The Mall That Ate Katy

Big money, big lobbyists, big tax breaks. The Mills Corporation is bringing one of its "megamalls" to Katy, and it's hardly business as usual in the little town on the prairie.

"Yeah, I've got stacks of petitions and literature they keep mailing me from Pin Oak Village and Falcon Point," says Councilman Walter Pope. "It's where I've been hearing from the most -- and they are not inside the city. I think most of the people in Katy proper support the mall. I haven't personally heard anyone within the city who is opposed to it."

That's a distinction that, under any other circumstances, probably wouldn't be made. But Pope, who has visited Grapevine Mills and deems it "first class," says that the subdivision residents' opposition to the mall is selfish and misguided -- especially since they pay no property taxes to the city. Pope pointed out that Mills has promised to build a landscaped berm for the homeowners, as well as directional lighting "so it doesn't look like the Fourth of July over there."

The residents of Pin Oak Village and Falcon Point believe the only way they can stop the megamall is by killing the tax-increment financing district that the Mills Corporation wants. They are hoping to replicate what happened in 1994, in Columbus, Ohio, when the local school district chose not to contribute property taxes toward a megamall -- a decision that killed the project.

In Texas, as well as in Ohio and other states, TIFs are set up to freeze ad valorem rates within a specific area; as improvements are made in the district, property values rise, and revenue generated above the frozen rate is collected by a TIF board.

The TIF withholds this added tax revenue -- the increment -- from the city, county and school district for 20 years, passing it along to the developer to pay for infrastructure improvements. Link says the Mills Corporation cannot afford to proceed with Katy Mills until the city of Katy, Fort Bend County and the Katy ISD agree to pony up $41 million.

"I don't think this project would proceed without some economic package that would help pay for the infrastructure costs," Link explains.

Link has grown exasperated with the subdivision residents, particularly their belief that Mills is asking for "tax subsidies." The project director also resents the charge that she is not responsive to the homeowners' grievances. "They gave me a list of six or seven concerns," she points out. "And I've done every thing they've asked for."

Link has promised a 25-foot berm around the south end of the development site to shield the mall from the subdivisions. And it's actually in the best interests of Mills to be "very proactive" when it comes to controlling traffic, she observes, to prevent the kind of headaches that drive away customers.

"I think there are maybe a half-dozen or a dozen people who are not very excited about this project," Link says. "But I've been meeting with them. If I'd wanted to, I could have acted like they didn't exist, but that's certainly not the kind of corporate neighbor we are."

Some residents are even insulted by the notion that Mills already considers itself a neighbor of Pin Oak Village and Falcon Point.

"In a way, it would have been better if they had annexed us, too," Falcon Point resident Paschal Gagliardo says. "At least we'd get police and emergency services from the city. Maybe if somebody was looking out for us, that's something that could have been done."

At this point, it seems unlikely the residents of Pin Oak Village and Falcon Point can turn the tide against Mills. Their one slim hope is the Chelsea-DeBartalo project at I-10 and Grand Parkway. In August, the partnership announced that by next fall, Katy area residents would be watching movies on the Houston Premium Outlets' 17-screen movie theater.

Perhaps, but the subdivision residents aren't optimistic that it can stop the Katy Mills megamall, which they suspect is a done deal.

And that's the way it seemed on October 13, when the Katy City Council rolled over and approved with no discussion the four mall-related ordinances on its agenda, including Mills's request to plant a sign announcing the mall's opening two years from now.

But the item that rankled mall opponents the most was an ordinance authorizing Katy to buy the taxing rights to 408 acres of Houston's extra-territorial jurisdiction for $1.25 million. The city of Katy would then annex the land, and Mills would have the space it needs to build the megamall and any subsequent projects, such as hotels and restaurants.

The architect of this unusual transaction was lobbyist Joe B. Allen, a ubiquitous dealmaker and attorney for Vinson & Elkins, who has been hired by Mills to act as legal counsel for the Katy project. In late September, Allen started chatting up members of the Houston City Council on the $1.25-million sale of the extraterritorial jurisdiction (ETJ) coveted by Katy.

The transaction made sense for two reasons: The land was not part of any annexation strategy being devised by Houston, and Mills had said it would develop the mall nonetheless, squeezing it up against I-10 so the cash registers jingling with sales-tax revenue were all in Katy. The ETJ would be used as a parking lot.

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