‘Financial engine’ Katy Mills turns 20 years old

Katy Mills dining pavilion
Shoppers can stop by the recently remodeled food court at Katy Mills mall. (Courtesy Simon Group)

Shoppers can stop by the recently remodeled food court at Katy Mills mall. (Courtesy Simon Group)

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A photo of Katy Mills food court on opening day (Courtesy D.R. Finley)
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(Designed by Chase Brooks/Community Impact Newspaper)
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(Designed by Chase Brooks/Community Impact Newspaper)
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(Designed by Chase Brooks/Community Impact Newspaper)
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(Designed by Chase Brooks/Community Impact Newspaper)
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(Designed by Chase Brooks/Community Impact Newspaper)
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(Designed by Chase Brooks/Community Impact Newspaper)
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(Designed by Chase Brooks/Community Impact Newspaper)
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(Designed by Chase Brooks/Community Impact Newspaper)
Thousands of retailers have closed their brick-and-mortar stores, spelling disaster for many U.S. malls.

Yet Katy Mills—as it celebrated its 20th anniversary Oct. 28—boasts of more than 175 stores across its 1.2 million leasable square feet, according to the mall’s owner. In 2018, the mall had a 97.3% occupancy rate.

Katy Mills is the city of Katy’s largest employer with about 3,200 employees and the largest property taxpayer with a total taxable value of $125.1 million in 2017, according to city documents.

“We’ve absolutely been the engine for the city that really helped spark a catalyst for growth,” Katy Mills General Manager James Ross said.

This thriving mall is no accident. Since the mall’s developer first came to talk with the city of Katy in the 1990s, the municipality has worked to attract new development by investing about $29.6 million in infrastructure projects from tax revenues from the mall and nearby area, former and present Katy officials said.

To continue its economic role, Katy Mills is undergoing a $30 million remodel that is expected to be largely completed by the end of the year and help make the Katy a destination city in conjunction with the neighboring Katy Boardwalk District under construction, city officials and Ross said.

“[Katy Mills] opened a lot of doors, and I don’t think Katy would be what it is today if it hadn’t happened,” said Kayce Reina, the city of Katy’s director of tourism and marketing.

Catalyst for growth

In the late 1990s, Katy was a quiet town far from the hustle and bustle of Houston, Katy Mayor Bill Hastings said. There was nothing south of I-10 but rural land, and Memorial City Mall—east of the Sam Houston Tollway—was the nearest major shopping center.

“The older residents in Katy at that time, they were perfectly content shopping at [local stores] eating at the Sonic and Dairy Queen,” Hastings said. “[But the growth] was inevitable.”

To attract additional development near Katy Mills, the city of Katy worked with Fort Bend County to set up an agreement, Katy City Administrator Byron Hebert said. In this agreement, a portion of property taxes and sales taxes across a commercial-use parcel that includes Katy Mills would finance infrastructure projects in the area surrounding the mall.

Over the past 20 years, about $29.6 million in commercial property and sales taxes collected on the commercial-use parcel has gone toward building utilities, roads and other infrastructure, Hebert and Katy Finance Director Andrew Vasquez said.

This then attracted additional businesses such as Typhoon Texas, hotels and other businesses, Hebert and Reina said. Between 1997 and 2018, the taxable value of the commercial-use parcel increased 6,098% from $4.4 million to $272.6 million, Vasquez said.

Additionally, the sales tax revenue not going toward infrastructure has helped pay for fire, police and other basic city services, Hebert said. Throughout the past 20 years, it has been a steady revenue source for the city.

“The financial dealings were unprecedented for our city,” former Mayor Hank Schmidt said.

He—along with former City Administrator Johnny Nelson and a team of others—worked with Fort Bend County on the agreement, with the city of Houston to expand Katy’s city limits to include Katy Mills, and with the mall developer on permitting and building codes.

“It’s been an economic boon to the city,” Schmidt said. “It’s helped the taxpayers in ways they don’t even realize.”

Community support

However, the rise of online sales did cause the city to worry about Katy Mills’ future, Hebert said.

“The threat of malls going dark was real,” he said.

A 2017 analysis by Wells Fargo Securities found 72 out of 1,000 malls in its database have shuttered. The report found newer, more modern malls were causing retailers to leave older malls for these new developments.

To remain competitive, Katy Mills owner Simon Property Group announced in March 2018 the mall would undergo a remodel. The interior renovations were completed in December 2018, and the exterior updates are projected to be largely completed by the end of 2019.

The city of Katy played a part in this renovation project. In 2014, Hebert said the city administration and the Katy Development Authority began negotiating an economic deal with Simon. In the agreement, Simon agreed to invest $30 million in renovations for Katy Mills, while KDA would repay the company $9 million over the next 20 years.

Out of the dozen or so malls in the Greater Houston area, Katy Mills is among the five to six malls that are succeeding thanks to a thriving, supportive community, said Jason Gaines, the senior vice president and retail division leader of NAI Partners.

“Katy has almost anything a retailer would want: national reputation for good schools, clean communities, affluent residents, diverse demographics,” Gaines said. “Everything is desirable.”

During its 20 years, Katy Mills has been a place to shop for deals, a social space for teenagers and a destination for family fun, especially with a movie theater, said Cindy Byers, who has lived in Katy since 1997.

Alex Argeuta, who met his wife at Katy Mills in 2000 while she was working at Burlington Coat Factory with his sister, said he brings his children to the 20-year-old mall.

“We live on Westheimer ... two [minutes] away from Katy Mills [and] bring our two boys for fun [and] indoor shopping to Katy Mills,” he said. “They love the train [and the] children[‘s] playground.”

Katy Mills also partakes in community activities, Ross said. The mall serves as an events space for festivals such as Katy Brew Fest and partners with Katy ISD through the Simon Academy to provide learning opportunities to students needing alternative education.

“We’ve always been more than just a place to shop,” Ross said. “We continue to serve as a hub for the community; we’ll always be a hub for the community.”

Katy’s retail future

Although financial services company Credit Suisse predicts 220 to 275 malls will shutter nationwide between 2017 and 2022, the city is confident Katy Mills will not be among those numbers, Reina said.

“[Simon is] committed to making sure [Katy Mills] continues to be the financial engine that it currently is with the city,” she said. “They have strategies of how to continue to develop the mall as the world changes ... to turn more entertainment based.”

The city, Ross and Gaines all said they agree the upcoming Katy Boardwalk District project—located next door to the mall—will not hurt Katy Mills; instead, the two developments will complement each other.

“One is totally different from what the other one is trying to do,” Hebert said.

Katy Mills will continue to offer outlet retail stores, while the Katy Boardwalk District will offer restaurants, entertainment, a conference center, and office and residential space, Reina said.

“There may be some retail [at the boardwalk], but the retail that would go in the boardwalk wouldn’t be retail that would fit into the mall,” Reina said.

Ross said Simon and Katy Mills support the Katy Boardwalk District.

“It’s something that the city really wants to become: a destination city,” he said. “We’re thrilled for this addition because in our minds it’s going to completely transform this area. ... We’ve been attracting the shoppers for 20 years now, and this is going to add another element of entertainment.”


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