Friday, January 10, 2014

Cincinnati Owns a Railroad?

Why, yes, they do:
The idea of selling Cincinnati’s most unique and perhaps most valuable asset is being raised again, this time as a way to help the city get out from underneath its massive pension problems.
Newly installed City Council finance chair Charlie Winburn has begun floating the idea of selling the city’s Cincinnati Southern Railway and using the proceeds to pay down the pension’s $870 million unfunded liability both within council as well as with state legislators....
Rail company Norfolk Southern now pays more than $20 million annually to lease the line that runs from Cincinnati to Chattanooga, Tenn. Since the lease was renegotiated in 1987, the railroad has paid the city $432 million in lease payments, all of which go directly into Cincinnati’s capital budget. The lease runs until 2026, although Norfolk Southern has an option at that time to extend it another 25 years.
That continual stream of revenue is just one of the reasons Mayor John Cranley listed when voicing opposition to the idea in an interview with The Enquirer. The revenue is set aside for capital projects such as maintaining roads and bridges, Cranley said.....
Then there is the question about how much the city could actually get for the 337-mile stretch of track that runs about 50 miles west of the Smoky Mountains and the Cumberland Gap. Built in the 1800s and finished in 1887, the line carries about 45 freight trains a day for Norfolk Southern, which leases and maintains the tracks and right of way. It is the nation’s only such long-distance line owned by a city or municipality.
Winburn has consistently said the track is worth $500 million, but Seelbach said that previous city administrators told him it was worth between $1 billion to $2 billion.
Half a billion dollars “is a very low-ball figure,” Seelbach said. “This is our largest and one of our most important and lucrative assets and should be valued as such.”
Estimates of the cost to physically replace a mile of track range between $350,000 and $1 million, putting the value of the track alone – excluding right-of-way, switches and sidings – at $118 million to $337 million.
I had no idea the city of Cincinnati owned a railroad.  Here's a little more history about the railroad:
  In 1851, the Ohio Constitution was changed to prohibit cities from becoming owners in any joint stock company, effectively preventing Cincinnati from constructing its railway. To overcome this obstacle, the father of the Cincinnati Southern Railway, Edward A. Ferguson, put forth a "remarkable proposition." Mr. Ferguson proposed that if the city could not aid a private enterprise in building the railroad, the city itself should build and own the road.
Mr. Ferguson’s proposition was passed May 4, 1869 and the citizens of Cincinnati voted in overwhelming support of the railway on June 26, 1869. Charles G. Hall recounted the election in his 1902 history of the Cincinnati Southern Railroad, "The day was made a holiday. Nine bands of music paraded the streets. The fire bells rang at six in the morning, at noon, at three in the afternoon. Various wards organized. A full vote was urged."
It was not until 1880 – almost eleven years after the Ferguson Act was approved by the Cincinnati citizenry – that the first trains would complete the journey from Cincinnati to Chattanooga. While trains had run on the finished portion since the summer of 1877, it was February 21, 1880 that the first freight train rode the entire line, and March 8, 1880 that the first passenger train completed the 337 mile trip.
Cincinnati still owns the Cincinnati Southern
Railway and leases its use to Cincinnati, New Orleans and Texas Pacific Railway (CNO&TP), a wholly-owned subsidiary of Norfolk Southern. While CNO&TP handles most of the line’s maintenance needs, a major overhaul or the road was done in 1961 to modernize the track and tunnels.
In 1987, the City renegotiated the terms of the lease for more favorable annual income. From 2003 to 2008, the Southern Railway Note Proceeds totaled $95.5 million.
It seems like a damn shame to consider selling an automatic moneymaker, but before the city can go and file bankruptcy and screw its pensioners, it will have to sell it.  I'd recommend raising taxes to close the pension funding shortfall they should have been paying for years, but I know that'll never fly.  Before it is all said and done, that railroad will be sold, and for a song.  The kleptocrats who run our economy sill make sure of it.

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