Railbanking
In the early 1980s, Congress became concerned about the dramatic decline in the nation’s railroad infrastructure. With so many railroads abandoning corridors, it became apparent to Congress that something needed to be done to preserve the nation’s rail system for future transportation uses. In 1983, Congress amended Section 8(d) of the National Trails System Act to create a program to preserve rail corridors (called “railbanking”), through which corridors that would otherwise be abandoned can be preserved for future rail use by converting them to interim trails. The old, inactive railroad route survives but is re-purposed for other—potentially temporary—trail uses.
Opponents of railbanking have unsuccessfully challenged the constitutionality of the railbanking provisions of the National Trails System Act. In 1990, the Supreme Court unanimously ruled, in the case of Preseault v. United States, that preserving a corridor for future rail use through railbanking is a legitimate exercise of governmental power. This decision protects a railroad’s legal right to transfer all forms of its ownership, including easements, to a trail group. A more thorough examination of the legal issues that often arise with railbanked corridors, as well as an overview of how some of those issues have been resolved, can be found in RTC’s Rails-to-Trails Conversions: A Legal Review (Click here).
Opponents also periodically attempt to stop implementation of the railbanking provisions through legislative restrictions on trail development. RTC remains vigilant in monitoring legislative and legal assaults on railbanking and continues to build support in favor of the railbanking statute.
If an interim trail use / rail banking agreement is reached, it must require the new trail manager to assume, for the term of the agreement, full responsibility for: (i) managing the right of way; (ii) any legal liability arising out of the transfer or use of the right of way (unless the trail manager is immune from liability, in which case they need only to indemnify the railroad against any potential liability); and (iii) the payment of any and all taxes that may be levied or assessed against the right of way.
Why Railbank?
A rail corridor generally has several ownership types along its length. A railroad may have purchased some of the corridor “in fee,” meaning it acquired an ownership interest in the land; it may have purchased some easements, giving it only the right to use the land; or it may have acquired the right-of-way through federal grants. Occasionally, there is no information about how the railroad acquired the property (for example, when the property has been acquired through adverse possession or condemnation). These ownership differences are largely irrelevant to a railroad while the corridor is in active railroad use. Once a railroad decides to abandon a corridor, however, these ownership distinctions become important.
Upon abandonment, under the law of some states, the railroad may lose any rights to possess or transfer parcels of land within the corridor to which it merely held as an easement and whose use is limited to railroad purposes. At this point, even though the corridor may appear unchanged, it may no longer exist as a right-of-way, and the owners of the underlying land (often adjacent landowners) regain full rights to the corridor. In these cases, acquiring a corridor can become incredibly complex because it may be owned by many different people.
A corridor that is railbanked, on the other hand, precludes abandonment, and railbanking preserves the railroad’s right to transfer all forms of ownership, including easements, to a trail group. This arrangement can be very beneficial to the railroad company because it’s able to sell the entire corridor instead of pieces, therefore reducing transaction costs, and allows the railroad to avoid the expense of removing railroad structures such as trestles and culverts. It also prevents time-consuming and costly inquiries or litigation to resolve ownership questions.
Railbanking equally benefits trail organizations, whose acquisition of the corridor might otherwise be vulnerable to ownership challenges. The lowered costs to the railroad as a result of railbanking should be a factor in negotiating a lower purchase price. In addition, trail managers are in a position to resist attempts by railroads to employ an “across the fence” valuation methodology that does not take into account the railroad’s inability to demonstrate fee simple title to the corridor.
Definitions
Railbanking: Condition allowing a railroad to “bank” a corridor for future rail use if necessary. During the interim, alternative trail use is a viable option.
Surface Transportation Board: The federal agency that oversees changes made by railroad companies. Formerly the Interstate Commerce Commission (ICC).
The Virginia Creeper - an Appalachian success story
The economic effects of trails and greenways are sometimes readily apparent (as in the case of trailside businesses) and are sometimes more subtle, like when a company decides to move to a particular community because of amenities like trails. There is no question, however, that countless communities across America have experienced an economic revitalization due in whole or in part to trails and greenways.
Trails and greenways create healthy recreation and transportation opportunities by providing people of all ages with attractive, safe, accessible and low- or no-cost places to cycle, walk, hike, jog or skate. Trails help people of all ages incorporate exercise into their daily routines by connecting them with places they want or need to go. Communities that encourage physical activity by making use of the linear corridors can see a significant effect on public health and wellness.
Click underlined Links for various Rail-Trail projects around the US:
Johnson City, TN
Damascus, VA
Missouri’s KATY Trail
Bike KATY Trail link (includes planning routes and businesses that have been built up along the trail)
Surface Transportation Board ruling on NITU Extensions
The following excerpt from a 2019 STB ruling, states that negotiations can be permitted to continue under a railbanking agreement beyond expiration of its initial term. The NITU Railbanking Agreement filed related to the Oneida Line under discussion will expire in March of 2025 absent a request for extension under this ruling as its initial 1 year plus 3 (@ 1 year) extensions began back in spring 2020:
“The final rule amends current regulations and will: (1) provide that the initial term for a certificate of interim trail use or abandonment (CITU) or notice of interim trail use or abandonment (NITU) will be one year (instead of the current 180 days); (2) permit up to three one-year extensions of the initial period if the trail sponsor and the railroad agree; and (3) permit additional one-year extensions if the trail sponsor and the railroad agree and extraordinary circumstances are shown.”
Valuation of Railroad Right of Way
The traditional definition of market value may be of little use in these situations, as an operating or unused railroad corridor property is not typically sold in the open market. The value of the land can be estimated using a variety of assumptions and approaches, any of which may present serious challenges for the appraiser. Depending upon what specific assumptions are set out in the problem statement or appraisal SOW, a dramatic divergence in property values may result. Thus, the FTA provides appraisal guidelines specifically applicable to valuation of existing railroad ROW. The objective is to achieve consistent and reliable valuation outcomes in similar railroad ROW procurement situations.