4.11.3.1. Streets, Highways, Roads, and Alleys.Under federal law, streets, roads, highways, and alleys typically have only nominal market value, and therefore only nominal compensation is due for their acquisition.1130 This is because streets and similar property are normally long narrow strips of land that have been legally dedicated to use as streets or highways, depriving them of value except as thoroughfares.1131 As discussed in more detail in Section 4.6.5 (Easement Valuation Issues), it is critical for the appraiser to understand the precise property interest(s) being acquired and the impact of any existing encumbrances.1132 Legal instructions are typically required. The Ninth Circuit explained the process for determining just compensation for the taking of state-owned lands dedicated as public thoroughfares in California v. United States (Naval Shipyard): 

“Just compensation” is to be measured by what the State lost by the taking, and, [here], this is the value of the lands in question burdened as they were. The legal effect of the dedication under the law of the State must first be determined. That question of law resolved, the monetary value, if any, of the loss to the State of the lands so burdened must then be ascertained . . . .1133 

Federal courts have repeatedly upheld the payment of only nominal compensation for streets and similar property with only nominal market value.1134 If the owner of a street acquired by the United States is not required to replace it, the owner—typically a city or other municipal entity—suffers no loss, and therefore no compensation is due.1135 Such federal acquisitions may even benefit the owner economically by relieving the owner of the cost of maintaining the land as a highway.1136 Nominal compensation in such circumstances is therefore consistent with the basic Fifth Amendment principles of indemnity and fairness.1137 Alternatively, as discussed below, it is constitutionally permissible for the United States to provide compensation in the form of a substitute facility instead of cash.1138 

Even strips of land that may have been intended for use as a street, but are not legally encumbered (or “dedicated”) to prohibit non-street use, typically have limited market value. Indeed, it is legally improper to simply assume such strips have the same market value as surrounding lands.1139 As the Federal Circuit explained: 

The point is that the property at issue here consists of strips of land, rather than one large, easily developable tract. The question . . . is, what is the fair market value of such odd pieces of land, taking into account their potential uses, current condition and the improvements thereon, and considering the most profitable uses to which the pieces of land can probably be put in the reasonably near future.1140 

Again, legal instructions are typically required regarding the precise property interest(s) to be appraised and the effects of any encumbrances. Existing legal encumbrances must be considered when developing opinions of market value.1141 

Acquisitions of existing roads or rights of way may also involve land with physical impediments or conditions—such as embankments, underground utility lines, rail ties, or poor soil conditions.1142 Preexisting physical conditions, like legal encumbrances, must be considered when developing opinions of market value.1143 For example, in an inverse taking of a railway corridor with physical remnants of the abandoned railway that would require removal to put the property to its highest and best use, the Federal Circuit recently held that failing to consider the removal costs “will result in an artificially inflated value and yield a windfall to the landowner.”1144 Physical remnants of improvements made by the United States may require special treatment, and the appraiser must request appropriate legal instruction. This issue is discussed in Section 4.2.2.2.1 and the accompanying case study. 

At times, streets or similar facilities may be “so infrequently traded” that their market value may be too difficult to ascertain, at least from comparable sales.1145 But a market need not be “an extremely active one” to allow market value to be ascertained.1146And market value can generally be determined even when no comparable sales are available.1147 Accordingly, it is legally improper to assume that market value cannot be ascertained, even if no comparable sales are available.1148 Whatever valuation method is used, “the equitable principles underlying just compensation require that any profitable uses of the lands which are left open by the dedication must be considered in determining the fact of loss and in calculating its monetary equivalent.”1149