Palacios is a bayside resort town bounded on two sides by the east and south segments of Trespalacios Bay, an arm of Matagorda Bay. The original mile-square townsite was platted in 1902 by the Palacios City Townsite Company as part of a larger agricultural real estate development that involved subdivision of what had been portions of the A. H. Pierce cattle ranch. In 1903, the New York, Texas and Mexican Railway extended its line from Bay City to give Palacios a rail connection. The townsite company constructed a wood pavilion on the South Bay front in 1904 and deeded thirteen acres at Hamilton Point, the southeast corner of the townsite with frontage on both East and South bays, for the Texas Baptist Encampment, which opened in 1906.
Like Port Arthur, Galveston, Port Lavaca, Fulton, Rockport, and Corpus Christi, Palacios possesses a waterfront corniche,S. Bay Boulevard and Duson Street on the south and Bayshore Drive on the east. Lined with palm trees and oleanders, S. Bay and Duson open directly onto Trespalacios Bay. Cottages line the street on the land side, flanking the Luther Hotel ( BE19).
Continued reconstruction of the pavilion, built by the townsite company to Jules Leffland's design and reconstructed following hurricanes in 1909, 1919, and 1934, and replaced when a seawall was built in 1935, then reconstructed after Hurricane Carla in 1961, has ensured continued public use of the waterfront. Palacios indicates how railroads and entrepreneurial real estate development diversified the cotton-growing and cattle-ranching economy of Matagorda County in the nineteenth century by planting towns in what had been an all-rural county. What continues to make Palacios so charming is its relaxed, small-town urbanity.
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