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State Supreme Court to Decide Just What a Billboard is Worth

Public officials are nervously awaiting the high court's ruling in a fight between TxDOT and Clear Channel Outdoor that could drive up future highway project costs.

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It's been eight years since the state condemned land and cleared away two billboards standing in the way of an expanding Interstate 10 in Houston. 

But the debate over how much Texas should pay Clear Channel Outdoor for those billboards rages on, and public officials now nervously await a Texas Supreme Court ruling that they fear will make some future road projects more expensive. 

“Far fewer Texas highways will be built” if the state loses the case, the Texas Association of Counties, the Texas Municipal League and several other groups warned in a brief.

The case began with two small, neighboring plots that the Texas Department of Transportation condemned in 2006 for highway expansion. Clear Channel Outdoor had leases for both plots, and its two billboards towered over them. It was, the company said in court filings, “one of the highest trafficked and highest demand areas in Houston.”

TxDOT offered to pay the company for the value of the structures, and pick up the tab for moving them, the agency's standard approach when condemning billboards. Clear Channel said no. The company also rejected an offer by the city of Houston to move the billboards because, it argued later in a legal brief, the city couldn't give the company "a comparable location in such a strategic market."

And the city's offer of a new spot was only good for 10 years, the company argued, "whereas, absent the condemnation, Clear Channel Outdoor’s sign structures would have remained in place for decades more.” 

Clear Channel Outdoor ultimately filed suit, arguing that the billboards were fixtures of the condemned real estate and that the state was obligated to compensate it not only for the physical structures, but also for loss of future advertising revenue.

In 2008, a jury leaned the company's way. The state's appraisal expert pegged the appropriate compensation at $50,600. The jury awarded Clear Channel $268,235.27. In 2012, the 1st District Court of Appeals in Houston affirmed the jury’s ruling.

During oral arguments before the Supreme Court last month, Assistant Solicitor General Michael Murphy argued that Clear Channel is asking for billboards to be treated differently than other businesses,

“When the state condemns land, it doesn’t take the business,” Murphy said. “It takes only the physical property.”

Any effort to determine lost income for a billboard company are “too speculative” to be valid, Murphy said.

“It’s based on too many factors unrelated to the land, and it would be a sea change in condemnation law in Texas to allow businesses to be compensated for loss of their business on the land,” Murphy said.

The National Federation of Independent Business and the Owners' Counsel of America, a group of lawyers that represent private property owners in eminent domain cases, filed a brief backing Clear Channel, calling the issue “of concern not only to all commercial billboard owners in Texas, but all property owners in the state.”

“Billboards are not designed to be moved,” the brief read. “And the most valuable part of a billboard is not steel, concrete, and wood but the potential to generate income.”

The state and its supporters point to Clear Channel’s rejection of Houston's offer to move the billboards as an argument to throw out the jury award. 

“Some locations are going to be more valuable than other location and that’s just a matter of the assumption of the risk you take when you’re in this type of business,” said Margaret Lloyd with Scenic Texas, an advocacy group that supports the state in the case. “That the company might not make as much money in one location as another, we don’t believe that should be paid by the taxpayers.”

Houston and other Texas cities have revised their sign codes in recent years to limit the proliferation of billboards, making it more difficult for companies like Clear Channel to relocate their billboards, Lloyd said.

"When these relocations occur, it simply moves visual blight from one location to another," Lloyd said. "The city should be able to have their city look the way its citizens want the city to look, not the way a billboard company wants the city to look."

Clear Channel’s lawyer, Marie Yates, told the justices that the relocation offer was optional and not relevant to how much the company deserves to be compensated.

“We’re trying to get the same treatment that’s given to all other property in condemnation,” Yates said.

The justices are expected to rule later this year.

Disclosure: The Texas Association of Counties and the Texas Municipal League are corporate sponsors of The Texas Tribune. A complete list of Texas Tribune donors and sponsors can be viewed here.

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