The community-made SilentPatch for GTA 3 includes fixes for texture conversion errors.
Sometimes the error is triggered by absurdly high FPS. GTA 3 was built for 30-60 FPS. If you have a 360Hz monitor, the game races through its initialization sequence too fast to convert textures. gta 3 cannot convert textures your video card
Download and install the GTA 3 compatibility patch: The community-made SilentPatch for GTA 3 includes fixes