Ten questions (and answers) about the plan to sell Cincinnati's railroad

Voters in Cincinnati have a decision to make on what advocates say is a once-in-a-generation opportunity: to sell a rail line that connects three states, a railway that Cincinnati built and has owned for 143 years. It's a complicated question. In an effort to break it down, here are 10 key questions and answers.  More information, as well documents pertaining to the sale, can be viewed on the Cincinnati Southern Railway Board's website.

1. What are we voting on?
The city of Cincinnati owns 337 miles of railroad line that runs from Cincinnati to Chattanooga, Tenn. Its ownership includes 9,500 acres of land, as well as connected facilities such as side tracks, bridges, stations, signal facilities, storage areas, and buildings. The city built it, completing it in 1880, and has owned the line since then. The city leases the line to a private railroad, a subsidiary of Atlanta-based Norfolk Southern Corp., a $13 billion, Fortune 500 company. Norfolk Southern runs its trains on the line and handles the operations and maintenance.  The terms of the lease are overseen by a five-member board, the Cincinnati Southern Railway Board of Trustees, whose members are all appointed by the Cincinnati mayor, with no more than three being from the same political party. 

Norfolk Southern has agreed to buy the property for $1.6 billion. Under state law, Cincinnati voters must permit the city of Cincinnati to sell it. The city wants to establish a trust fund “in perpetuity” with the money, invest it, and use the investment returns for “existing infrastructure improvements.”

2. Why now?
The railway board began negotiations with Norfolk Southern in 2020 to renew the lease, which is due to expire in 2026.  After months of negotiations, the board and the company were tens of millions of dollars apart, according to the board, and appeared unable to come to an agreement on financial terms. In July 2021, Norfolk Southern offered to buy the railway for $865 million. After more than a year of “strenuous negotiations” over a sale, the parties agreed on a purchase price of $1.6 billion.

3. Why does Norfolk Southern want to buy it?
Owning the line would eliminate the company’s uncertainty about future costs and give it control over the asset. Norfolk Southern says the line is one of the busiest segments of its network, with up to 30 trains a day traveling the route. "The Cincinnati Southern Railway is a critical artery linking the Midwest and the Southeast and plays an important role in our powerful network that serves more than half the U.S. population," said Norfolk Southern CEO Alan H. Shaw.

4. How much does Cincinnati get now under the current lease?
Cincinnati receives $26.5 million a year currently. That amount is adjusted each year to account for inflation. Norfolk Southern has the right to lease the line until 2051, but the rent has only been negotiated through 2026.

5. How much would Cincinnati get if the property is sold?
The railway board says the earnings from the $1.6 billion trust fund would likely result in a doubling of what the city receives annually under the current lease. It projects it will receive $25.5 million in 2024 under the current lease. It estimates it would receive $57.1 million in earnings from a $1.6 billion fund that was conservatively invested. That amount would be after returning more than $30 million back to the trust fund to protect the fund’s principal. The board hired an independent consulting firm to come up with these estimates, and it forecasted a 5.5% annual investment return, a reasonable assumption. However, this scenario assumes that the current lease payments would not be increased under any future negotiations. Before lease negotiations broke down, Norfolk Southern had offered $37.3 million in a baseline lease payment. The railway board had proposed $65 million.     

6. If the sale passes, what would the money be used for?
The state law that was passed in 1869 to allow Cincinnati to build the rail line was amended in March to specify that the money from the sale can only be used to repair or replace existing infrastructure, meaning public facilities owned by the city, including streets, bridges, municipal buildings, police and fire stations, parks, recreation facilities, and health centers. This law is the “guardrail” protecting the use of the money that proponents speak of. That said, laws can be, and often are, changed.

Earlier this month, City Hall released a plan specifying how $250 million of the funds would be spent over 10 years, with 40% going to streets and sidewalks, 20% to “public services,” which includes police and fire facilities, 16% to parks, 13% to health centers, and 11% to recreation.

An 1879 map showing the route of the Cincinnati Southern Railway7. Who would control the money?
The railway board would be responsible for setting up and managing a trust fund. Its members are listed in the attached sidebar. The board would be required under law to hire at least one independent financial adviser to assist in investing. State law requires the board to invest the funds using a "prudent investor standard of care," generally meaning with care and caution, and in consideration of the beneficiaries, the citizens of Cincinnati.

8. What happens if the issue doesn’t pass?
Cincinnati still owns the railroad. Norfolk Southern still leases it. The company has already declared it wants to lease the line at least until 2051. The question is how much will they pay after 2026. The two sides would probably return to negotiations. If they still can’t agree, the matter would go to a professional arbitrator. The arbitrator’s decision would not be binding on the parties, but it would carry weight. After arbitration, the city could choose to approach another rail carrier about leasing the line.

9. Who’s for the sale?
All five members of the Cincinnati Southern Railway board; Mayor Aftab Pureval; eight of the nine Cincinnati City Council members; former mayors John Cranley, Mark Mallory (also a member of the railway board), Roxanne Qualls, David Mann, and Charlie Luken (also a member of the railway board); U.S. Rep. Greg Landsman; the Cincinnati USA Regional Chamber; the Cincinnati Enquirer editorial board.

10. Who’s against the sale?   
At least three citizens groups have organized to oppose the sale. One, called Save Our Rail, is led by former Cincinnati City Council member and attorney Kevin Flynn, who has described the group as a “grassroots confederation of progressives, conservatives, and civic-minded Cincinnatians.” Also opposing: the Cincinnati NAACP; the union representing National Institute for Occupational Safety and Health (NIOSH) employees in Cincinnati; Railroad Workers United, a pro-union group.