1. The project being built without using the alley

or

2. the sisters getting sued in civil court by Marriott's potential landlord.

Either one of those outcomes is 1000000 times better than what Brewster bought us.

My experience on the UTC, by the way, leads me to believe that it also isn't a simple open/shut eminent domain case to take an alley - the standard is in fact very high, even if there is street access.

[G. G. Austin]

Does "Harry Whittington" mean anything? Look up his eminent domain case.

[OldTimer]

If Las Manitas goes out of business, I'd love to see the following bumper sticker all over town:

LEGALIZE SHOOTING NEWCOMERS!

Ah, what the hell ... I'd love to see that bumper sticker all over town even if Las Manitas stays open!

[M1EK]

Just posted by me to Chronic (unattributed; thanks horrible UI!):

Under the normal (ante-Kelo) definition of eminent domain, there must be a clear public purpose for the property; and the standard in Texas is fairly high, as we learned with the Convention Center parking garage debacle. To say nothing of the fact that the state legislature would go into fits at the sight of Austin condemning a property (or a property's alley access) just to turn around and gift it to Marriott for a private development.

I know; alley != property; but still, the state law seems to treat alley access as pretty much as sacrosanct as the property itself. The key here to me is public purpose vs. private purpose. Again, yeah, Kelo, but that won't fly here in Texas.

[Big Dan]

Bottom line is our City Council is comprised of a bunch of spineless idiots. From the Shoal Creek Blvd. debacle to this incident they have proven they are incompetent. Vote these losers out of office !!!!!

[M1EK]

Without delving into the minutia of the law as it stands today (which I'm sure you're correct on), I still think you're being a bit too dismissive of the political implications...

I suspect at least some of the legal advice received by the City Council had to do with possible future interactions with our friends at the state.

What do you suppose would happen the next time the Lege rolled into town and they heard that Austin had taken an alley access from a local business to give it to a national business? Remember - these are the same guys that wrote laws restricting SOS (which held up in court fine; albeit too late to stop some damaging development out there).

In this particular case, a large cross-section of Austin residents would even support the state's action. The only thing that would rile people up more than the debacle we just went through would be the city being perceived as taking away from the sisters to give to Marriott.

[smcdow]

M1EK's warning is prescient.

Anyone living in Austin during the 80s and 90s will remember how arbitrary and capricious teh Lege can be to Austin.

If a few underhanded dealings can keep the Lege off our backs, then it's money well spent.