New York Cent. Lines, LLC v State of New York

[*1] New York Cent. Lines, LLC v State of New York 2013 NY Slip Op 51621(U) Decided on August 27, 2013 Ct Cl Marin, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on August 27, 2013
Ct Cl

New York Central Lines, LLC, Claimant,

against

State of New York, Defendant.



102648



For Claimant:

Goldstein, Rikon, Rikon & Houghton, P.C.

By: Jonathan Houghton, Esq.

For Defendant:

Eric T. Schneiderman, Attorney General

By: J. Gardner Ryan, AAG

Alan C. Marin, J.

This claim, arising from the appropriation of certain real property, was remitted by the Second Department to this Court for a "determination as to the appropriate corridor factor to be applied to the ATF [across-the-fence] value as estimated by the claimant's expert. . . "[FN1]

The State, in fee, took 236,836 square feet belonging to New York Central Lines, LLC along a 0.9 mile length of part of the Fremont Secondary Line in Queens County. The property rights of New York Central (or its successor in interest, CSX Transportation, Inc.) were also diminished by a permanent easement of 43,856 square feet, and by temporary easements on five parcels aggregating 11,973 square feet.

The value of a railroad corridor is intrinsically linked to the fact that it connects two points. The above-quoted appellate excerpt refers to the methodology of claimant's expert, Charles W. Rex, - - the value of the rail corridor is the value of the land or specific parcels that make up the corridor (the across-the-fence value) multiplied by the applicable corridor factor, reflecting the value of that continuity or connectedness. Such valuation methodology is analogous to the extra value of an assemblage of property on a valuable urban commercial block [*2]which would allow construction of a large office building as compared to the value of having, for example, two-thirds of the parcels on such block.

The Corridor Factor

Claimant's expert presented about a dozen comparable rail corridors and explained that four of these were most applicable to determining the corridor factor of the Fremont Line. Each of these dozen comparables represented negotiated sales for all or part of the corridor property rights; they often included non-cash consideration such as the upgrading of an alternate route paid for by the buyer.

The analysis offered by claimant and its expert is straightforward and fairly accessible: Find the corridor factors of these examples of comparable fair market sales by dividing each purchase price by the corresponding across-the-fence value. From these corridor factors (CFs), the appropriate one can be determined from within the range of CFs, and then the value of the Fremont Line is the product of such corridor factor times its across-the-fence value.

The corridors looked at in this case are from around the country and may extend outside of urban areas, but the ATF component will account for an expensive, intensively developed site such as within the City of New York.[FN2] The four corridors that Rex emphasized were as follows:

Comparable Corridor Sale 007 [R 1539]

Comparable Sale 007 involved a corridor averaging 112 feet wide from Palm Beach County, Florida running 81 miles south to the Miami International Airport. This was a sale with the subject claimant, CSX Transportation, Inc., the grantor, and the Florida Department of Transportation (DOT), the grantee.

According to Mr. Rex, it was purchased for use as a passenger rail system (Tri-Rail); at the time of purchase, it had been an "active mainline corridor" [R 1593]. CSX retained an easement to run its freight business at times that would not conflict with the Tri-Rail system. Rex's submission states that, "It is significant to note that this is a sale where the railroad was able to maintain its operation" [R 1594].

Mr. Rex submitted revised figures when new information became available to him, which will be considered below, but for now, the Court will use his initial figures to explain the methodology. The ATF value is described as the average of the two Florida DOT appraisals and the CSX appraisal or $225,955,000. The cash price paid was $264 million, and that figure divided by the $225,955,000 equals 1.17 for the corridor factor using the cash price. Rex's submission contained the following entry:

"Corridor FactorTotal:1.32 [*3]

Cash:1.17"[R 1594]

The "total" corridor factor of 1.32 results when the total in-kind payments of $33.5 million are added to the $264 million cash price with the new total of $297.5 million divided by the ATF value of $225.955 million. In Mr. Rex's revised analysis for Corridor 007, the total CF was 1.26 and the cash CF1.03 [R 2500, and R 727-28 (tr 5-15, 16)].

Like Corridor 007, two of the other three highlighted corridors have a total corridor factor that differs from the cash factor because they include in-kind non-cash benefits or payments. Such was never claimed here by either party; in fact, this Court accepted claimant CSX's position that such benefits like bridges and modified track beds were not to be credited to the defendant in determining the value of the taking. Consequently, no in-kind value will be used here in calculating the corridor factor.

In addition, there is another set of adjustments, which Mr. Rex submits results when "The corridor sales are analyzed both quantitatively and qualitatively" [R 1543]. Such analysis comprehends corridor type (mainline, secondary, industrial leads, abandoned, disassembled), whether a rural or urban location is implicated, the corridor's length, whether the subject is an entire corridor or a portion thereof, the acreage and improvements (R 1543-1550). To this trier of fact, the analysis adds at least one more level of discretion, insufficiently tethered to guidelines or standards.[FN3]

Comparable Corridor Sale 013 [R 1540; 1609]

Comparable Corridor 013 was a sale from CSX's predecessor to the Washington Metropolitan Area Transit Authority. The corridor was 5.25 miles long with an average width of about 22 feet. As Rex observed, "While this sale is of [an active] mainline [corridor], it has alternate routes and, therefore, is somewhat comparable in importance to the subject" [R 1540]. The entire purchase was in cash, so there is no corridor factor other than the cash CF which was 1.29 - - the cash price of $3,115,000 divided by the ATF value of $2,414,729.



Comparable Corridor Sale 102 [R 1540; 1613]

The Texas Department of Transportation purchased a rail line in the Houston area following the merger of the Union Pacific and Southern Pacific railroads, but the Union Pacific had use of it for five more years when it was torn up for the potential expansion of the interstate highway, I-10. It was just under 28 miles long and averaged 100 feet wide. Rex concluded that the cash corridor factor was 1.13 (his figure for the total CF was 1.87).

Comparable Corridor Sale 7199 [R 1543; 1636]

This was a 3-mile corridor in suburban and rural Frederick, Maryland, which was subject to a sale agreement between CSX and the Maryland Transit Administration. It was about 31 acres, with an average width of 75 feet. CSX retained a perpetual easement for freight along the track, although passenger service would have priority [R 1636-1637].

Rex noted that, "This sale is slightly inferior to the subject corridor because it is an operational industrial lead versus a secondary line" [R 1543] - - he had the cash corridor factor at [*4]1.45 and the total CF was 2.41.

* * *

The cash corridor factors for these four comparable corridors (using the revised number for Corridor 007) are 1.03, 1.29, 1.13 and 1.45, respectively. The average of the four is 1.225 or 1.23, and the median 1.21; if we had used the original 1.17 corridor factor Mr. Rex submitted on Corridor Sale 007, the average would be 1.26 and the median 1.23. In any event, the Washington, DC corridor (013), by Rex's description and analysis, is most comparable to the subject corridor. Its CF is 1.29, only slightly above the average of the four comparable corridors.

When Rex received the additional information about Corridor Sale 007, he concluded that it was not as comparable as he analyzed it on the initial data: "[T]his sale should be given less weight than other sales . . . the sale is not as good as what I thought it was, as I got additional information concerning [it]" [R 740 (tr 5-28)]. If Corridor 007 is then dropped from our comparables, the average (and obviously, the median) of the other three cash corridor factors is 1.29. Accordingly, the Court will use 1.29 as the corridor factor.[FN4] The value of the property taken in fee is thus $10,898,957 [FN5] times 1.29, or $14,059,655.

Easements

Eight parcels were subject to permanent easement. Not at issue was this Court's determination that the across-the-fence value of four of them was $1,205,049 (P130, P193, P194 and P195). But such figure must be multiplied by the corridor factor of 1.29, yielding $1,554,513 as the value of claimant's loss with respect to these four properties.

As for the remaining four parcels (P130-A, P193-F, P194-J and P195-H), the Second Department concluded that the State was correct at trial in valuing the loss at 5%. The ATF for these four parcels was $255,094;[FN6] 5% of that is $12,755, which multiplied by the corridor factor of 1.29 results in a loss to claimant of $16,454.

The Second Department did not specifically address the application of the corridor factor for temporary easements. However the same concept would apply, and therefore the three figures valuing the temporary easements are also multiplied by 1.29: $179,123 becomes $231,069; $13,068 becomes $16,858; and $49,286 becomes $63,579. [*5]

***

In view of the foregoing, claimant New York Central Lines, LLC is awarded the corrected amount of $15,630,622 for the takings in fee and by permanent easement, plus the statutory rate of interest from the date of the taking, January 6, 2000, together with the following amounts for temporary easements (the same amounts as per 29 Misc 3d 1205[A]): -

the corrected amount of $231,069 for the temporary easement for the period from January 10, 2000 to January 6, 2010, plus the statutory rate of interest thereon; -

the corrected amount of $16,858 for the temporary easements for the period from January 6, 2000 to May 17, 2006, plus the statutory rate of interest thereon; and -

the corrected amount of $63,579 for the temporary easements for the period from January 6, 2000 to May 18, 2006, plus the statutory rate of interest thereon.

Claimant is thus awarded the total corrected amount of $15,942,128 with interest to run as stated above.

The award to claimant herein is exclusive of the claims, if any, of persons other than the owners of the appropriated properties, their tenants, mortgagees or lienors having any right or interest in any stream, lake, drainage, irrigation ditch or channel, street, road, highway or public or private right-of-way, or bed thereof, within the limits of the appropriated properties, or contiguous thereto, and is exclusive also of claims, if any, for the value of or damage to easements or appurtenant facilities for the construction, operation or maintenance of publicly owned or public service electric, telephone, telegraph, pipe, water, sewer or railroad lines.

Any filing fee paid by claimant may be recovered pursuant to Court of Claims Act § 11-a.2.

LET JUDGMENT BE ENTERED ACCORDINGLY.

New York, New York

August 27, 2013

ALAN C. MARIN

Judge of the Court of Claims Footnotes

Footnote 1: New York Central Lines, LLC v State of New York, 101 AD3d 966, 968, affirming in part, reversing in part 29 Misc 3d 1205 (A).

Footnote 2: Mr. Rex at R 258 (tr 1-179): "[W]hat we have found is that whether the sale is located in Maine or California or Oregon or Florida, that in itself, the geographic location, does not in any way influence the corridor factor. The geographic location is handled by and measured by, within any given sale, by the across-the-fence factor."

Footnote 3: See the testimony at R 292-R 301 (tr 2-13 to 2-22).

Footnote 4: In one of the scholarly articles that Rex relied upon and which was cited by the Second Department, 101 AD3d at 968, Charles F. Seymour, The Continuing Evolution of Corridor Appraising [Back to the Basics], Right of Way, May/June 2002 at 17, the author wrote, "For example, while the entire array of corridor sales (after eliminating erratics) indicates that most corridor factors lie between 1.1 and 2.0, sales for freight rail corridors tend to support 1.1 to 1.2 while sales for electrical transmission lines are more often in the range of 1.5 to 1.7" [R 2035].

Footnote 5: See footnote 30 and the accompanying text in 29 Misc 3d 1205(A).

Footnote 6: See footnote 36 of 29 Misc 3d 1205(A).