CINCINNATI — In a little over a month, Cincinnati voters will decide the fate of the Cincinnati Southern Railway (CSR).
The city wants to sell the railway to Norfolk Southern for around $1.6 billion. And if voters approve the sale, that money will be invested back into the city to address "capital maintenance of core deteriorating infrastructure now and for future generations to come," according to the City of Cincinnati's Budget and Finance Committee.
The sale is projected to double the amount of money the city makes from the leasing of the railway. Right now, the city said it makes around $25 million a year from the railroad. If voters approve the sale in November, the city projects it will earn up to $50 million a year from reinvestment of the funds into a trust, and only spend that money to fund critical infrastructure maintenance.
The money from the sale won't be spent all at once. State law (Chapter 746 of the Ohio Revised Code) established the parameters of a sale like this in a way that protects the city's interest in receiving a large annual payment.
Here's how it will work: Money will be placed in a trust fund that generates annual interest. Trustees appointed by the Mayor with the approval of Cincinnati City Council will be responsible for investing the money. The city says they will then use that interest (up to $50 million a year) on existing infrastructure.
There's a catch, that $50 million is not a guarantee.
According to the proposal, discretion is granted to the trustees to tailor the amount of annual payments to the city to reflect investment returns in a given year. That means in good investment years they'll pay more but in bad investment years, they'll pay less. However, the city said that discretion is limited by a required minimum payment of $25.6 million per year, regardless of the investment returns. This ensures that the city won't receive any less than it generated from the railroad prior to the sale. The proposal also states that "in the unlikely case that the trust balance dips below 75% of the balance from the previous year, then a moratorium on payments to the city is required until the balance of the trust recovers to the level of the previous year before that loss."
Here's what voters will see on the ballot:
Shall the Cincinnati Southern Railway Board of Trustees be authorized to sell the Cincinnati Southern Railway to an entity, the ultimate parent company of which is Norfolk Southern Corporation, for a purchase price of $1,600,000,000, to be paid in a single installment during the year 2024, with the moneys received to be deposited into a trust fund operated by the Cincinnati Southern Railway Board of Trustees, with the City of Cincinnati as the sole beneficiary, the moneys to be annually disbursed to the municipal corporation in an amount no less than $26,500,000 per year, for the purpose of the rehabilitation, modernization, or replacement of existing streets, bridges, municipal buildings, parks and green spaces, site improvements, recreation facilities, improvements for parking purposes, and any other public facilities owned by the City of Cincinnati, and to pay for the costs of administering the trust fund?
The city is estimating a 5.5% return on its investments, which is $88 million. They're also saying 2% of that return will go back to the trust. That's $32 million. That means $56 million should be available to the city. So, there are some unknowns including: Will they really get a 5.5% return? What will they have to pay their investment managers?
On Tuesday, the committee will hold a special meeting where it will present "Cincy on Track: A Spending Plan for the Proceeds of the Proposed Sale of the Cincinnati Southern Railway."
The city said this plan seeks to address the old, outdated and dilapidated facilities and infrastructure that have been "chronically underinvested in."
"The plan takes an inclusionary and intentional approach to address systemic issues to ensure that residents and businesses in the city have an opportunity to grow both economically and socially within the community they call home," the proposal reads. "Over the proposed ten-year plan, the intent is to prioritize significant investment in recreation centers, health centers, and parks, which play a vital role in improving the quality of life and livability of underserved neighborhoods."
In the proposal, the city "conservatively" projects the CSR sale will generate a minimum of $250 million over the next 10 years (around $25 million a year). That money will be spread between five categories:
Streets & Sidewalks (Transportation Infrastructure): $101 million
- Mill Creek Road (Central Incinerator) Bridge Rehabilitation
- Street rehabilitation
- Converting electrical lights to LED
- Improving traffic signals citywide
- Traffic calming: asphalt speed hump reconstruction citywide
- Streetlight replacement in Central Business District
- Replacing pavers in the crosswalks and sidewalks in Central Business District
Public Services (including Police and Fire): $49.6 million
- Major improvements to fire stations
- Cormany Garage renovation
- College Hill Town Hall renovation
- 801 Linn Street Renovation ( Police)
- West Fork Incinerator Demolition and Site Reuse Project
Parks: $40.7 million
- Major improvements at multiple parks including lighting, help box, safety improvements and cameras
- Mt. Echo Park: pavilion restoration and maintenance garage improvements
- Smale Riverfront: river edge stabilization
- French Park: French House grounds improvements, culvert and turf replacement
- Fairview Park: overlook stabilization
- Ault Park: cascade stabilization and pavilion renovation
Health: $31.1 million
- Replacing the Bobbie Sterne Health Center
- Replacing the CHD Administration Building
- Replacing the Northside Health Center
- Price Hill Health Center interior remodel
- Parking lot improvements and generators at multiple centers
Recreation: $27.6 million
- Major improvements to two recreation facilities: Dunham and Pleasant Ridge
- Riverside Sports Complex boat dock facilities rehabilitation
- Improvements to three aquatic facilities: Leblond, Winton Hills and Mt. Adams
- Improving outdoor courts, playgrounds, and lighting at multiple ball fields
The city said the "Cincy on Track" plan could generate an additional $125 million for women business enterprise, minority business enterprise and small business enterprise.
The railway, which runs from Cincinnati to Chattanooga, Tennessee, stretches 336 miles through Kentucky and Tennessee. It has been owned by Cincinnati for more than 140 years. The Cincinnati Southern Railway Board of Trustees unanimously voted earlier this year to put the proposed sale on the ballot.
The board also said this sale would help bridge the nearly $400 million funding gap found in Cincinnati's recently approved budget.
"The need to improve the City's existing infrastructure has never been greater," the CSR Board of Trustees said in July.
Amy Murray, who sits on the Board of Trustees, said this all started when Norfolk Southern asked to negotiate a sale rather than renegotiate its lease with the city.
Murray said because of the lease, Norfolk Southern had the first right of refusal. Plus, she said it's smart to sell right now.
“Even though we’re indemnified if there’s an accident on our track, we could still be sued," Murray said.
The now former Cincinnati Vice Mayor, Christopher Smitherman, said the city shouldn't sell the railway, and especially shouldn't sell it to Norfolk Southern after the derailment in East Palestine.
Smitherman also said he doesn't think $1.6 billion is enough compared to the roughly $25 million the city gets each year under the current lease.
“Those dollars are used for capital projects, why would we handcuff them?" he said.
While state law specifies what this money can be used for, Smitherman is still skeptical that city leaders in the future would find a way to change that.
Cincinnati is the only municipality in the U.S. to own an interstate railroad. It has been leased by Norfolk Southern since 1881. In 2021, that lease was extended through 2051.
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