CINCINNATI — Norfolk Southern has offered to buy the Cincinnati Southern Railway, the route owned by the city of Cincinnati that it currently leases, for more than $1.6 billion.
A meeting to consider the sale will be held Monday, Nov. 21, according to the Cincinnati Southern website. The meeting, set for 1 p.m. EST in the Cincinnati Dining Room at Cincinnati Terminal, had originally been set for Friday, Nov. 18.
NS, through its subsidiary Cincinnati, New Orleans & Texas Pacific Railway, currently pays about $26 million annually to lease the 336-mile route from Cincinnati to Chattanooga, Tenn., and performs all maintenance on the line. The lease runs through Dec. 31, 2026, but NS has an option for an additional 25 years.
The Cincinnati Business Courier reports in a paywalled article that under the terms of the proposed sale, annual payments to the city would more than double, to about $56 million. WLWT-TV reports discussions about a possible sale have been ongoing for “a couple of years.”
A sale would have to be approved by voters — as required by the terms of the original lease — and require action by the Ohio General Assembly.
The city voted to build the line — the nation’s only municipally owned interstate railroad — in 1869; it was completed in 1880 and first leased to the CNO&TP in 1881. Since a 1987 renegotiation of the lease, the city has used the income to support infrastructure projects.
I don’t see the 1.6 billion advantage for NS. 25 million a year seems fair and I have not seen any thing to suggest the city interferes with their operation. What am I missing here?
Another thought, should the city be in the business of owning a freight rail line that doesn’t directly benefits it citizens such as an airport, or say a light rail system? Another way to put the question, do you want small govt, govt in services that that the private market can or should provide?
I would run with the offer, the $56 million per year over the 25 to 30 years if it went to a dedicate capex program. Say the city commits 50% to street pavement & sidewalks, 25% to park improvements and 25% for affordable housing or maybe police/fire dept/bus fleet replacement, etc..
Of course not a resident so the good folks of Cincy will get to decide.
Didn’t they try to buy this before?
They would be foolish for selling this if they’re not hard up for more cash.
This has mondo potential for political shenanigans. Politicos live for the short term deals because by the time the money runs out they are out of office/deceased. Again, the future generations’ assets are sold from under them.
This purchase might have another reason. What is the fine print in the lease agreement ? Maybe any request for passenger service has NS unable to contest for immediate service? If the present lease is for 25 years that would make it possible that Cincinnatti wrote in some passenger or Amtrak immediate service?
One of the reasons the Southern Railway stayed out of Amtrak in 1971 was to avoid passenger trains off their freshly revamped CNOTP. It is not likely NS would have been okay with such a provision in the current lease.
Very simple gentlemen, in this day and age you want to eliminate any and all uncertainties related to an extremely strategic key piece of NS infrastructure. Once you own it lock stock and barrel there are no opportunities for some financial pirates to come in and try to hold NS for blackmail (or greenmail if you prefer).
So, by my figuring, the city would get payments for roughly 30 years and then that would be it. Or keep the railroad and get paid decades beyond that. And we all know when the lease is near its end a new negotiated higher rate will be instituted. Keep the railroad for the long term benefit. Ignore the short term wad of cash.
Unless the Queen City is hard up for cash then why lose the long term payout?
“under the terms of the proposed sale, annual payments to the city would more than double, to about $56 million.”
That implies that the payments will be ongoing, perhaps only for a while (I can’t get to the paywalled article referenced). But having a $1.6BN trust fund/endowment could be quite lucrative for the city to pay for infrastructure projects using the proceeds from investing that money.
If the payments to Cincy are going to more than double, then there has to be some sort of installment payment at the end of which NS owns the RR and there are no more payments to Cincy.