railroads for tax purposes in 1903 contain the following: 6

The strip of land usually taken for railroad right of way is not generally along or parallel to the boundaries of the land. The proper construction of the road often makes access from the land on one side to the land on the other side more difficult, and such access at more than one crossing is often impossible on account of right of way fences, deep cuts, or high fills. The natural drainage is oftentimes interfered with. Roads and streets may be closed or changed. The noise, smoke, danger, and inconvenience from the operation of railroads may not be distinct subjects of damage, yet in so far as they depreciate the market value of the remainder of the premises they should be considered. These considerations always make the right of way value more, oftentimes much more, than its market value for other purposes.

To determine the value of the land in the present right of way, such lands must be deemed as belonging to the owners of the adjoining lands and to be acquired by negotiations with such owners or under the power of eminent domain, whereby the owners are entitled to just compensation for the land actually taken and for depreciation in the market value of the residue in consequence of the railroad crossing the part taken. In ordinary language, the inquiry will be first, what is the fair average market price per acre for ordinary purposes of the land taken, and second, how much is the depreciation in the saleable value of the residue of the parcel, lot, or tract with the buildings thereon from which the right of way is severed. The sum of the two items, first, the market price of the land taken, and the second item, depreciation in the saleable market value of the residue, will constitute the right of way value.

$135. Multiples used in various state appraisals.

In the Michigan railroad appraisal, 1900, it was es

"Report Wisconsin Tax Commission, 1907, p. 274.

timated that railways would have to pay from two to two and one-quarter times the market value of adjacent property, and the estimated cost of reproducing the right of way was fixed accordingly. A fixed charge of $3 to $8.50 per acre was also added to cover expense of acquiring abstracts, recording deeds, etc.

In the Wisconsin railroad appraisal the method used has been described by Chief Engineer Taylor as follows: 7

In farming lands, small towns, and suburban and residence property, the right-of-way value was taken to be 250% of the market value for other purposes.

In city property, the right-of-way value was taken to be 133% of the market value for other purposes, where the land was owned in strips of 100 ft. width or less, and 110% of the market value for other purposes, where the land was owned in blocks, or in widths greater than 100 ft.

This is still the general method followed in railroad land appraisals made under authority of the Wisconsin Railroad and Tax Commissions.

The Washington Railroad Commission, in valuing the Northern Pacific Railroad in 1908, states that in order to reproduce the right of way, it would be necessary to pay prices ranging from the actual market value of the land to 500% in excess thereof and that this fact was considered by the Commission in fixing the reproduction cost of railroad land. In the Texas Railroad appraisals very little allowance was made on account of added cost for railway purposes, but Chief Engineer Thompson states

'Discussion of paper by R. A. Thompson on "Valuation of Railroad Property," published in Transactions American Society of Civil Engineers, Vol. 52, p. 360 (1904).

8 Finding of fact No. 33, in second and third annual reports, Railroad Commission of Washington, 1907-1908, p. 157.

that a certain percentage was added to the actual market value of land to cover damages to abutting property owners.9

§ 136. Minnesota Appraisal and Rate Case.

Dwight C. Morgan, engineer in charge of the Minnesota railroad appraisal, holds that on an average the Minnesota railroad companies are required to pay for right of way three times the true value of lands taken.10 He estimates the total true value of land for right of way and station grounds, but excluding city terminals, at $8,374,125, and allowing for increased cost to the company he estimates the reproduction cost at $21,190,211. The Minnesota Railroad and Warehouse Commission, to whom Mr. Morgan submitted his report, disagreed with Mr. Morgan in his contention that the reproduction cost should necessarily be taken as the value of railway land. The Commission would go no further than to admit that the company should be allowed the actual cost to it of the land even though such actual cost was in excess of the market value of adjacent land. A company may have purchased its right of way when land was very cheap or the right of way may even have been granted by the government. The Commission argues that it is certainly unjust not only to appraise the right of way at a value based on the present enormously increased value of adjacent land but even to double or treble such value on the theory that if the railroad were now exercising the right of eminent domain it would have to pay this increased price. The Commission says: "It seems to us after a full consideration of this subject

"Method Used by the Railroad Commission of Texas in Valuing Railroad Properties," by R. A. Thompson, Transactions American Society of Civil Engineers, Vol. 52, pp. 328, 361 (1904).

10 Annual report, Minnesota Railroad and Warehouse Commission, 1908,

pp. 27-36.

that the term 'cost of reproduction' could never have been used by the courts in a sense which would permit an entirely imaginary and artificial value to be placed upon a property actually owned and in the possession of the railway company." The Commission issued orders based on the above valuations for the reduction of railroad rates. The validity of these orders and of certain acts of the legislature reducing rates was questioned in a proceeding before the United States Circuit Court. Judge Otis, Master in Chancery, in his report of September, 21, 1910, states that witnesses for both parties usually used a multiple of three in appraising the reproduction cost of railway right of way. Circuit Judge Sanborn in approving the report of Judge Otis says: 11

But the evidence in this case is conclusive, nay, we may say it is without conflict, that every railroad company is compelled to pay more than the normal market value of property in sales between private parties for the irregular tracts it needs and acquires for rights of way, yards, and station grounds. The defendants' witness, Mr. Morgan, testified that in his opinion the companies necessarily paid three times the normal value for the lands outside of the terminals in the three cities and 75 per cent. more than the normal value for their terminals within those cities. The master in effect found that the cost of reproduction and the present value of the lands for the terminals in the three great cities, including therein all cost of acquisition, consequential damages, and value for railroad use which he allowed, was only about 30 per cent. more than the normal value of the lands in sales between private parties. He found the value of the lands outside the terminals to be only twice their normal value. Findings of lower values would have been contrary to the great weight of the evidence and without substantial support therein.

11 Shepard v. Northern Pacific Railway Co., 184 Fed. 765, 806, April 8,

§ 137. South Dakota appraisal, 1910.

Engineer Carl C. Witt in his report on the appraisal of the railroads of South Dakota says: 12

It is a well-known fact that the price paid for land to be used for railway purposes on account of damage to the remainder of the property is several times the farm value. After an investigation of the prices paid for right of way by the M. D. & P. R. R. and the C., M. & St. P. Ry. for extensions in this state in 1906 and 1907 and an investigation of the results obtained by investigations made in Minnesota, Wisconsin and other states by various taxing and appraising bodies and also of the sale of public lands in this state and other states for railway purposes, it was determined to use a multiple of 250% throughout the state, both for property for station grounds and right of way, the average outside of towns being somewhat higher and inside of towns somewhat lower.

This question of multiple value for railway property is one that must be handled with great care, particularly in large terminals, and requires a separate investigation for each case to avoid vicious results. Fortunately there are no very large terminals in this state and it is the belief that 250% is a fair average multiple.

§ 138. Justification of use of multiples.

In justification of including percentages or multiples to cover all items entering into cost of reproduction of right of way, Henry Earle Riggs in a paper before the American Society of Civil Engineers, January 4, 1911, says: 13

12 Report of Carl C. Witt, Engineer to the Board of Railroad Commissioners of the State of South Dakota, containing the report of the appraisal of the railroad properties in the State with comments by the Board, dated November 15, 1910. (In Twenty-first annual report of the Board of Railroad Commissioners, 1910, p. 31.)

13 "Valuation of Public Service Corporation Property," by Henry Earle Riggs, in Proceedings American Society of Civil Engineers, November, 1910, pp. 1369, 1428.