Last-minute change paves way for vote on Cincinnnati’s $1.6B railway sale
State lawmakers attached new ‘guardrails’ to the sale in an eleventh-hour compromise that is expected to become law.
CINCINNATI (WXIX) - The final version of Ohio’s transportation bill that is expected to be signed by Gov. Mike DeWine now—again—includes language necessary for the sale of the Cincinnati Southern Railroad to proceed.
The state law change permits Cincinnati to use proceeds from the $1.6 billion sale to fund improvements to existing infrastructure, whereas previously the city could only use them to pay down public debt.
The sale language appeared for months to be a virtual lock in the transportation bill, which appropriates funding for the next two years. But a sudden turnabout gutted the bill of the sale language and put the sale itself in doubt.
Different versions of the bill passed out of the Ohio House and Senate in recent weeks. The House version contained the CSR sale language, but the Senate stripped that language out in committee. Lawmakers cited concerns about how Cincinnati would use the proceeds as well concerns about Norfolk Southern in the aftermath of multiple Ohio derailments.
The bills went to a conference committee earlier this week. The committee report emerged Tuesday night with the CSR sale language returned from the dead. It was approved unanimously, 6-0.
That version of the bill now goes to each chamber for votes Wednesday morning. Both chambers are expected to pass the bill. It must go to DeWine’s desk by Friday.
The sale language in the conference committee report contains several significant changes, according to Sen. Nickie Antonio (D-Cleveland), ranking member of the Senate Transportation Committee and one of the six conference committee members.
“Senate members from the Cincinnati area had some concerns and wanted some guardrails around the sale of the railway,” she said Tuesday night. “My Democratic colleagues wanted to support [Cincinnati Mayor Aftab Pureval] and his efforts. But at the same time, there were concerns. This is a local issue. What the legislation does is enable the people in the community to make the decision.”
Antonio calls them “guardrails.” Sen. Bill Blessing (R-Colerain), who authored the amendments Tuesday night, calls them “failsafes” against “possible mischief in the future.”
The new version changes the ballot language that will go before Cincinnati voters to specifically identify the “buyer” of the railway as “Norfolk Southern.”
Antonio says this change came in the context of safety concerns bubbling up around Norfolk Southern: “So people understand exactly what they are supporting or not supporting... So the people understand what they are making a decision on and who the railroad company is,” she said.
The new version says the principal amount that is placed in the trust (managed by the CSR Board of Trustees) can never decrease by more than 25 percent. If the principal falls below that threshold, all payments to the city stop until the fund accumulates enough interest that it is replenished to the base amount, or 100 percent of the principal.
That number is adjusted yearly, such that if the fund outperforms and grows to $2 billion in one year and then falls by more than 25 percent in the next, the payments to the city will stop until the fund rises above $2 billion. The number is never adjusted down.
The Board is permitted to dip into the principal only if interest/investment proceeds from the fund in a given year do not rise above the minimum annual distribution to the city, as defined by the sale agreement,
Blessing says he added the amendment because, while the board is obligated to pay the city around $27 million annually, there’s no ceiling on what it can pay out.
“In theory, the fund could be mismanaged,” Blessing said. “The point is, if it hits that lower threshold, it ensures the payments to the city stop, and the fund has enough time to recover. It’s a failsafe to ensure the fund will always be there, nothing more than that.”
Lastly, the new version allows the sale to go to voters in primary or general elections only in 2023 or 2024 and permits the CSR Board to submit the question just once.
Blessing recalls being approached at the eleventh hour “to figure out what can be added to this to make it acceptable.” He says, strictly speaking, none of the amendments are his ideas, but rather came from public feedback and conversations with fellow legislators.
He remains against the sale. “I still think keeping the railway as an asset is a good thing,” he said. “I think that over time it will perform better than the fund would.”
“I wasn’t able to convince my colleagues, and it’s going to go to the voters. But if nothing else, I’m glad the failsafes are in, and I’m glad we had this discussion,” Blessing continued. “I think voters will be able to go into the ballot booth armed with a lot more information than they would have otherwise.”
DeWine has line-item veto power over the transportation bill, but he isn’t expected to use it on the CSR sale language. A spokesperson says DeWine supports the ability of Cincinnati voters to make the decision for themselves, according to our media partners at the Enquirer.
The change to state law isn’t strictly necessary for the referendum to proceed. Cincinnati has always been empowered to put a sale to a vote, and though the 2022 sale agreement with Norfolk Southern requires the state law change, it also allows either buyer or seller to waive that requirement.
Nevertheless, Cincinnati Mayor Aftab Purevel has consistently characterized the change as a necessary precondition of the sale, and state lawmakers have acknowledged the sale would be infeasible without the change.
If the sale were to go on the ballot in the 2023 general election on Nov. 7, the ballot language would have to be delivered to the Hamilton County Board of Elections 90 days prior, or by Aug. 9.
Cincinnati City Council has only a ministerial role in passing along the ballot language.
Cincinnati currently receives around $25 million annually from Norfolk Southern in lease payments. It could receive $60 million annually from interest and investment proceeds on the principal if the sale goes through.
The sale agreement contains an indemnity clause insulating the City from liability and putting Norfolk Southern on the hook for all costs incurred for claims arising in connection with the ownership, use and operation of the line after closing.
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