Overhead Utility Crossings: Is the Impact Based on Perception or Reality?

Shenehon Company is pleased to announce an upcoming article by John Schmick and Robert Strachota in the July/August 2010 issue of International Right of Way Association Magazine regarding compensation for Overhead Utility Crossings.

The extensive infrastructure of utility pipelines and power lines in the United States ultimately creates situations where utility lines cross active railroad tracks and/or non-active rail corridors. Historically, crossing fees were little more than negotiated agreements between the utility company and the railroad. Fees were not based on market-supported land valuations which reflect the actual impact of a crossing on the corridor. This article describes how to measure the change in value, if any, due to the presence of overhead power lines on a rail corridor.

At this time, the railroad industry favors two methods to determine usage fees. The first is the Rate Sheet method; it is essentially a fixed price list based on wire, pole, or pipe size. However, the Rate Sheet method bears no relationship to land values and is contradictory to the railroad’s most widely used valuation technique, the across-the-fence (ATF) method.

A second method for determining usage fees is the Occupancy Factor. A percentage of fee simple land value (typically 30%) is randomly selected to represent the impact of the utility line on the rail corridor. However, there is no market support for this method because appraisers and railroad companies fail to consider the economic profile and highest and best use of the subject land when assigning an occupancy factor.

The article presents a discussion of larger parcels, highest and best use, valuation and the adjustment process, and economic profile of the subject. While individual crossings have unique characteristics, the majority of utility crossings have little to no measurable impact on the rail corridor. In the final analysis, the usage fee must relate to the value captured by the utility crossing.