Should the cost of reproduction of right of way be carried to the present value column? Clearly, yes. If a road is unfortunate enough to buy its rails when they are at a price of $60 per ton, the full price is charged to capital account; and when the line is sold to some large corporation, no reduction is made, even though the price of rails be much less at the time, but the selling price is based on the construction account as a whole.
The same is true of the right of way. In no case which has come under the writer's notice has a new company, or a set of promoters disposing of a new line or a new right of way, ever consented to deal except on the basis of construction account, plus promoters' profit. The cost of a right of way is increased on account of continuity. A farmer is justified in increasing his price per acre by reason of the fact that the road must have a continuous line, regardless of how it affects the individual. He must rearrange his fields, replant his orchard, change his fences, ditches, and tile lines, and re-adjust his entire property to accommodate the necessity of the road. He must also take into account severance or damages. He is compelled to cross the line at an inconvenient place, open and close two gates in every lane or at every crossing, drive his cattle back and forth to water, haul his produce over a short heavy grade across the track, and he must not interfere with the railroad. He is in constant danger of loss of property from fire or from accident, and he is in personal danger every time he passes from his own land on one side of the railroad to his own land on the other side. Every one who has bought right of way knows these arguments, and is aware that the farmer knows them and charges extra on account of them.
The law provides that, in condemnation, the jury shall take into account two elements, the value of the land, and damages. The railroad pays them, and very promptly charges the entire cost to the right-of-way account. No one will question the propriety of the farmer taking them into account in fixing his price. The value of continuity to the railroad can hardly be measured in dollars and cents.
A fair illustration of continuity may be found in coal lands. A promoter will secure option on a large acreage. As long as his holdings are disconnected and widely separated they are of no more value than adjoining lands, but let him close options on a large block of land all in one body, and immediately he can add from 100 to 200% to the value of his land for mining purposes. This added percentage is due to continuity.
The conditions surrounding the purchase of railway lands in Michigan have changed materially in the past few years. In a new country, without means of transportation, land values are low, and, in order to open new markets, land owners can afford to donate the right of way. Undoubtedly, a very large percentage of the total right of way on the older lines was either donated or bought at very low prices. As a community grows and develops, acquires new industries, and receives new improvements, property values increase; and, along with a general appreciation of other values, those of railroad property must increase. It would certainly be true that the present value of the site of the Majestic Building, in Detroit, is not the same as it was in 1850; the argument that its actual cost in 1850 was, say, $200, would not be any justification for such a value to-day. Equally is it true that the value of property owned by the Michigan Central Railroad is not to be measured by the price paid for it 50 years ago. The greater business, and the larger income derived from that business, make the Detroit of to-day a much more valuable terminal for the road than the Detroit of 50 years ago.
The same argument will apply to any city which has grown up after the construction of railroads. The original right of way was farm land and may have been a donation, but the change from farm to city certainly increases the value of the railroad land just in proportion as the surrounding land increases.
The same reasoning is properly applicable to lands which decrease in value. Where a railroad buys right of way to gain access to valuable timber lands, and, after the removal of the timber, the land is too poor to support a population, the present value should depreciate in the same ratio as the surrounding land, and immediately on its abandonment as a right of way it would cease to have a railroad value.
In an appraisal, it appears to be fair to base the cost of reproduction on the cost of building a new line on the location of the road under appraisal, all other means of transportation remaining as they are to-day, so as to secure as nearly as possible the conditions that would be encountered by a new company building a new line on this location.
The argument was made in 1900, and reiterated frequently, that railroad companies secure many donations. It may safely be said that, in a developed country, such as in the south half of the Lower Peninsula, the donations are of little account. Few donations were found in an examination of records of deeds covering 10 years; and in some cases the conditions were so burdensome that it may be said that the gift land was the most expensive. A condition for a cattle-pass costing from $400 to $600, a side-track costing from $1 to $1.50 per ft., and other like specifications are found; and in many deeds where a liberal consideration is named conditions which add greatly to the cost are not infrequent.
The recent new lines in Southern Michigan secured but few donations, although all considerations of $1 and other good and valuable considerations were classed as donations unless the contrary was susceptible of proof. In the case of the Ann Arbor Railroad, in Washtenaw County, the $1 consideration represents a higher price than the average, this being known by the writer, as he bought it. The same is true of the Detroit and Toledo Shore Line, in Monroe County. In making an appraisal, no deductions should be made for donations, if there are any, as the fact that land is donated does not indicate absence of value; nor should an addition be made to the appraisal value on account of the fact that a road has been held up and compelled to pay exorbitant prices in certain localities.