Notes for the Valuation Study

1. See Fair Market Value Analysis For a Fiber Optic Cable Permit in National Marine Sanctuaries, National Oceanic and Atmospheric Administration (August 2001.) Assigning a value to the rights-of-way is not a case of first impression for federal, state or local government. Federal agencies such as the United States Department of Transportation, the U.S. Department of the Interior (Bureau of Land Management “BLM”), the United States Department of Agriculture (U.S. Forest Service) and the National Oceanic and Atmospheric Administration (“NOAA”) have all been actively engaged in assessing value for rights-of-way for years. Valuation of rights-of-way, and the requirement that government receive fair market value for their use, can be found in regulations (43 C.F.R. Sections 2803 and 2883) statutes, and case law. A whole industry has developed to provide federal, state, and local governments, as well as individual land-owners, with valuations of their rights-of-way. The public side of this industry can be found at the International Right of Way Association and the American Public Works Association. Private practitioners of evaluating and valuing rights-of-way may be found at the Appraisal Institute.

2. All highway number are drawn form the U.S. Department of Transportation’s Highway Statistics 2000 study available at http://www.fhwa.dot.gov/ohim/hs00/index.htm

3. The total 3,917,232 inventory includes 2,961,731 miles that are the sole responsibility of state and local governments. In addition, 160,161 miles belong to the Interstate System, and an additional 795,340 miles are state and local roads entitled to Federal funds. State and local governments pay ten percent of the acquisition, construction and maintenance of these roads. This analysis reflects this burden by adding ten percent of the federal roads (79,534 + 16,016) to the state and local mileage.

4. 40-foot average width is a conservative number. A traffic lane must be a minimum of nine-feet wide. A 40-foot width provides a single lane of traffic, two lanes of parking, plus a six- foot sidewalk/ pedestrian way/utility right-of-way on each side of the street. Many streets and roads are much wider than a single traffic lane.

5. The Bureau of Economic Analysis of the Department of Commerce (the organization that estimates the Gross National Product numbers other leading economic indicators) has tracked government fixed assets for decades. Among those fixed assets is a category for roads and highways. See Department of Commerce’s Bureau of Economic Analysis Fixed Asset Tables for 2002. These tables may be viewed at www.bea.doc.gov/bea/dn/faweb/FATableView.asp?SelectedTable=67&FirstYear=1995&LastYear=2000&Freq.

6. This valuation understates the interest of state and local government in the rights-of-way. BEA staff, in interviews for this paper, suggested state and local jurisdictions are responsible for 100% of the ownership and maintenance of the nations streets and highways, regardless of whether the road is identified as a local, state or interstate highway.

7. There exists no government research number for a national value of the land located in the right-of-way. This paper therefore employs the following formulae: [(Feet per mile) x (miles of no-federal roads)x (40 feet width)] x value of land per square foot.

8. Not all western land, however, is that cheap. In 1994 Nevada Bell paid the federal government an annual fee of $1.05 per linear foot or $5,544 per mile for an easement. This followed a determination by the Bureau of Reclamation that the market price for the land ranged from 1,000 to $50,000 per mile. See page 25 of the National Ocean Service “Fair Market Value Analysis” of December 2000.

9. See Indirect Costs of Utility Placement and Repair Beneath the Streets. A Report by Raymond L. Sterling , Ph.D., P.E. to the Minnesota Department of Transportation. (1994)

10. The $5.70 is 1994 dollars. Adjusted for recent increases in property values in Minneapolis and other inflation, the value would be $9.00 per square foot in 2002 dollars. $9.00 per square foot appears to be a representative number based on two recent fiber optic easement class action lawsuits brought against railroads by abutting landowners. In Vera J. Hinshaw et.al , v. AT&T Corp (S.D. Ind, 2001) Civil Action No. IP99-0549-C-T/G ) a Federal Court accepted $10 per square foot for the class action settlement. A copy of the agreement may be found at http://att.fsiwebs.net/settlements/IN_docs/ClassSettlementAgreement.htm. Uhl v. Thoroughbred Tech and Telecomms., 2001 U.S. Dist Lexis 13115 (S.D. Ind. 2001), settled another class action lawsuit by landowners abutting a railroad right-of-way. The Uhl court awarded $31,875 per mile (approximately $6.00 a linear foot), plus an equity interests in the optical fibers deployed, plus 7.5% to 11.25% of the operator’s gross receipts.
    
    In an affidavit filed with the United States District Court for the District of Oregon, in Qwest v. Portland, (D.Oregon) Civil Action No. 01-CV-1005-JE ) Brant Williams, a city engineer for the City of Portland, stated that the combined property value and improvements in the city's rights-of- way was almost $10.00 per square foot.

11. Assessing right-of-way values at full value is difficult, as value has been rapidly growing over the last 15 years. In its report, NOAA stated “For…rights of way greater than 5 miles in length, price levels rose from $8,026 per mile in 1987 to $11,880 per mile in 1993 to $100,042 in 1997.” See NOAA at p. 18.

12. Value of Land in Right of Way: 625,517,587,200 square feet x $5.40/square foot = $3,565,450,247,040.00.

13. $3,565,450,247,040 (land) + $1,110,589,700,000 (improvements) = $4,676,039,947,040

14. NOAA report at 12.

15. Id.

16. While the fiber optic rights-of-way numbers identified by Federal Highway Administration and NOAA are supportive of the values discussed in this paper, they establish a floor, not a ceiling. Fiber rights-of-way are not exclusive and most often are in rights-of-way housing competitive fibers. So the value assigned to a particular fiber facility is necessarily less than the value of the right-of-way as a whole.

17. The NOAA evaluation was based in part on the following transactions identified in its study. In 1994 the Bureau of Reclamation established that the market price for the non-exclusive rights-of-way in rural Nevada reached $50,000 per mile for rural interstate. 1988 research developed by the United States Department of Transportation established a value for non-exclusive rights-of-way per mile in urban areas at $31,250. See Shared Resources: Sharing Right-of-Way for Telecommunications, Appendix A, U.S. Department of Transportation (April 1996). A research study by San Francisco established an annual rate of $350,000 per mile for a seven-mile right-of-way that crossed the grounds of the Presidio and the Golden Gate Bridge. The City of Austin Texas charges the equivalent of $126,316 per mile per year for an easement on 31 miles of Transit Authority right-of-way. The Massachusetts Turnpike Authority concluded a deal for 50 miles of right-of-way with Level 3 Communications of Boulder, Colorado for $112,477 per mile per year plus a fee for each fiber deployed. The parties further agreed that these additional fees per fiber have the potential to raise the level of compensation to $1 million per mile.

18. NOAA acknowledges this multiplier in its seminal study: “In contrast to the ATF [Across the Fence] approach, what is called a ‘corridor value’ accounts for assemblage of land parcels into a contiguous right of way. ATF values for land along a right of way may be multiplied by an ‘assemblage factor’ or ‘corridor enhancement factor’ to reach an estimate….Some analyses have determined that corridor values typically exceed ATF appraisals by a factor of two to six.” (NOAA at p. 6) See also Clifford A. Zoll, "A Logical Approach to Appraising Railroad Rights of Ways", The Appraisal Journal, October 1998 and Clifford A. Zoll, "Rail Corridor Markets and Sale Factors", The Appraisal Journal, October 1991.
    
    Another way to think of this multiplier effect has been captured by Charles P. Bucaria and Robert G. Kuhs in their paper “Fiber Optic Communications Corridor Right of Way Valuation Methodology” delivered at the December 4, 2002 Appraisal Institute Workshop. They captured the multiplier as “Cost Avoidance Analysis.” David Harris in an unpublished paper cited by the Department of Transportation study below, identifies that the savings from dealing with a single landowner can be as much as the purchase price of the land.
    
    The U.S. Department of Transportation has also accepted the premises that a straight valuation based upon “ATF” or the value of adjacent land is not sufficient for valuation of a telecommunications corridor. “Using adjacent real estate values directly overlooks the degree of uninterrupted access afforded by public rights-of-way as well as the very real financial and administrative advantages of dealing with one agent rather than a number of individual landowners.” The Department then cites examples of this “continuity factor”. Citing from Miltenberger's “Rail Right of Way Valuation,” The Appraisal Journal for 1992, Vol. 60, No. 1 (Chicago IL), DOT demonstrated that the lowest continuity factor employed was 1.9 by Penn Central in 1995.

END NOTES

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