The Texas Supreme Court ruled the developer of a proposed multibillion-dollar high-speed rail project connecting the Dallas and Houston areas has eminent domain authority, giving the company behind what has become a criticized project that some thought would never happen the go-ahead to move forward.
The proposed high-speed rail being developed by Texas Central, a privately held company based in Dallas, is designed to shuttle passengers between Dallas and Houston in 90 minutes at a speed topping 200 mph. The project, originally scheduled to get underway in the summer of 2020, has been met with fierce opposition by a group of Texas lawmakers who petitioned the federal government to cease work on the project in part because of its hefty price tag, and has faced setbacks from landowners unwilling to part with their land.
The state's high court ruled in a 5-3 decision Friday that Texas Central counts as a railroad company and an interurban electric railway company and therefore can use eminent domain to acquire land under the state’s transportation code. The ruling came after the owner of 600 acres in Leon County along the proposed railway route sued Texas Central, saying it lacked eminent domain rights of a railway company.
The property owner and plaintiff, James Fredrick Miles, told the court that in the event the project was canceled or indefinitely stalled, the right to repurchase the land "will not compensate the landowner for the damage done to it or the stigma associated with encumbrances like railway easements," nor will it compensate for any "vacant buildings, useless tracks, and 40-foot-high embankments" left if the project is abandoned in the future. The judges agreed, in their decision, that Miles' right to repurchase the land does not provide any additional landowner protections, which could need a policy amendment, a matter that isn't for the court to decide.
Initial work on three rail stations — in Dallas, Houston and near College Station — started last year. The Texas project is modeled after the Japanese Tokaido Shinkansen high-speed rail system that connects three of Japan's busiest cities and was expected to use the same technology through a partnership with Central Japan Railway, but an agreement was never reached.
The project has been in the works for about a decade, with plans to bring the nation's first high-speed rail project to Texas using private funds. But costs tied to the Texas project have increased over the years from $12 billion to $15 billion to $20 billion and even estimates as high as $30 billion amid scrutiny about how it was going to be financed.
Management Departures
This month, Texas Central President and CEO Carlos Aguilar announced he was leaving the company after more than five years, posting a statement on LinkedIn saying he is immensely proud of the company's work and the staff's growth from a "small start-up to an expert interdisciplinary and integrated team. ... While I could not align our current stakeholders on a common vision for a path forward, I wish the project the greatest success and remain convinced of the importance of this venture."
Other members of Texas Central's executive management team have also left the company recently and the board has reportedly disbanded.
A Texas Central spokeswoman told CoStar News that the company appreciates the Texas Supreme Court's time and consideration of "this important issue as we continue work on this innovative high-speed passenger train rail."
Prior to the court's Friday decision, a representative from Texas Central filed a letter with the court saying "Texas Central remains open for business under its new management, is continuing to seek further investment, and is moving forward with the development of this high-speed train."
Dallas developer Jack Matthews resigned from Texas Central's board about three months ago because he didn't think the economic interests that controlled the company were doing the best things to achieve success, he told CoStar News.
"I am very hopeful we'll see some new blood involved in the business," Matthews said.
Matthews and his partner, Fort Worth investor John Kleinheinz, still control the land surrounding the three federally designated high-speed rail stations comprising about 170 acres. They are moving ahead with plans to design and build mixed-use developments surrounding the stations in hopes the real estate is ready once the high-speed rail is built, said Matthews, president of Dallas-based Matthews Southwest.
If the project comes to fruition, it is expected to be a catalyst for other real estate development.
"I believe the construction of high-speed rail will have a generational impact, creating thousands of jobs right here in Houston and injecting billions of dollars into our local businesses," Houston Mayor Sylvester Turner said in a statement Friday.
Turner hopes the Supreme Court's decision will "revive interest in the project and incentivize investors to move forward in financing and building the Houston to Dallas bullet train."