Acquiring a rail corridor is rarely a simple, straightforward task. The process often requires multiple stages of groundwork, including conducting corridor research to determine who owns the right-of-way, undertaking environmental assessments, negotiating with the railroad, figuring the cost, or value, of the corridor and securing financing or funding.
Who to Involve
Engaging the appropriate people in your trail project is a necessary step. When you're organizing your project, identify individuals with appropriate skills to catalyze trail development. While you will likely need to hire professionals to meet many technical skill sets, it may be possible to find experienced community members who support trail development and are willing to volunteer their expertise. Some suggested positions and experts include the following:
- Project manager, lead negotiator and spokesperson: These roles may be filled by the same person or separate individuals.
- Attorney: Few attorneys specialize in railroad or trail law, so you may need to work with a lawyer who practices real estate law.
- Appraiser: Your state's comptroller of treasury may be the official qualified to appraise railroad property. The National Association of State Auditors, Comptrollers and Treasurers and the Appraisal Institute both offer searchable directories.
- Environmental engineer: Your state environmental agency may be able to provide information on toxic remediation and brownfield issues.
- Historic preservation specialist: Your state historic preservation officer is a good resource for information on the historical significance of nearby structures or locations.
Depending on the interest of the railroad and the status of the corridor, there are several acquisition options available. You may be able to railbank the corridor if it has not yet been abandoned, or consider pursuing a rail-with-trail project to share the space. Depending on how you are acquiring the property, timelines may be more urgent. For example, if railbanking is an option, you will have to closely follow the abandonment timeline and procedure set by the Surface Transportation Board.
In any case, you must fulfill the due diligence process prior to acquisition. From your preliminary corridor research, you will need to examine the state of the title, survey the property, appraise the corridor, assess structures within the corridor and complete an environmental assessment. Acquisition of the corridor may include a bundle of property rights, which may also be physically distinguished as surface, subsurface and air rights. Some trails share corridor use (or property rights) with utility companies. This overlap may be predetermined in the acquisition agreement or leveraged to offset the cost of the trail.
Whether the rail line has been abandoned or you are railbanking, there are a variety of methods to acquire the corridor in whole or in parcels:
Land can be purchased outright by either a nonprofit or a public entity. This option may be the simplest, but it can prove costly. If the rail line has been abandoned, it could also require reaching agreements with dozens of landowners, particularly if the railroad never owned the corridor in fee simple.
Option to Buy
An option is a legal document giving a person the right to buy. The document outlines the required price and applicable period, with a fee (often 10 percent of land value). If the property is bought, the fee is deducted from the purchase price; if the purchase does not proceed, the fee is nonrefundable. This option may be a good approach if you are interested in purchasing land but need to raise funds for the purchase.
An easement is a right to use another person's real estate for a specific purpose; in your case, a trail. Easements can be negotiated with railroads, private landowners and public entities, such as a utility company. Because you are not purchasing the land, the cost is typically less than if you were to purchase it.
A railroad or other landowner can donate property to an agency or organization. Tax credits may be available for land donated for conservation purposes.
In these cases, the land is rented from the landowner for a set amount of time. Leases can come from a variety of sources, including railroads, utility companies and public entities.
Purchase and Lease Back
An agency can purchase property and lease it to the previous owner for a specified period of time. This arrangement may include use restrictions and may be useful if the landowner wants to sell the land but wishes to continue using it, such as for grazing animals.
This refers to the sale of a property at less than the fair market value. The difference between a bargain sale price and fair market value often qualifies as a tax-deductible charitable contribution. You can use this method to avoid high capital gains taxes.
Property, or parts of property, can be forcibly taken from a landowner for use by the general public. This method is not ideal because it can create resentment toward the trail by the former landowners and lead to negative press coverage, and the acquirer is still required to pay fair market value for the property.
If you are acquiring a corridor through railbanking, you may be in a position to finance your acquisition through the purchase and subsequent resale of all railroad-related material, such as steel rails, in the corridor. This process is called a "line buy." Line buys are rare opportunities, as most railroads salvage the material within their corridor prior to railbanking or abandonment. They are also very complicated transactions that require extensive understanding of the value of the entire corridor (not simply the real estate) as well as the costs associated with dismantling the corridor, such as hiring a salvage company. However, line buys can work if you are able to manage the salvage of a corridor profitably.