Clearing up misconceptions on railroad sale | Opinion

The right to debate and disagree is a cornerstone of American democracy. As a voter, I have read with great interest the arguments presented both in support of and against the sale of the Cincinnati Southern Railway. However, in my capacity as the president of the Cincinnati Southern Railway Board of Trustees, it is my duty to clarify certain issues that recent letters to the editors of The Enquirer have raised.

A number of the voices opposing the sale misunderstand the economics that led to the railway board’s decision. The railway board is tasked with extracting the greatest possible value from the Cincinnati Southern Railway for the benefit of the city of Cincinnati. When it came time to begin our most recent round of lease renewal negotiations, we were not initially considering selling the asset. After lengthy negotiations and an intensive valuation and diligence process, it was abundantly clear that selling the railway will result in the greatest value for the city now and in the future.

If approved by the voters of Cincinnati, the city will receive $1.6 billion in March 2024. These funds will be placed in a professional managed and diversified trust fund. A return of 5% on the invested dollars (a relatively modest return in today’s economic climate) will generate $90 million per year; the railway board intends to reinvest a third of that annually to grow the fund, and the city will be paid the balance, or around $60 million, each year − more than double the current lease payment.

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However, our decision to recommend this sale was not made lightly. We first took action to ensure the proceeds would be held in trust that could only be used to replace and repair existing city infrastructure − the same purposes that lease proceeds have been used for the last 30 years − by insisting that a state law called the Ferguson Act be amended to prevent politicians and others from diverting the sale proceeds for other uses.

In a recent guest column, a former railway employee argued that the railway board should negotiate a higher lease or offer the line to another railroad company rather than sell. The first fallacy of this argument is the idea of the railway board finding another company to lease the railway. Norfolk Southern Corp. has already exercised its contractual right to extend the existing lease for another 25 years, meaning the railway board cannot look for an alternate lessee. Further, the Cincinnati Southern Railway is of a significantly higher value to Norfolk Southern than any other company. The Cincinnati Southern Railway is the only leased segment in Norfolk Southern’s route map, and the greater value they see in owning rather than continuing to lease the segment motivates Norfolk Southern to pay a higher price than another potential buyer.

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We consulted expert third parties to advise the railway board on the solution that would provide the greatest long-term value the city. Although opponents to the sale argue that Norfolk Southern has no alternative to the Cincinnati Southern Railway and would pay a much higher value, these experts informed us that there are two viable alternatives to the Cincinnati Southern Railway for the journey south from Cincinnati to Chattanooga. These viable alternatives, which add as little as 90 miles to the journey, establish a ceiling to the value of the Cincinnati Southern Railway. Because of this, value that could be gained through the highest possible annual lease value is well less than the $90 million that conservative estimates of the railroad sale fund will generate each year.

Given how important the proposed sale of the Cincinnati Southern Railway line is to the people of Cincinnati, it is encouraging that so many people are thinking critically about the sale. Having dealt with these issues and the true facts about the factors involved in the decision to sell the line, the railway board unanimously believes that this sale is in the best interest of every person who calls Cincinnati home.

We encourage the public to continue discussing the merits of this sale and hope that these points help clear up some misconceptions that have been circulating.

Paul V. Muething is president of the Cincinnati Southern Railway Board of Trustees.

This article originally appeared on Cincinnati Enquirer: Clearing up misconceptions on railroad sale