Corridor Valuation

The railroad company may appear to know everything about the corridor, including the value of the property, but before entering into negotiations with the railroad, conduct your own initial corridor research to determine its physical and legal components. You will first need to determine what needs to be bought, as corridor acquisition may include a full bundle of physical rights, or perhaps only a part of the surface, subsurface or air rights. Also learn about any restriction on the use of the property and verify legal ownership: is the corridor owned in fee simple, or is it held under easement agreements?

History

Learning more about freight activity on the line is necessary to determine environmental implications. Railroad records may provide some of this data, but you may also find a wealth of information in local newspaper archives.

Condition

You can obtain permission from the railroad to conduct an on-the-ground inspection. Performing a complete assessment of the corridor’s physical condition is necessary to be able to prepare a feasibility study or corridor management plan.

Taxes and Charges

The railroad probably pays local real estate taxes and complies with other local ordinances. These payments are all public records that may provide clues as to how the local tax assessor’s office values the corridor. Your state may have a designated official—comptroller of the treasury, for example—who handles property tax assessments for railroads and is qualified to appraise railroad corridors. Visit the National Association of State Auditors, Comptrollers and Treasurers to search for a representative in your state to have your corridor appraised.

Appraisal Methods

Adequately and fairly assessing the value of rail corridors is a topic of much debate. No clear consensus has emerged on the best method to use for valuation, in part because no single approach appropriately accommodates the unique and complex issues associated with each specific corridor. The three most widely used methods of valuating rail corridors, however, are:

• Across-the-fence approach: This method determines market value based on the prices of adjoining land. Many appraisers conclude that the across-the-fence method best accounts for local market conditions by using readily available information to extrapolate value. Others argue that this approach is inappropriate for railroad corridors because the adjacent property values are based on land uses that in many cases are impossible to replicate on a narrow, linear corridor.
• Comparable sales approach: This method assigns value by researching comparable rail corridor transactions. Market value is then established by analyzing the terms negotiated in these other transactions. The challenge with this method is to find past transactions that are truly comparable, such as those with similar population density, land-use demands, adjacent land uses and zoning, acquisition date and intended use.
• Income approach: This method determines value based on a property’s potential to generate income. A railroad may generate revenue from easements or licenses with billboard or utility companies that use portions of the corridor. Yet this approach is rarely applied to rail line acquisitions for trail purposes since such specified revenue information is usually difficult to obtain.

Sale of Excess Property and Railroad Materials

Generally, state and federal regulations require railroads to return corridors to their original condition upon abandonment, which includes the removal of tracks, ties and other structures. In most cases, the railroad will remove all salvageable materials before the final property transaction of a railroad corridor. However, you may find that the railroad is willing to sell more than just the corridor, and salvaging railroad materials, such as steel rails, could raise significant funds for trail development. The value of these materials and any excess property will need to be taken into account when appraising the corridor.

Resources

‣ Manual – Acquiring Rail Corridors: A How To Manual (see chapter 5, “Researching the Property,” and chapter 9, “Due Diligence”)

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