On holy ground

Dallas Plan Commissioner Rick Leggio doesn't have any doubts about the purpose of a letter he received last month from a member of the Roman Catholic Diocese of Dallas days before commissioners were to vote on a plan to designate St. Ann's building a historic landmark over the church's objections.

In his curt, two-page missive, J. Oliver McGonigle, a member of the diocese's finance council, warned that if the diocese suffered financially as a result of the commissioners' decision, he would have little choice but to recommend that it sue the city and seek the "highest possible" damage award.

"I don't think it's right that plan commissioners or council members get threatened in writing," says Leggio, who was appointed to the commission by city council member John Loza, a leading proponent of preserving St. Ann's, once the site of a school. "I don't know how many hundreds of cases we do a year, and I have never received a written threat. I didn't like that."

A longtime political strategist, Leggio has seen his share of hardballs, so he didn't hesitate to swing at McGonigle's pitch: He sent the letter to The Dallas Morning News and, two days before the commission voted to approve designation, McGonigle's litigious thoughts were a matter of public record.

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To those who want to save St. Ann's, chiefly Hispanics who remember the school's role in what was once Dallas' Little Mexico neighborhood, the news confirmed their increasingly sour perception of the diocese as an inflexible bureaucracy more concerned with its assets than with the desires of its flock.

Since the diocese was handed an $11.3 million bill for its share of the verdict in the case of child-molesting priest Rudy Kos last spring, it had turned down several offers from the Hispanic community to buy St. Ann's, arguing it could get more money from private developers who would ultimately raze the building. Now, the diocese was escalating the conflict by threatening to sue.

News of McGonigle's letter was a minor public relations disaster for the church, prompting spokeswoman Lisa LeMaster to dismiss it as an unfortunate mistake, borne out of McGonigle's frustration with the diocese's tenuous financial condition. It is an argument LeMaster still makes.

"The bishop and the team all want to work toward some kind of a political solution as opposed to a legal solution," LeMaster says. "We have not been trying to thrust around our legal weight."

The diocese is understandably leery of looking like a bully as it struggles to right Kos' wrongs. Nevertheless, its lawyers are considering their options in the event St. Ann's is made a landmark by the city council later this month. And though the city's attorneys say the council has the authority to save St. Ann's under its preservation ordinance, the case may not be so easy to defend if the diocese takes the city to court.

The church's lawyers may soon argue that the drive to preserve St. Ann's began as an outright effort to force the church to sell the building at a bargain-basement price.

Unable to raise the $4 million the diocese wants for the property, St. Ann's defenders are using the preservation ordinance to block its sale to Swiss developer Harwood Pacific, which has steadily been developing that corridor of Dallas since the early 1980s. Using the city's preservation ordinance to gain advantage in a real estate deal is a unique use of the law--and unique uses of the law tend to wind up being haggled over in court.

Those same courts have long recognized that cities have the right to preserve landmark buildings, even if the owners object. But just how high-handed the government can be--unless it's willing to compensate property owners--is unclear, particularly when the owner is a church with a proven record of employing lawyers to defend its religious freedom.

Indeed, the church could well argue that if the city can force it to preserve St. Ann's for the public's sake, then the public should bear the burden of repairing and maintaining the building as the ordinance requires.

To muddy waters further, Gov. George W. Bush is pushing legislation designed to protect religious freedom from government meddling. The legislation comes in response to a 1997 U.S. Supreme Court ruling that nullified the Religious Freedom Restoration Act of 1993 in a case that pitted the Archdiocese of San Antonio against the Hill Country town of Boerne over that city's historic-preservation ordinance.

If the fate of St. Ann's has become a test of the diocese's future relationship with its Hispanic parishioners, it's likely to test Dallas' commitment to historic preservation as well.

Since the historic-preservation ordinance was passed in 1973, most designated buildings were preserved because of their architectural value and with the consent of their owners. The 72-year-old St. Ann's, located on Harry Hines Boulevard along the entrance of the Dallas North Tollway, would become the first building made a landmark because of its role as the cultural heart of the city's first Hispanic neighborhood.  

Now St. Ann's supporters and private developers alike are waiting to see whether city officials are willing to go to court to defend their ordinance and, in a sense, their commitment to preserving the city's past. The question city officials must first answer is whether St. Ann's is worth the risk.

With its doors locked and aluminum foil rolled over its windows, the crumbling, two-story St. Ann's building offers no clues to its value.

Built in 1927 and expanded 20 years later, today St. Ann's is hardly noticeable from its location just south of the tollway. Each day, commuters stream past the school, rushing into town along Harry Hines Boulevard on the west, and back home via McKinnon Avenue to the east. Except for St. Ann's, there's nothing to indicate that the area was once a neighborhood where tamale peddlers navigated crooked streets and tiny homes were filled with Mexican immigrants.

Instead, commuters are greeted by an orderly row of steel poles bearing the flags of Switzerland, Germany, and Italy, which snap in the breeze of the passing cars, saluting a new business alliance forged inside the sleek glass and cement office towers that have risen from the barrio's ashes.

Lacking any architectural value, St. Ann's is deemed worthy of saving solely because it was a sanctuary and place of hope for Mexican immigrants, who in 1910 began arriving in Dallas after fleeing the violence of revolution. Until now, the city's preservation efforts have ignored that aspect of local history--a point Hispanics hammered home last fall during two jam-packed meetings of the city's landmark commission.

"I have never sat through anything so moving as the two hearings in which we heard St. Ann's. The emotion and the feeling and the depth of what was expressed, I just found amazing," says historian Virginia McAlester, a member of the commission.

With her mother, Dorothy Savage, McAlester fought a bitter battle to have Swiss Avenue designated as the city's first historic district in 1973 as part of the passage of the city's historic-preservation ordinance. Back then, being a preservationist in boomtown Dallas was akin to being branded a Communist. The city's attitude toward preservation has since matured, McAlester says, but St. Ann's represents a new challenge.

"This is the first case where the entire Hispanic community has come forward and said, 'This is a building that is crucial to our community,'" McAlester says. "The simpler buildings [like St. Ann's] can say as much about the people, their culture, and where they were in that time...as much as something formal and ornate. It would be really cynical if all we preserved were grand and glorious things."

Even the diocese concedes that St. Ann's, or at least the 1927 portion of it, has historical value; its chief objection is to the way in which designation was pursued. In most preservation efforts, either the landmark commission or the property owner, motivated by tax breaks and other financial incentives offered under the preservation ordinance, initiates the process. That didn't happen in this case.

Shortly after the diocese borrowed $11.3 million to pay its share of the $119.6 million Kos judgment, a developer offered $4 million for St. Ann's and the city block on which it sits. (The church countered with a price of $4.5 million.) In two separate offers, the Mexican Cultural Center and the Guadalupe Social Center Community Development Corp. offered $2 million for the property, hoping the diocese would drop its price in a show of goodwill toward its congregation.

On August 13, Bishop Charles Grahmann rejected the lower offers. Five days later, the city notified the diocese that St. Ann's was being considered for landmark designation. In short order, a temporary moratorium was placed on building to prevent its demolition and, according to the diocese, the developer withdrew its $4 million bid.

"We would argue that the value of the property was dramatically reduced once the designation process started," LeMaster says. "Ultimately the property is worth what someone will pay for it, and someone was willing to pay $4 million before this process started. Now that [price] has gone dramatically down. There's no question that it has impacted the process."

The diocese complains that the designation would make it difficult to tear down the building, limiting how the land could be used and lowering its value to developers who have the money to pay the diocese's asking price. St. Ann's supporters call that an outright lie, says Dallas attorney Sol Villasana, who is representing the Guadalupe group.  

"The diocese is again just trying to find some excuse for its lack of sense," Villasana says. "No one in my organization has ever said we are trying to drive the price of this property down. My people are interested in using [designation] to save the school."

Despite Villasana's denial, there is some evidence to support the diocese's contention. Take, for example, a letter state Rep. Steve Wolens, one of several heavy hitters batting for designation, penned on October 22, shortly before a subcommittee of the landmark commission unanimously voted to preserve St. Ann's.

"Because of the property's location in the middle of a prime commercial real estate area," Wolens wrote, "designation as a landmark will help prevent the sale of the property to developers and the ultimate demolition of the school and social center."

Wolens, whose Oak Cliff district is largely Hispanic, did not respond to the Dallas Observer's requests for an interview. On November 10, the landmark commission voted to name St. Ann's as a landmark and took the extra step of designating the entire city block as a landmark as well, thereby further restricting how the property could be used by potential buyers.

The notion that historic preservationists are now using their political clout and the city's own rules to block a real estate deal is a curious new chapter in the history of local development, particularly in Little Mexico.

In Dallas, progress has always come before preservation, and one need look no farther than Little Mexico for proof. It is where city planners, in the name of economic development, used zoning laws to orchestrate the death of a neighborhood former Mayor R.L. Thornton once touted as the city's blueprint for neighborhood planning.

In 1956, Dallas was heralded as a national example of how to rebuild blighted neighborhoods under a new "urban renewal" program initiated by the Federal Housing Administration. That year, Dallas became the first city in the nation to qualify for new federal funds under the FHA program. The money was earmarked specifically for Little Mexico to repave streets, install water and sewer lines, and provide low-income loans to repair the substandard houses that plagued the neighborhood.

Civic leaders and newspaper editors trumpeted the project because of the "spirit of friendly cooperation" flowing between city officials and Little Mexico residents, but the relationship was short-lived. Just four years later, the construction of the Dallas North Tollway was under way, and the city's original barrio was sliced in two. Soon, a new strand of commercial development began spreading throughout the neighborhood.

By 1970, private investors had bought up an estimated 25 percent of the neighborhood, and residents could do little to stop a new stream of requests to tear down homes so new businesses could be built. Residents complained that the "strip" or "spot" zoning requests were made by developers who bought out homeowners lot by lot and intentionally let the vacant houses erode so they could use their unsightly conditions to bolster arguments for new development.

"What these [residents] don't realize is that under the law, anybody can make application for a zoning change...and there's nothing to prevent you or me or anyone from buying a house, tearing it down or leaving it sitting there," then-city planning director James Scroeder Jr. told reporters. "I don't think the solution to proper planning is to bite [a neighborhood] off in bits and pieces."

Despite Scroeder's condemnation of the developers' tactics, his bosses on the city council sided with developers and used every tool they had, from condemning property to abandoning streets, to bury Little Mexico.

Scroeder's comments illustrate the conflict between developers and neighborhood preservationists, whose battles over zoning continue to consume city planners. The best recent example is a request by the Albertson's supermarket chain to change residential zoning to commercial so it can build a grocery store in the heart of Old East Dallas. Residents there shudder to think they are confronted with the very same problem that Scroeder described 30 years ago.

Unlike residents of Old East Dallas, those living in Little Mexico didn't have the grand old mansions that were built along Swiss Avenue by the city's first generation of business and political leaders to use as weapons in the fight to save their neighborhood. Nor did they have members of the city's social elite like Dorothy Savage, the city's former first lady, to lead their cause. Instead, Villasana says, they were poor, second-class citizens who were routinely excluded from the debate over their own future.

"What's unfortunate is that the plan [for Little Mexico] has always cut out the Mexican-American community. They were going to be expendable, and everything attached to their culture was going to be expendable. I think St. Ann's is a real clear example of that," Villasana says. "You're talking about a diocese that for 30 to 40 years now has been trying to move into a position [to] get the Mexicans out of that parish. Now they're getting ready to tear it down, sell it off, and make a big profit."  

In other words, Villasana says, the sale of St. Ann's is the last step in a misguided path the city started down long ago.

Early in the debate over St. Ann's, the diocese was tight-lipped when asked to identify the developer who had made the $4 million offer for the property. In fact, the information is still noticeably absent from the thick public information packet the diocese's consultants have prepared in response to the designation process.

But in his controversial letter to Leggio, the diocese's McGonigle confirmed speculations that the developer was St. Ann's neighbor Harwood Pacific.

"The diocese's financial position since the Kos settlements has been very tenuous, and we desperately need the funds from a sale of the property," McGonigle wrote. "Of particular concern to me is that the de facto blocking of the potential sale to Harwood Pacific has resulted in a further reduction in needed social and charitable activities of the diocese."

While the diocese is accused of being greedy for turning down the Guadalupe group's offer, which now stands at $1.5 million, it's little wonder its financial advisors would prefer to deal with Harwood Pacific: St. Ann's is, after all, sitting on a pot of Swiss gold.

Harwood Pacific's president and founder is J. Gabriel Barbier-Mueller, a Swiss transplant who has purchased nearly every parcel of land in the corridor surrounding St. Ann's under the auspices of various companies that operate out of his fourth-floor office in the Rolex building.

The prevailing belief in the development community is that the lion's share of Harwood Pacific's real estate projects is financed by the Rolex employee pension fund, but Barbier-Mueller's relationship with Rolex is unclear

In addition to Harwood Pacific, Barbier-Mueller's office is home to the Rolex Texas Realty Corp., a subsidiary of the Geneva-based Rolex watchmaker that owns the Rolex building as well as several blocks of land to the west, north, and east of St. Ann's. Under a company called Caroline Investments, Barbier-Mueller also controls more than a block and a half of vacant land that lies southwest of St. Ann's and is a stone's throw away from the site of the new arena.

Since the Rolex building was erected in 1983, Barbier-Mueller has steadily proceeded with a multi-phase, 15-acre "International Center" that travels north along the tollway, from St. Ann's to the KERA building. The corridor now includes the Centex building, the nearly completed Jones Day building, and a 20-story office tower under construction at the corner of Hunt and Harwood streets.

Barbier-Mueller isn't talking about his project, but company officials have said previously that the ultimate plan is to style the International Center after the United Nations center in New York, making it a self-contained complex in which the landscaping and buildings are architecturally related. Seated at the would-be entry of this complex, the crumbling St. Ann's building doesn't exactly match the sleek, modern design of Barbier-Mueller's concrete buildings.

Developer Newt Walker, who has tracked Harwood Pacific's growth in that area, says that aside from St. Ann's appearance it would still be difficult for the company or any other developer to build on the property if the school were kept in place. "It occupies very close to the center [of the block]," he says. "To be able to build around it is probably cost-prohibitive."

The English and parenting classes once taught in St. Ann's have been moved elsewhere, and the building is closed. While Hispanics still have fond memories of the building, Walker says he isn't convinced that designating it a landmark is the best idea.

"As a private property owner, you don't want third parties telling you what you can and cannot do with your real estate, unless it is something so stellar that anybody, without question, would say we've got to preserve that building," Walker says. "With this building, [designation] certainly raises an eyebrow."

But diocese critic Villasana says that what's questionable is the game of "holdout" the diocese is playing because it is aware of the money Barbier-Mueller has to offer. Why else, he asks, would the diocese have rejected Harwood Pacific's original offer of $4 million if it were in such dire financial straits?

"They wanted more money," Villasana says. "[The diocese] has a...reputation in the real estate business for playing a pretty rough game."  

Spokeswoman LeMaster says the diocese's perceived prowess in real estate is a myth, especially the belief that the bishop can just "call Rome" and get a cash advance or unload any one of the dozens of properties listed under the bishop's name in the county tax rolls.

Most of those properties are held in trust by the bishop, and the diocese can't sell them because local parishes own them. What's left, LeMaster says, are a few buildings--including the bishop's house--and a handful of vacant lots that have all been mortgaged.

"What was pledged to the bank was everything that was basically pledgeable, and most of it is on the market," LeMaster says. "As I keep trying to say, there is no vault at the chancery."

Assistant City Attorney John Rogers says he's not troubled by the appearance that the designation process was a tool to block a real estate deal. If the diocese decides to sue, he says, he's confident the city is on solid legal ground.

"The important thing to bear in mind is that historic designation does not control who owns that building," Rogers says. "The whole point of the historic-preservation ordinance is to prevent buildings from being torn down. I think that's what's going down in this case. The city clearly has authority to do historic preservation."

Although Rogers says he doesn't believe the church will sue the city if St. Ann's is designated, diocese attorney Bill Dahlstrom says he is carefully studying the option. Dahlstrom won't discuss any specific legal strategies, but he confirms that his primary concerns are whether the designation puts an unreasonable financial burden on the church and whether it interferes with the church's internal operations.

"There are plenty of case laws that support a city's ability to enact these kinds of regulations. You question whether the ordinance is invalid on its face or whether it's invalid as applied to a specific situation," Dahlstrom says. "We are looking at all possible avenues that are available to us to protect our rights."

In a 1978 case involving a developer's plan to build an office atop New York's Grand Central Station, the U.S. Supreme Court upheld local government's authority to preserve historic buildings. In that case, the station's owners argued they had suffered a significant financial loss because they would not benefit from the income the office tower would generate. By using the New York City's landmark law to prevent construction, the owners argued, the city had "taken" its private property in violation of the 5th and 14th Amendments.

In the case of St. Ann's, Dahlstrom says the precedent set in the New York case may not be enough to legally justify the designation of the school as a historic landmark. "There are some factual differences between what was happening in New York and our case, which I really don't want to get into now, but I think they help distinguish our case."

In the New York case, the court concluded that the loss of future income generated by the proposed tower did not place a significant financial burden on the owner. Because the landmark ordinance did not interfere with the current use of the building, the court reasoned, the owners would continue to make the same profits off the building as they had before the office tower was proposed.

But St. Ann's is not a historic landmark now, nor was it on the city's list for buildings under consideration for preservation until after the Hispanic groups realized they couldn't match Harwood Pacific's $4 million offer. Second, and perhaps more importantly, the diocese is trying to sell a surplus property to pay off an existing debt. Unlike the owners of Grand Central Station, the diocese is not arguing that designation will limit its abilities to make a profit on a future development.

The St. Ann's case also raises questions about whether the city is interfering with the church's free exercise of religion.

In its correspondence with the city, diocese officials have stated that if they are unable to sell St. Ann's, they will be forced to cut back on educational, social, and other services. If that's true, a court may agree that the city is violating the diocese's constitutional rights, says Douglas Laycock, a law professor at the University of Texas in Austin.

"The city is interfering with the church's management of its own property, and it's interfering in an internal matter of the church," Laycock says. "That's simply none of the government's business."

In 1997, Laycock argued on behalf of the archbishop of San Antonio in a case it brought before the U.S. Supreme Court against the city of Boerne. The South Texas diocese had asked the city for a construction permit to expand its sanctuary because its congregation had outgrown the building. The city denied the request because the sanctuary had been designated a landmark under its historic-preservation ordinance, which restricted how the building could be altered.  

In that case, the diocese argued that the city's preservation ordinance violated the 1993 Religious Freedom Restoration Act, which was designed to give religious organizations greater protection from city ordinances and other laws that adversely affect religious freedoms. Congress passed the RFRA in response to an earlier Supreme Court ruling, in which Congress felt the court had gone too far in interpreting the separation of church and state.

In siding with Boerne, the court nullified the act and, in the process, created uproar over religious freedom across the country. The decision was clearly designed to send Congress a message that the court, not Congress, is the final interpreter of the Constitution. That battle is hardly over, but in the meantime, the court in Boerne gave states the green light to adopt their own version of the act.

Last month, Gov. Bush announced his full support for the Texas Religious Freedom Restoration Act, which was quickly embraced by a broad coalition of religious organizations, including everyone from Baptists and Jews to Native Americans. Like its federal predecessor, the legislation is generally designed to keep governments from stepping on religious freedom. For example, the law might prevent cities from disciplining police officers who chose to wear crosses while in uniform.

Not surprisingly, the diocese is tracking the legislation closely, hoping its passage might enable it to expand its argument that the designation of St. Ann's is a violation of its constitutional rights.

"I think it would help," Dahlstrom says of the legislation.
As part of its case, the diocese could argue that its attempts to find other ways to commemorate Little Mexico, including everything from saving portions of the building and creating a mini-museum to renaming the city block, were rejected in favor of an overly intrusive designation process.

"The bishop has never had a problem with commemorating the cultural significance of what went on in the area," Dahlstrom says. "But does preserving a building that needs a significant amount of work go too far? Are there less intrusive ways of accomplishing the goal? Yes, there are."

Rogers says he's curious about how the Texas RFRA could impact the St. Ann's case, but when he spoke to the Observer late last month he had not yet read through the proposed legislation. But Catherine Horsey, executive director of Preservation Dallas, says RFRA creates a potential for disaster--not just in the St. Ann's case, but also in the city's overall effort to enforce the preservation ordinance.

"If the Texas Religious Freedom Restoration Act, which is retroactive, passes, then the churches can do pretty much what they want to. It absolves churches and religious groups from any state or local law that they believe interferes with their religion. That includes druids who worship trees and everything on up," Horsey says. "One of the things about preservation that is so frustrating is, nothing is ever safe."

In January, however, the city plan commission voted for designation, with only one commissioner voting against. The commissioners decided that only the building plus a 25-foot buffer zone should be protected under the ordinance. That scenario would leave the diocese free to sell the rest of the property. The city council is expected to decide the matter February 24.

Last month, Dallas Children's Theatre officials presented the diocese with what so far appears to be the best solution to the standoff when it announced that it was interested in making St. Ann's its new, permanent home as part of a partnership with the Guadalupe Group. DCT board president Craig Sutton says he knew he was stepping into a tough situation.

"The diocese is in a difficult position. They've got a significant financial obligation that they have to deal with, and they are having to deal with the polarization in this community over the handling of the property," Sutton says. "They've got Catholics against Catholics and Hispanics against Hispanics. But we're very hopeful that we can bring into the mix some potential for solutions. We would like to bring some healing to this riff."

The diocese quickly balked at the $1.5 million offer because it was too low. Although Sutton says he still hopes to reach a compromise, LeMaster says the group failed to respond to the diocese's undisclosed counteroffer by a January 18 deadline. Now, she says, the prospect of amicably resolving the issue is lingering in "never-never land."

Mary Ellen Degnan is a former chairwoman of the city's landmark commission, and when she left the post in 1983, the city's historic-preservation ordinance had been in place for 10 years. Today, Degnan is a development consultant for the Dallas Institute of Humanities and Culture, where she helps developers understand the benefits of historic preservation. Though Degnan is not involved with the effort to preserve St. Ann's, she eagerly awaits the outcome of the controversy.  

During her tenure with the commission, Degnan saw many grand old buildings like the Texas, Woolf Bros., and Victor Costa buildings fall victim to the bulldozer because, despite the ordinance, the city placed next to no value on the concept of historic preservation. Since then, the city's attitude has changed and, on occasion, city officials have even defended the ordinance in court.

Still, the city has never been handed a case quite like St. Ann's, where the owner is so opposed to designation, and the idea of preserving a non-distinct structure solely for cultural reasons is unprecedented.

"I think the building is worthy of preservation and fits all the criteria, but it's always difficult if the owner does not concur. It's a dilemma we've never resolved in Dallas," Degnan says. "We have achieved a lot in Dallas, but we have never ever been able to get to the point where we say, 'OK, take us on; we'll go to court with you because we have to say you can't take our buildings down.'"

Until then, only God knows whether St. Ann's can survive the test of time.

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