Ohio House, Senate at Odds Over Cincinnati Railroad Sale

Nothing is stopping Cincinnati from selling the railroad; the problem is the local infrastructure trust fund.

Mar 27, 2023 at 9:54 am
click to enlarge A Norfolk Southern EMD SD60E rebuilt locomotive. - Photo: 4300streetcar/Wikimedia Commons
Photo: 4300streetcar/Wikimedia Commons
A Norfolk Southern EMD SD60E rebuilt locomotive.

Ohio’s two-year transportation budget is heading to conference committee, and a planned railroad deal in Cincinnati hangs in the balance. It’s one of many issues House and Senate leaders need to hash out, but one that will be closely watched.

Part of that interest comes from the perennial debate over where to draw the line between state and local authority. Another aspect is the buyer Cincinnati has in mind for its municipal railroad. Norfolk Southern, the rail operator embroiled in controversy after a derailment in East Palestine last month, has offered $1.6 billion to purchase the railway.

The Ferguson Act

Back in 1869, Ohio lawmakers passed legislation allowing large cities to establish railroads. Cincinnati was the only one to took them up on the offer, and in 1880, it completed work on the Cincinnati Southern Railway.

Since 1881, private operators have leased the system. For the bulk of that first century, Southern Railway ran things. In the early 1980s that company merged with Norfolk & Western Railway to create Norfolk Southern.

Cincinnati currently brings in about $25 million each year through Norfolk’s lease. But with a sesquicentennial creeping around the bend, city leaders are ready to get out of the railroad business.

Last November, when he announced the plan, Cincinnati Mayor Aftab Pureval called it “an historic opportunity to deliver great value to citizens of Cincinnati and realize a substantial return on the investment and foresight of our predecessors.”

City leaders propose putting the proceeds in a local infrastructure trust fund. Each year, fund managers would transfer investment proceeds to the city to pay for “roads, bridges, parks, recreation facilities, and other infrastructure necessary for delivering core public services.”

How to sell your railroad

Here’s the thing — nothing is stopping Cincinnati from selling the railroad. The problem is that local infrastructure trust fund.

It’s a point Senate President Matt Huffman made shortly after his chamber approved the budget Thursday.

“The city of Cincinnati can sell the railroad without any state legislative activity. They can put it on the ballot, they can do it,” Huffman said. “What state law says is if you sell it, you have to pay your debt versus spending new money.”

Since its introduction, the Ferguson Act’s provisions have seen a fair few amendments, but state law still limits how a city can spend proceeds. Without changes, Cincinnati could only apply the money to paying down existing debt until all its debt is extinguished.

According to its most recent audit, the city was sitting on $1.2 billion in long-term debt.

The governor’s transportation budget proposal gives Cincinnati the green light for its infrastructure plan — although, notably, it prohibits the city from using funding for new projects. The House approved that language in its budget bill, but the Senate stripped it out.

Reading the tea leaves, Mayor Pureval issued a statement, calling the sale a “top priority” and a “bold, once-in-a-generation opportunity.”

“I’m committed to working alongside the General Assembly to pass the required legislation that allows the referendum for voters to decide,” Pureval said. “There has never been a more important time for our city to get out of the rail business. Selling now gives us local control over our assets in an investment trust for generations to come.”

Huffman downplayed the disagreement in comparison to other sticking points but argued it’s the state’s responsibility to ensure “local entities are secure.”

“Lots of folks, like me, say if you have debt, pay it off before you spend,” he said.

This story was originally published by the Ohio Capital Journal and republished here with permission.

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