TR Circular E-C058_9th LRT Conference_2003.pdf - Florida ...

606 Transportation Research Circular E-C058:9th National Light Rail Transit Conference
business or a portion thereof has been taken. The question is whether that is an appropriate basis
to determine fair market value given the particular facts of the acquisition.
Cases in jurisdictions across the United States have found such evidence at least relevant
to market value, if not determinative (21). One court has held that there must be an exception to
the general rule against admitting evidence of business profits to show the value of land in the
situation “where the business is inextricably related to and connected with the land where it is
located, so that an appropriation of the land means an appropriation of the business” (22). One
clear reason for this conclusion is that, for income-producing property like paid parking lots, the
prospective earning power is evidenced by past earnings, which would be a foremost factor
between a buyer and seller (23, 24). One of the earliest cases addressing this exception in valuing
parking lots is Trenton v. Lenzer (25).
Lenzer arose when the City of Trenton adopted an ordinance creating a parking authority
to determine the feasibility of creating off-street parking facilities to address the City’s parking
problems. As part of the process, it identified a private parking lot for condemnation to create a
public parking lot. The lot owner argued that the acquisition was not only a taking of real
property, but in effect the taking of their “parking yard business.” Acknowledging that when land
acquisitions result in the loss of the owner’s business located thereon, an owner of property is not
entitled to compensation for the value of the business, the New Jersey Supreme Court explained
that the fair market value is, nevertheless, measured by the price which a hypothetical seller and
buyer would agree. Although the compensation for the parking lot was not an issue for the court,
the court writes,
The property being taken under the terms of R.S. 40:60—25.1, N.J.S.A., is land
which has been operated profitably by the appellants for many years as a parking
lot. Its fair market value . . . would be fixed after due weighing of all the factors
which customarily enter into [a willing seller and buyer’s] purchase and sale
negotiations. A foremost factor in the sale of the parking lot would be its
prospective earning power evidenced in considerable part by past earnings.
The Supreme Court of Missouri considered the issue a few years later in Municipal Court
Facilities v. Kordes and provided a more forceful statement in favor of considering business
losses (26). There they stated the issue very succinctly:
Are business profits derived from land used as a parking lot and operated by the
owner of the land properly capitalized to determine fair market value even though
such land can be used for other purposes and in spite of comparable rules of land
in the area?
In Kordes the properties at issue were being used as surface parking lots, and were being
condemned to build a new courthouse. At trial, a jury awarded $651,000.00 for a 38,000 ft 2
parcel and $256,000.00 for a 15,840 ft 2 parcel (27). The lot owner submitted and the trial court
allowed the valuation evidence based on capitalized income from parking fees, over the
objection of the government. On appeal, the government argued that the trial court erred in
permitting the property owner to use “capitalized business profits” as evidence of fair market
value, citing the speculative and conjectural nature of business profits. Affirming the trial court’s
judgment, the Missouri Supreme Court held that “the operation of the public parking lot was