Value of railroad corridor for just compensation purposes must include remnants of railroad’s use

by Hannah Dankbar and Gary Taylor

Rasmuson, et al v. United States
U.S. Court of Appeals for the Federal Circuit, October 5, 2015

Rasmuson and others own land adjacent to three railway corridors in Central Iowa. Pursuant to the National Trail System Act Amendments of 1982, the Surface Transportation Board issued Notices of Interim Trail Use (NITUs) for the corridors. NITUs “preserve established railroad rights-of-ways for future reactivation of rail service” and permit the railroad operator to cease operation without abandoning any “rights-of-way for railroad purposes.” The trial court found that “but for issuance of the NITUs, under Iowa law the railway easements would have reverted back to plaintiff adjacent landowners upon cessation of railroad operations, and plaintiffs would have enjoyed land unencumbered by any easement.”  The trial court thus found that a taking occurred, then held a bench trial to determine just compensation.  The trial court determined just compensation to be the value of the land as raw land (without any of the railroad’s improvements), and the United States appealed.

A landowner subject to a taking is entitled “to be put in as good a position … as if his property had not been taken.” In the case of an easement, the conventional method of valuation is the difference between the value of the property before and after the government’s easement was imposed.  The issue before the Court was a narrow one: Whether, as the government argued, the “before” condition was the property with the physical remnants of the railway’s use (with tracks, ties, earthen embankments, poor soil conditions) or, as the plaintiffs argued, without such physical remnants (raw land pre-railroad development).

The Court concluded that the fair market value of the land “before” the taking was the value including the physical remains of the railway.  The “before” condition was the property “before” the issuance of the NITUs.  Without the NITUs the land would have returned to the landowners with the physical remains of the railway since the railroad was under no legal obligation to remove the physical remnants of railroad use, and no evidence was introduced that the railroad would have done so on its own.  An appraisal of the land to determine just compensation must therefore take into account the remnants of the railway.

The trial court’s decision was vacated and remanded.

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