CINCINNATI — The City of Cincinnati plans to sell the Cincinnati Southern Railway for more than $1.62 billion to help fund infrastructure repairs and maintenance in the future. But before that happens, city residents will have to vote to approve the deal.

What You Need To Know

  • Cincinnati plans to sell the Cincinnati Southern Railway for more than $1.62 billion 

  • The buyer is Norfolk Southern, which currently has a 25-year lease for the railway

  • Proceeds from the sale would go toward fixing the city's aging infrastructure

  • For the deal to go through, a state law would need to change and voters would have to approve it

Mayor Aftab Pureval announced on Monday terms of the deal with Norfolk Southern Railway Company, an operating subsidiary of Norfolk Southern.

The press conference — which included comments in favor of the deal from five previous Cincinnati mayors — took place at Union Terminal just before the Board of Trustees of the Cincinnati Southern Railway (CSR) voted to approve the terms of the sale.

Norfolk Southern currently operates the Cincinnati Southern Railway under a 25-year lease agreement from the city, which owns it. The company plans to purchase all assets associated with the 377-mile railway.

Mike McClellan, Norfolk Southern’s senior vice president, said the Cincinnati-to-Chattanooga rail line plays a critical role in the company’s shipping operations and the nation’s supply chain infrastructure.

Plans call for placing the proceeds from the sale into what Pureval referred to as the “Building Our Future” infrastructure trust fund. 

As part of the plan, the CSR board will transfer investment returns from the trust to the city every year to fund the rehabilitation or modernization of existing infrastructure. That includes things like roads, bridges, parks and recreation facilities.

Pureval, a Democrat, described the transaction as a “seminal moment” for Cincinnati.

“This is a historic opportunity to deliver great value to citizens of Cincinnati and realize a substantial return on the investment and foresight of our predecessors,” the first-year mayor said. “We are fortunate that a number of events have brought us to this point and will provide for the transportation needs of our city for decades to come.”

The closing of the sale is subject to regulatory clearance from the U.S. Surface Transportation Board and passage of proposed state law changes, the city said.

During his comments on Monday, Pureval noted that State Rep. Bill Seitz (R-Cincinnati) supports the plan and plans to advocate for law changes in Columbus.

Advocates for the sale must also convince prospective voters. A majority of Cincinnati voters need to vote in favor of the sale for it to happen. Pureval said he believes it will appear on the November 2023 ballot.

The Cincinnati Southern Railway is the only municipally owned interstate railroad in the country. Since 1881, the city has had a lease agreement with The Cincinnati, New Orleans, and Texas Pacific Railway Company, a subsidiary of Norfolk Southern. 

The city said Monday that it currently generates $25 million per year from the lease agreement. As the result of a recommendation in the Smale Commission report from the ‘80s, the city council endorsed a policy to dedicate funds generated by the Southern Railway to infrastructure projects, according to the Cincinnati Southern Railway website.

Under the new plan, Pureval believes the city will net between $50 million to $60 million.

Pureval said the change of state law and ballot language will include a “floor” amount the city would get every year from the trust. He expects that to be about $25 million.

“If returns are particularly good, the board has the discretion above the (floor) to hold back some of those returns and not give the full amount to the city,” he said. (That’s) in order to make sure that the principal is untouched in order to have a contingency in the years where returns may not be as robust.”

Following the announcement, critics of the plan went to social media to voice their displeasure. Most stressed a belief that the railway is worth more than $1.62 billion to the city.

Joe Hartke, a self-described transport advocate, called it a “bad deal” for the city.

“It’s a profitable asset, probably more profitable than investing in stocks,” the West Price Hill resident said.

But the advocates for the sale believe this deal is the best long-term deal for the city. Pureval noted the city has more than $300 million in deferred maintenance projects over the next five years. He also noted a projection that Cincinnati will have a nearly $50 operating budget deficit within two years. 

“At a time when we have tremendous and growing unfunded infrastructure needs, this community asset provides crucial support — and it’s built to last in perpetuity,” he added.

The infrastructure trust money would only go toward the rehabilitation, modernization or replacement of existing infrastructure, Pureval said. He noted the city wouldn’t be able to use the funds received for payment of debt service or for the construction of new infrastructure improvements.

Under the proposal, the infrastructure trust would be managed by the Cincinnati Southern Railway board of trustees. The board has five members who serve a five-year term. Those members receive an appointment by the mayor and approved by city council. 

The current board members are:.

  • Paul Muething (Republican): An attorney with Keating Muething & Klekamp PLL. He’s been on the board since 2018.

  • Paul Sylvester (Democrat): An accountant who’s been on the board since 1984.

  • Charles Luken (Democrat): A former U.S. congress person and longtime Cincinnati mayor. He’s been on the board since 2018.

  • Mark Mallory (Democrat): A former Cincinnati mayor. He’s been on the board since 2018.

  • Amy Murray (Republican): A former member of Cincinnati City Council. She’s been on the board since 2019.

“We trustees, and those who have served before us, have taken great care and pride in our stewardship of the Cincinnati Southern Railway over the years,” said Muething, the board’s chairperson. “This transaction gives us the ability to deliver transformative and perpetual value to the city and its citizens.”

Former Mayor John Cranley appointed four of the five current board members, including Mallory, who described the sale as the “transformation of a city asset from railroad tracks and trains to a trust fund.” 

From the perspective of Norfolk Southern, the sale provides a “level of certainty about future operations and the health of the railroad,” McClellan said.

The city said the sale wouldn’t result in any changes to day-to-day rail operations, and traffic would not be expected to fluctuate to any significant degree.

If the sale weren’t to go through, the city said they’d look to negotiate a new lease with Norfolk Southern. The current lease expires in 2026.