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tions would have given for it in fact — not what a tribunal at a later
date may think a purchaser would have been wise to give, nor a pro-
portion of the advance due to its union with other lots.

''The city is not to be made to pay for any part of what it has
added to the land by thus uniting it with other lots if that union would
not have been practicable or have been attempted except by the inter-
vention of eminent domain.

"Any rise in value before the taking, not caused by the expectation

of that event, is to be allowed, but we repeat, it must be a rise in what

a purchaser might be expected to give."

****** *

"The enhanced value of the land as a part of the Ashokan Reser-
\oir depends on the whole land necessary being devoted to that use.
* * * If the parcels were not brought together by a taking under
eminent domain, the chance of their being united by agreement or
purchase in such a way as to be available well might be regarded as
too remote and speculative to have any legitimate effect upon the

This case well illustrates i.he fact that in condemnation proceed-
ings the owner is not entitled to the enhanced value of the land which
comes to it as a part of the enterprise for which it is taken; that is to
say, the additional value gained by the company's act of taking the
land and combining it with other parcels should not be taken into
account, and the owner is not entitled to participate in such addi-
tional value so gained. The company is not bound to pay any part of
what it adds to the land by uniting it with other tracts. In determin-
ing the reproduction cost — what the owners are entitled to receive —
adaptability to the purposes for which the land can be used most
profitably may be considered, but only so far as the public would have
considered such adaptability if the land had been offered for sale in the
absence of the company's exercise of the power of eminent domain.
The available uses and purposes referred to may not properly include
any more than what it may be fairly believed a purchaser under fair
market conditions would pay lor the land in advance of its union with
other lots for more profitable use. Any value which exists before the
taking of the land, and which is not caused by the expectation of that
event, is to be allowed.

Normal Cost of Public UiiliUj Lands as Compared with General
Land Values. — As has already been pointed out, sales of land for


general purposes are made under conditions which are very different
from those that prevail in the case of sales for railroad or reservoir
lands. In one case, the sale is of the entire parcel, both parties to the
transaction being willing parties, the buyer being free to take or leave
the bargain. In the other case, the purchaser must take this particular
parcel or part thereof and no other. He may condemn, but if he takes
only a part, he must include the element of severance and other dam-
ages in his price. These considerations lead the Committee to the
conclusion that fair comparison can only be made with similar pur-
chases, that is, railroad land costs for inclusion in a valuation by the
reproduction method must be determined by a study of railroad pur-
chases of lands of the same class, in the same locality. It may be that
in certain districts the cost of lands for railroad right of way exceeds
little, or not at all, the cost of lands for farming or other general pur-
poses, while a few miles away the development of the country is such
that very heavy severance damages will be incurred, thereby increas-
ing the resulting cost per acre to several times that of the general pur- land. It devolves on the evaluator, therefore, to support his esti-
mate by actual history as to the extent of inclusion of damages, and
by actual recent costs of like accumulations of property in the same
or contiguous territory or in territory where all general conditions are

That, as a general rule, a right of way for a railroad or a body of
lands acquired for a dam or reservoir does cost more per acre or
square foot than other lands is clearly shown by a study of records
of actual costs of such tracts.

Professor David Friday, in making the land valuation of the Pere
Marquette Railroad, in Michigan, cites several instances of land pur-
chases, as follows:

(1). — The right of way from Greenville to Stanton, purchased in
1900, cost $22 435. This includes several $1 considerations
and does not include such costs of acquisition as services of
real estate agents, registration fees, legal and recording fees,
and other similar items of expense. The value of this record,
on the basis of contiguous lands, would be only $6 738, mani-
festly an absurdly low figure in view of the fact that land in
this district has increased in value more than 60% since
the date of purchase.

(2). — The right of way from Belding to Lowell, purchased at
various times between 1892-1900, cost $32 518. The present
value, on the basis of adjoining lands, is $13 136. Here, also,
the increase in value hns been large.


(3). — The right of way from Oak to Delray, purchased in 1891-
1892, cost $191 013. The present value, on the basis of ad-
joining lands, would be $121 120. The proximity of this
land to the City of Detroit has increased general values by
more than 100% since the acquisition of the right of way.

(4). — The land for the right of way for the new track at New
Buffalo, consisting of 199 acres, was purchased in 1911 at
an average cost of more than $185 per acre. This is at least
three times the unit value of adjoining lands.

The following, also cited by Professor Friday, serve as further
examples of the cost of railroad rights of way in various locations and
under various conditions :

The Benton Harbor-St. Joe Interurban Road, from Benton
Harbor to Coloma, Mich., a distance of 12 miles, bought, in
1910, 100.46 acres for its right of way at an average cost per
acre of $267.30. This was bought through a territory which
desired the road and in which land was worth from $60 to
$100 per acre.

The Milwaukee, Sparta and Northwestern Railway in the State
of Wisconsin purchased the 5 127 acres in its right of way and
station grounds for $1 129 531. The market value of these
lands on the basis of values of adjoining lands was $361 015,
or less than one-third the amount actually paid therefor.

The Chicago, Burlington and Quincy Railway bought, some years
ago, land in the City of Moline for $112 000. The market
value of these lands, as estimated on the basis of adjoining
values, was $66 600.

The "Soo" line paid for 3 460 acres in Wisconsin, purchased in
extending its road from Glenwood north to the State line
and from Thief River Falls west to the State line, the sum
of $190 950. The value per acre of land in the immediate
vicinity as estimated by the Wisconsin Ta;x Commission
was $19.30; the price paid by the Railroad Company was
$55.20, or 2.85 times the ordinary value.

Purchases for the Illinois Central through Mower and Freeborn
Counties in Minnesota some years ago, amounting to 228
acres, cost the Railroad $125 per acre, while the adjoining
lands were estimated by the Minnesota Railroad and Ware-
house Commission as having a value of $49 per acre.

The Hastings and Northwestern Railroad Company, a subsidiary
of the Union Pacific Railroad, purchased its right of way
between August, 191S, and May, 1914, at a cost of $221 355.06.
The value of this land, on the basis of unit values of adjoining
land was $96 729.


In 1903, an extended series of investigations of actual considera-
tions paid by railroads for rights of way for new lines, changes of line,
and for lands for widening right of way, were made by Mr. Van Ranst
Pond and H. E. Riggs, M. Am. Soc. C. E.

These investigations were supported by a large mass of testimony
given by registers of deeds, land owners, and others, in the Michigan
tax cases. There are very few condemnations in the many hundreds of
transfers investigated. Some typical examples of these data follow:
The Jackson and Battle Creek Railway was an electric interurban
line, partly paralleling the highways, and for a number of
miles being parallel with and adjoining the Michigan Central
right of way — all country lands; average considerations to
owners in Jackson County, $239.53 per acre; in Calhoun
County, $218.74 per acre. Farm land values in these counties
range from $60 to $100 per acre, with $75 to $80 per acre as a
liberal average.
In Monroe County, Michigan, several lines of road have been built
since 1900. This is good farming land worth from $80 to
$100 per acre. Considerations (average for the entire County)
were paid for railroad lands as follows: Flint and Pere Mar-
quette, $215.21; Toledo and Monroe (electric), $461.13; and
the Detroit and Toledo Shore Line, $262.49.
The Grand Trunk Railway made certain changes of its lines near
Flint and near Battle Creek, which involved in each instance
building several miles of new line. This was far enough
away from the old line to get out of the same farms and,
except at the extreme ends, there were no complications due
to crossing lands already cut. There were no condemnations.
The line near Flint, in Genesee County, was entirely across
good farm land worth from $100 to $115 per acre. The
average paid per acre was $337.56. West of Battle Creek, in
Calhoun County, the land was sandy and not high-class,
and worth from $60 to $85 per acre. The average consideration
Avas $491.13 per acre. In neither case were values affected by
proximity to the cities, as there was no plotting of new
additions near the city nor of either cut-off.
In 1896, the Ann Arbor Railroad built a new main line 10 miles
north in Washtenaw County. This line left the old line about
3 miles north of Ann Arbor and was several miles west of the
old road. It was wholly in farming lands, part of poor quality.
Values ranged from $50 to $90 per acre, averaging about $75.
The considerations averaged $285 per acre.

The foregoing examples are only a few of the many investigated in
Michigan. In these, the railroad lands, no matter how acquired, cost


from two and one-half to six times as much as general lands, due,
doubtless, in great measure, to the amount of severance damages paid
by the companies, but which elements of cost were not segregated in
the work in Michigan.

In none of the examples cited are costs of acquisition or overhead
cost included.

Among the illustrations presented by the railroads to the Inter-
state Commerce Commission in 1915 was a statement showing, for a
number of roads in several States, the actual cost of recent acquisitions
of railway lands. This statement includes purchases on a total of more
than 465 miles of line, and is summarized as follows:

Total purchase. Bare land Percentage rifVior ^l^'^r'

M.,..on,.e. ««js^°' ?„'"i™\'sf :i^i, 'S^i^ sS;^

acquisition. values. total cost. °^ "^^^^^ "otal cost

Right of way, 465.4. $7 868 213 $3 857 783 49 $4 009 831 51
Yards and terminals. 2 005 158 1144 774 57.2 856 384 42.8

These figures indicate so clearly that railroad purchases exceed
purchases for general purposes that it would appear, with a proper
presentation as to the percentages of the total acreage aiiected by other
elements of cost, and proper sxipport by reference to actual recent rail-
road costs under conditions similar to those under investigation, that
the proof might be considered to be convincing as to the relation of
actual costs to general values of lands.

That lands belonging to other classes of utilities present the same
relation to general lands is more difficult of exact illustration on
account of the scarcity of reliable records.

Certain records are available, showing the considerations paid for
lands and the amounts paid for damages and incidental costs other
than land in connection with the acquisition of lands.

New York City — Catskill Water Supply — Cost of Lands.*

Direct cost of 21 327 acres $10 699 946; average $509 per acre

Interest (actual) 1648 801 " 78 " "

Indirect and consequential damages. 294 801 " 14 " "

Fees, legal, and sundry expense 4 188 795 " 200 " "

Total cost of lands $16 808 344; average $801 per acre

Excluding interest $723 "

The cost of acquisition, or overheads, excluding interest, aggre-
gates 39.26 per cent.

* Based on Board of Water Supply figures of December 31st, 1914, litigation
still pending as to value of 345 acres.


Cost of

land per

acre, award.

per acre.

of land cost.

Total per
acre cost.

.15 221

$ 243

$ 155


$ 398

. 1637





. 3 182





. 163

8 796

3 871


12 667

. 957




2 774


An analysis of this figure is of great interest as showing the same
wide range between cost of land and expenses that occur in railroad

Division of work.

Ashokan Reservoir .
Northern Aqueduct .
Kensico Reservoir..
Hill View "
Southern Aqueduct .
City Aqueduct, 90

acres owned by city

(bought) 76 6 585 962 15.03 7 547

A recent case in Michigan is very interesting, as throwing light
on the cost and value of lands for flowage purposes.

A power company was organized to take over a tract of 17 000
acres of land on the Sturgeon River and build two hydro -electric
plants. In 1911, the Duluth, South Shore and Atlantic Railway valua-
tion placed the company's right of way in these counties (Houghton
and Baraga) at from $25 to $45 per acre for country lands near th©
proposed site of the reservoir (about 2 to 5 miles distant). The State's
attorney contended for values of from $5 to $10 per acre. Actual land
sales throughout that part of the country occupied by reservoir and
railroad had ranged from $2 to $10 per acre plus the value of the timber
on the lands, or an average, land and timber, of about $12. Under th©
law, the power company applied to the Michigan Railroad Commis-
sion for authority to issue stock and bonds. The opinion, by Commis-
sioner Lawton T. Hemans, is dated June 11th, 1913, and is in part
as follows :*

"We believe that the lands described in the application herein should
be capitalized at their fair market value, as represented by their initial
cost, plus reasonable compensation for the time, energy, and ability
bestowed in their acquisition, for the risk involved, and for the use of
the capital invested during the interval that must elapse between the
inception of the project, in carrying forward negotiations and pur-
chases of distinct parcels, and their final utilization as an assembled
whole. It may be contended that the various elements which it is
suggested should form the basis of the capitalization allowed for lands
and flowage rights are, except as to initial cost, as indefinite as cap-
italization computed upon any of the bases which the Commission
rejects, but the Commission is persuaded that with the various ele-
ments stated, disproportion between them, if any exists, becomes more
apparent with correspondingly greater certainty in arriving at correct


• Northern Michigan Power Company, Orders and Opinions, Michigan Railroad
Commission, Vol. 2, No. 1, p. 25.


"It is not to be understood from the foregoing that the Commission
holds that the initial cash payment for lands of the character involved
is to be considered, of necessity, the all controlling factor in the fixing
of their value for purposes of capitalization. Cases can be readily
imagined where the cash cost of the physical property embraced in the
lands and flowage rights was the least important of the factors
enumerated. Indeed, the tract of land under consideration partakes
strongly of this character. It is located in a comparatively undeveloped
portion of the State, although in close proximity to the copper mining
district of the State and possessed of some timber value, the physical
features of the greater portion of the tract are such as to make it un-
suited for agricultural purposes, compared with like areas alike suit-
able for water power development in other and more populous districts,
the market vahie of the land is markedly less. The record does not dis-
close the exact cost of the assembled lands, although it does appear
that they have been acquired at prices ranging from ten to one hundred
and seventy dollars per acre, and that more than thirty thousand dollars
was expended for lands at the last named sum. We are satisfied, from
the record, that the sum of ^va hundred thousand dollars would amply
cover the cash outlay for the purchase of the lands. But it appears
that the work of acquiring the titles has been in progress since 1902,
a period of more than ten year-i. If interest upon the real estate invest-
ment be allowed at six per cent, for half the time, which would seem
to be just, it represents the sum of one hundred and fifty thousand
dollars. The extended area of the lands necessary for this develop-
ment have required, as the record discloses, the making of several
surveys, the prosecution of legal proceedings, and extended negotiations
with more than one hundred separate owners of distinct parcels, who
have been found as widely scattered as the boundaries of the Union.
Under the laws of this State, the powers of eminent domain are not
accorded corporations which seek to develop hydraulic utilities. The
last description of land necessary for the purposes of the enterprise
must be acquired by purchases before the project is assumed, and
while the element of risk involved in the ultimate purchase of so large
a body of lands, held under such diversity of ownership, is difiicult to
estimate in dollars and cents, it is still a risk that is very real, and
which enters materially into the value of the property acquired."

The testimony in this case shows that the lands varied in cost from
$10 to $170 per acre, averaging about $30. This was more than two
and one-half times the average price per acre of lands sold in ordinary
tracts. The costs of acquisition, allowing a moderate per diem for
the actual time of the promoter plus the expense, were equal to the con-
sideration paid to owners of land.

The examples cited are not exceptions. They are typical of all the
cases which have come to the attention of the Committee. There is
no general relation between the normal cost of lands acquired for
railroad or reservoir purposes, and the market value of farm lands, or
other general purpose lands, which can be considered fixed and definite.


Such a relation, however, may be established for limited districts. No
rule can be formulated or multiple determined on, which can be uni-
versally applied, or even generally applied in any one State.

There have been, in the past, instances of the construction of rail-
roads in timber tracts, or in the western prairie States, in advance of
settlement, where the benefits to be derived from the line equalled or in
cases far outweighed any damages ; and, in such cases, it is easy to con-
ceive that the price paid for the land would not greatly exceed the
general average value of lands in the district.

Such conditions rarely exist in an old settled community. For
many years the conditions prevailing in all such communities have
made the normal cost of railroad and reservoir lands higher when the
attempt is made to compute them on the basis of a price per acre.

Costs of Acquisition. — To What Extent Includable in Valuaticnf —
The Interstate Commerce Commission in its classification of Invest-
ment in Koad and Equipment, effective July 1st, 1914, includes as
Items of Expense relating to land the following:

Abstracts Plats

Appraisals Premiums on condemnation bonds

Arbitrators in condemnation cases Recording deeds

Commissions paid to others Payments for relinquishments of

Condemnation expenses including cattle passes and other rights
Court costs and special counsel Removal and relocation of build-
fees ings and other structures not

Damages to property of others purchased

Deferred payments for right of Rent of land when part of con-
way sideration for purchase

Ditches for waterways when part Right-of-way agents' compensa-
of consideration tion when engaged solely in ac-

Judgments and decreed costs to quiring right of way

clear or defend titles Taxes accrued and assumed at the

Notarial fees time of purchase.

Every one of these items it- a necessary expense, not all incurred
in connection with every parcel, but every parcel involving some of
them, and all are chargeable to capital account as a legitimate cost.

The amount is considerable, in some cases a vei'y large percentage
of the purchase price of the parcel of land, but it is somewhat difficult
to compute, for when it is reduced to a per acre basis or a percentage
of cost basis it is extremely variable. The cost of condemning, or
acquiring by purchase, a small fragment of land one-tenth of an aero
in area may be as great as the cost of similarly acquiring a farm of
many acres.


Examples of actual cost of acquisition of lands are of value as
showing the extreme variations in percentage and per acre rates of such

Land Purchases of the Buffalo, Rochester and Pittsburgh Railway.

Cost of Acquisition :
Consider- Total Percentage
Year ending No. of Total ation for costs of ac- of coosid- Per

June 30th. parcels. acres. land. quisition. eratiou. Per acre, parcel.

1910 35 165.789 S20 086 S5 828 2.9 .^.35.30 $166

1911 16 .58.694 16 604 1521 9.1 26.00 95

1912 29 60.7.32 33.506 1718 5.1 26.50 59

1913 63 109.705 73 469 3 486 4.7 31.70 55

1914 24 28.730 .50 292 3 677 7.3 126.40 153

Total and
average. 167 423.646 $193 958 $16 231 8.38 $38.31 $97

These variations in costs of acquisition in percentages from less
than 5 to 29, in cost per acre from $26 to $126, in cost per parcel from
$55 to $166, are such as to show the necessity of careful investigation
of varying local conditions before fixing the estimated amounts.

Land purchases of the Chicago and Northwestern, on one of its
new lines, show ratios as follows : 3 620.41 acres ; land consideration,
$594169; expense, $72 685; being 7.62%, or $20 per acre.

Statistics presented by Mr. Thomas W. Hulme, in the argument
recently held before the Interstate Commerce Commission, show pur-
chases by twenty different corporations for forty-five different pieces
of construction. The percentages vary from a minimum of 0.86 to a
maximum of 38.4.

Total consideration, all lines, $8 389 730.

Costs of acquisition, $452 656, average 5.4 per cent.

Water-works properties afford an illustration of a class of proper-
ties carrying a high cost of acquisition. This is shown by the land
costs of the New York City Catskill water supply.* The whole matter
may be briefly summarized, as follows:

Amount of awards for land, including

payments for land purchased $10 669 946

Awards for indirect damages 135 007

Estimated awards for land and damages
during 1915, proportionate part of
$500 000 323 000

Total payments for land and damages $11 127 953

* Information furnished and arranged by Allen Hazen, M. Am. Sec. C. E.,
from records and published reports and with the aid of engineers of the Department.


Brought forward $11 127 953

Expenses of acquiring land not includ-
ing interest, as per Auditor's
report $4 188 795

Do. in connection with damages awards 159 794

Do. in connection with estimated awards
during 1915, proportionate part of
$500 000 127 000

Total expenses $4 475 589

Sum, being the cost of land, with ex-
penses of acquiring it, but not in-
cluding interest $15 603 542

Interest on awards allowed by Commis-
sioners and included in the Audi-
tor's report, as part of the cost of
land $1 648 802

Estimated interest on awards allowed
for 1915, proportionate part of
$500 000 50 000

Total interest on awards $1 698 802

Total actual payments for property to

January 1st, 1916, including an

estimate of $500 000 for payments

in 1915 $17 302 344

Cost of carrying, after acquiring, up to

the time when the system is to be

put in service, taken as January

1st, 1916:

Taxes paid $216 534

Taxes estimated for 1915 25 000

Interest on amounts paid to January

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