As the American economy slowly recovers, it is worth noting that the economic stimulus package, the American Recovery and Reinvestment Act (ARRA; P.L. 111-5) of February of 2009, includes $8 billion for intercity passenger rail and high speed rail projects. The ARRA funding is certainly not the first time Congress has invested tax dollars in high speed rail service. Congressional interest in high speed rail (HSR) dates back to the 1960s, but it is the ARRA funding which has had the industry buzzing since its announcement almost two years ago.

This time around, the federal government’s commitment to rail seems different. Rather than a series of proclamations declaring that rail travel is a vital part of American interstate commerce, it was in January 2010 that President Obama pledged hard dollars to HSR. Several state specific HSR projects which, at the time, were well underway were targeted for funding, including:

Money has also been made available for HSR projects in: 

There are even indications of cross-border collaboration with Quebec and Canadian HSR. The Boston Globe, October 10, 2010. Earlier this year, an observer remarked that “[t]he distribution of dollars is well thought-out and reasonable: it provides money to regions across the nation and prioritizes states that have made a commitment of their own to a fast train program,” says The Transport Politic in its January 28, 2010 edition. (www.thetransportpolitic.com). Where in the past, “the case for fast, efficiently operated intercity trains has been hampered…by the complex network of federal and state government organizations and quasi-public transit authorities that have oversight and private freight companies that operate along the route, [n]ow all the interests seem to be coming together to take stock of their considerable infrastructure needs.” See The Boston Globe, supra.

Historical Framework

Americans may have to go back 140 years to find another federal commitment to rail travel of this magnitude. Early in the 19th century, rail travel was, at best, only modestly successful principally due to the fact that the reach of the rail transportation network was relatively limited. Beginning in the 1870s, railroad construction in the United States increased dramatically when the federal government increased its funding of transcontinental railroad projects. In 1862, Congress passed the Pacific Railway Act and the first transcontinental railroad was completed just a few, seven years later in May 1869. By 1900, four additional transcontinental railroads connected the eastern states with the Pacific Coast. An important component of this rail expansion was the use of millions of acres of public land for four of these five transcontinental railroads. Congressional land grants to the railroad companies provided not only location for the track, but the rail companies were free to sell or lease the land granted to finance construction. Between 1871 and 1900, 170,000 miles were added to what had been a nationwide rail network consisting of only about 45,000 miles of track. By 1920, the nation's railway system reached its peak of 272,000 miles.

Then, over the next 70 years, American railroading began to disappear. Abandoned rail is visible in virtually every city. By 1990, only about 141,000 miles were in use. By the time the U.S. Supreme Court considered the constitutionality of the “rails-to-trails” program, which converted abandoned or discontinued railroad rights-ofway to biking and hiking trails (the National Trails System Act Amendments of 1983, codified, as amended, at 16 U.S.C. §1241 et seq.), experts predicted the abandonment of 3,000 miles of railroad right of way every year through the end of the 20th century. Preseault v. ICC, 494 U.S. 1, 5-6 (1990).

See Rise of Industrial America, Library of Congress,

http://memory.loc.gov/learn//features/timeline/riseind/railroad/rail.html.

21st Century American HSR Projects

Federal investment in HSR will neither reverse nor stem the abandonment tide of little used railroad rights-ofway across the country. That is not its objective. Today’s investment in HSR projects, unlike its historical counterpart, is not intended to expand rail service to open up under-populated areas to future growth. Rather, 21st Century HSR is all about improving rail travel in the most heavily travelled urban areas; the nation’s most populated megalopolises where the roads are full and air travel is congested. HSR is intended to improve and expand rail travel so it becomes a preferred mode of rapid transportation, a desirable and efficient component of a comprehensive mass transit plan for clogged urban corridors. “Large population centers with strong business travel markets, concentrated downtown business centers with local transportation options, local highway and airport congestion – these are some of the most important attributes for a successful HSR system that minimizes public financial support, enhances opportunities for private investment, and reduces congestion in other modes.” David J. Carol, Five Things You Need to Know About High-Speed Rail, www.planetizen.com; April, 2010.

According to the Federal Railroad Administration (FRA), the 21st Century American HSR projects focus on three tasks: (1) building the new HSR corridors, (2) laying the groundwork for future HSR projects, and (3) upgrading intercity passenger service. Laying the groundwork for future HSR is a conceptual task, and upgrading intercity passenger is an ongoing effort that will tax transportation budgets well beyond this round of federal funding. The most daunting task is the building of new HSR corridors. Not only does that require a long-term investment in rail travel in multiple locations throughout the country, but it will be the most costly. HSR in the United States, David R. Peterman, Coordinator, et al December 8, 2009 Congressional Research Service, 7-5700, ) p.19, www.crs.com R40973 (CRS Report for Congress). Every budget projection for an HSR project is in the billions of dollars. Just last month, the inaugural meeting of the Northeast Corridor Operations and Advisory Commission was held to discuss what is likely to be $50 billion projected cost of infrastructure improvements. That same week, Amtrak unveiled its HSR for the Boston-Washington corridor, a project expected to take 25 years and cost $117 billion.

Rail and rail cars are expensive, as are the costs of labor and technology. But those costs are relatively minor when compared to what it may cost to repair aging bridges, replace track and assemble the land for new rail corridors. Land assembly costs are unpredictable regardless of how sound appraisal methodology may be. Acquisition costs for land, or for interests in land, whether for new rights-of-way or for the expansion and improvement to existing corridors, are subject to widely disparate opinions of value and the vagaries of market cycle fluctuation, locational differences and the condition of existing improvements. There is also the unknown contingent liability for land acquisition costs when, or if, property is taken by eminent domain. Even if the acreage of land needed is a fraction of what may have been required in the 19th Century, managing the cost to assemble the new HSR corridors will be a significant factor in the success of the 21st Century efforts to bring true high speed rail travel to the United States.

Corridor Assemblage and Valuation.

Corridor assembly is most commonly associated with road projects. But over the last 25 years or so, right-of-way assemblage activities have been principally related to natural gas and other subsurface pipelines and for aboveground transmission lines. Transmission of energy requires large swaths of land that typically traverse counties and states as well. Hundreds, sometimes, thousands of individual parcels are assembled with consequential related costs. Were it not for the public’s support for these large scale infrastructure projects intended to establish American sources of safe, reliable and efficient energy, it is unlikely that these admittedly less ambitious projects to what is conceived for HSR would have been built. See e.g., the Energy Independence and Security Act of 2007.

Right-of-way agents and appraisers for rail and utility companies have dealt with corridor valuation issues since the 1800s. In appraisal parlance, a corridor is a long narrow strip of land for which the highest and best use is to provide an economic benefit, usually for transportation, communication and/or energy, by connecting the end points. Where pipeline corridors have as their sole purpose transportation of, say, natural gas from the source to the end-user, transportation corridors serve intermediate points along the way. To some appraisers, corridors are “special purpose properties,” that is, a property which by its unique physical design or layout has a use that is restricted to the purpose for which it was built. Because a special purpose limits market demand, these properties are by definition and experience not commonly bought and sold on the open market and, therefore, have a limited number of consummated transactions, comparable sales, from which to determine market value.

When appraisers are called upon to value a corridor, there is some market data available because corridors do, in fact, sell. When the market data is limited, appraisers commonly use a variation of the sales comparison approach called “across the fence” or ATF valuation. See e.g., Washington Metropolitan Area Transit Authority v. U.S. 54 Fed.Cl. 20 Fed.Cl.,2002. ATF is based on the premise that the land which makes up the corridor should be worth at least as much as the land through which it passes. Using this approach, the corridor is typically divided into segments of districts of similar utility based on the adjacent land use, then the value of a typical parcel of adjacent land within the district is applied to that portion of the corridor to arrive at its market value.

Finally, the value of each of the segments or districts of the corridor are added together to estimate the ATF value of the total corridor. Across the Fence Methodology for Valuation of Corridors: What is It and How is it Used, By Arthur G. Rahn, 270 The Appraisal Journal, July 2001 at p. 270. The Enhancement Factor in Transportation Corridor Sales and Appraisals, Arthur G. Rahn, The Appraisal Journal, January 1999, p. 89; The Continuing Evolution of Corridor Appraising (Back to the Basics), Charles F. Seymour, MAI, May/June 2002 Right of Way at p. 12.

Part of the solution to the unpredictable land assembly issue is to use pre-existing transportation or other corridors for HSR. Florida’s HSR, for example, planned for land along the Interstate 4 corridor is, by some measures, already 90% assembled and state owned. See http:// www. floridahighspeedrail.org. Major highway improvement projects, like the recently completed Boston Big Dig, were planned in substantial part to utilize existing corridors. The DFW Connector Project now underway in Dallas-Fort Worth expands existing highway networks and corridors. That does not mean that all the land needed for Florida’s HSR, or in other states, will be located on existing corridors or rights-of-way, nor does it mean that existing corridors can be used for HSR without significant upgrades. But every effort will be made to do so.  

Once the corridor is assembled, with the federal monies being dedicated to HSR, it is possible that passengers will be traveling at high speeds in the not so distant future. Our clients are on the forefront of these efforts.