The development of a simplified valuation model for railroad right-of-way segments for the purpose of consolidation, merger or private purchase

The purpose of this research is to develop an income valuation model for segments of railroad right-of-way. This appraisal technique for profitable segments uses a limited number of characteristics critical to value. The outputs of the methodology are high and low endpoints of a relevant range of segment values. The model does this by an analysis of traffic which originates and/or terminates on a given segment. Gross revenues for each movement of the traffic analyzed are multiplied by net revenue factors to estimate the total net revenue contribution of traffic assigned to the segment. An estimate of the net revenue contribution above fully-allocated costs forms the lower end of the relevant range, while an estimate of the net revenue contribution above variable costs constitutes the upper end of the range of values.

The model is tested by using data made publicly available as a result of litigation to establish the value of railroad assets transferred to Conrail on April 1, 1976. A range of values and a calibrated midpoint are calculated for each of the following railroads: Ann Arbor, Erie Lackawanna, Lehigh Valley, Penn Central, and Reading. The calibrated midpoint is then compared to court-approved values for each estate to evaluate the predictive abilities and reasonableness of results developed from the methodology.

An extensive bibliography is developed which relates to right-of-way valuation for continued rail use, Interstate Commerce Commission rail costing, and Conrail valuation case proceedings. Suggestions for further research in this area are also provided.