Cincinnati May Sell Its Public Railroad to the Company Behind the East Palestine Disaster

The Cincinnati Southern Railway is the last municipally owned interstate railroad in the US. Despite being a consistent moneymaker, the city may soon sell it to the private corporation responsible for the derailment in East Palestine, Ohio, earlier this year.

Conductors swap out during a crew change while Norfolk Southern freight locomotives sit parked. (Luke Sharrett / Bloomberg via Getty Images)

The fate of the last municipally owned interstate railroad in the United States will be decided by voters in Cincinnati, Ohio, on November 7. At stake is the 336-mile Cincinnati Southern Railway, which runs from Cincinnati to Chattanooga and earns the city approximately $25 million annually. The city has tentatively accepted an offer of $1.6 billion from none other than Norfolk Southern (NS), its current lessee, which has been cited for fifty-eight violations of various federal and state environmental laws after their freight derailment in East Palestine created an environmental disaster in February.

In the short time between the July 13 tentative agreement and the beginning of early voting on October 11, a local nonpartisan opposition group, Derail the Sale, has formed. Working in close collaboration with Railroad Workers United and River Valley Organizing, these activists have organized multiple teach-ins to raise awareness of the issue and urge their neighbors to vote no on Issue 22.

Because the vote shares an off-year ballot with major measures around reproductive justice and recreational marijuana, Dylan Bauer, an activist with Derail the Sale, thought that city officials “expected this to be a minor issue,” and they were “ready to coast on not putting too much information out to voters.” But the potential sale is shaping up to be quite contentious.

The Propaganda Push

Following the announcement of the deal, Todd Zinser of Citizens for a Transparent Railroad Vote wrote letters to the administration, recommending they host citywide forums and hearings, as they have done for other issues, and that they dedicate a website where various parties could post their positions on the sale. He has also recommended that the city push back the vote to the primary or general election: “If we don’t have the information that we need to make a righteous decision, we’ll have to vote no.”

Ironically, even those in support of the sale have echoed the sentiment that voters aren’t well enough informed on the issue. Cincinnati’s vice mayor, Jan-Michele Lemon Kearney, told WLWT5 that while she doesn’t agree with Derail the Sale’s position, she is glad “they are at least getting the word out and letting people know about it so that everybody pays attention.”

This isn’t to say that proponents of the sale have been sitting idly by as the vote nears. Building Cincinnati’s Future — a PAC formed and funded, at least in part, by Norfolk Southern — has peppered voters with alarming TV ads and mailers, their selling points an eerie distillation of well-worn neoliberal tropes: “Cincinnati has a $400 million backlog in needed maintenance to our infrastructure. By selling the railway, we’ll upgrade our infrastructure and create thousands of jobs —without raising taxes.”

Jens Sutmoller, a spokesperson for the PAC, recently told WVXU that it hopes to accept donations from entities and individuals other than Norfolk Southern, but declined to comment on the company’s current contribution. Another PAC representative, Ashley Harp, said that information about the PAC, its donors, and its expenses will be released in late October — not until early voting is well underway.

As it stands, the Building Cincinnati’s Future website prominently features claims for cleaner water, improved roads and sidewalks, safer parks and playgrounds, and upgraded fire and emergency services, headlined again by a guarantee of no new taxes. In a June interview with CityBeat, Cincinnati mayor Aftab Pureval echoed many of their talking points, claiming that the only way to fund the city’s existing infrastructure was through the sale:

We cannot catch up to that growing deficit, we cannot catch up to doing the basic services that a city needs to provide unless we get a once-in-a-lifetime opportunity to shore up our city’s budget for infrastructure, not just right now, but into the future.

Buying the Railroad

This isn’t the first time that someone has tried to buy the Cincinnati Southern Railway (CSR). In 1896, the Southwestern Construction Company attempted to purchase the line, failing by just 338 votes.

A political cartoon from the Cincinnati Times-Star, dated February 20 of that year, depicts the Queen City cradling the CSR in her lap, as four suited hands bend ominously toward her. At her feet reads the line, “What Others Want Must be a Good Thing for Me to Keep.” The course of history bore out the prophecy of the Queen City and her voters, with a 1977 report by the Trustees of the Cincinnati Southern Railway concluding:

Cincinnati’s citizens should be glad that voters in 1896 rejected the idea of selling the Cincinnati Southern. . . . The railroad has returned its cost several times over in cash renewals. It is and will continue to be the source of a large and steady income for the city.

This appears no less true today. (Norfolk Southern also offered the city $500 million in 2009, but no serious negotiations were initiated.)

Cartoon opposing the sale published in the Cincinnati Times-Star, 1896.

While city officials and the CSR Board — an unelected board of five members on five-year terms appointed by the mayor — have said “they have negotiated aggressively in order to get the best possible deal with the city” and that Norfolk Southern isn’t open to raising the cost of the lease (reportedly responding, “We’re not going to do that — we’ll just buy it”), Derail the Sale argues that the notion that selling to NS is the only option is misleading.

Officials note that if the vote fails, the CSR Board and NS could return to the table on an agreement, but that NS would likely trigger an extension clause in the current lease, giving it exclusive rights to the CSR until 2051 at a rate decided in arbitration. Under these circumstances, city officials believe they won’t receive a favorable ruling — so they are arguing that the city is trapped with Norfolk Southern regardless.

Yet the current 1987 lease notes that “arbitrators shall determine fair market rental terms for the leased premises for the period of extension.” Just last year, Norfolk Southern’s president and CEO called the CSR “a core line” and “a critical artery” in its railway operation; in addition, an independent analysis commissioned by the CSR Board found every alternative NS route from Chicago to Atlanta would be cost-prohibitive.

Although NS reaped a staggering amount in revenue on its lease from 1992–2020, a report from the Bank of Montreal commissioned by the CSR found that “the City of Cincinnati has not participated in NS’s impressive financial performance, with CSR lease payments expanding only 68.2% since 1992.” They therefore advised that the annual lease rate be “revised upward to better reflect the value that this route has in NS’s operations,” suggesting initial negotiations at roughly $50 to 70 million.

There Is No Alternative?

Derail the Sale has noted that Norfolk Southern only made one offer on the rent of the current lease, pivoting the negotiations toward a sale instead of an increased lease. The city’s response has been that they are out of time; having passed the deal’s deadline, NS could move the city to a third-party arbitrator. The city’s claim that it is “locked in with Norfolk Southern through 2051 no matter what” appears to be refuted by language in the current lease, which states that the city may reject an arbitrator-proposed deal, leaving a full year to find another lessee for the railroad that would pay a higher price.

Should the sale go through, the $1.6 billion would be paid by Norfolk Southern in cash and subsequently placed in a trust managed by the CSR Board, dubbed “The Building Our Future Trust Fund.” The annual interest returns from the fund would then be transferred to the city in perpetuity.

The board would retain money management firms to oversee the investments of the fund, which they claim would net anywhere from $50 to $70 million annually. The fund guarantees an annual payment of $26.5 million, though if the gains don’t amount to that, then the trustees must dip into the principal to make up the difference. If the fund ever loses 25 percent of its value, then the city will receive nothing from the fund, and no income is allowed to be spent until the market recovers.

In fact, there have been more than four years in the past twenty where the market has declined by over 25 percent. During those recovery periods, when the money is arguably most needed, the city would be unable to spend a penny from the fund.

This raises a question: Why, instead of reversing course on years of developer tax abatements or raising the city’s 1.8 percent flat tax, are the administration and CSR Board putting so much energy behind selling a railway that, as CSR once claimed, has “proven to be the city’s greatest money maker . . . [whose] return on investment, dollar for dollar, is unmatched”?

Where Will the Money Go?

When the sale was proposed last November, the CSR Board also made a deal contingent on changing the language in the Ferguson Act, the railway’s founding legislation, to specify that Cincinnati could only spend the revenue on existing infrastructure. When asked during a panel about equity hosted by the Black Environmental Leaders Association concerning which infrastructure projects will be prioritized, Harp from Building Cincinnati’s Future referenced this changing of the Ferguson Act: “This is something that has walls around it, and can only be used on existing infrastructure.”

Just last year, a US district court jury convicted Cincinnati councilmember P. G. Sittenfeld of bribery and attempted extortion, and in 2020, the FBI arrested two additional councilmembers on corruption charges — meaning some skepticism about how the revenue will ultimately be allocated is more than warranted. Derail the Sale has stressed that there are few official policies and procedures in place for designating which projects are prioritized and detailing how the trust is ultimately managed.

In July, pastor of New Prospect Baptist Church Damon Lynch III, project director of the Cincinnati Black United Front Iris Roley, and civil rights attorney Al Gerhardstein, argued in an op-ed for the Cincinnati Enquirer that the sale should not go forward unless a substantial amount is designated to “[repair] harms from racist city policies that destroyed generational wealth for thousands of Black families in Cincinnati.” They added that annual funds from the railroad have historically helped build and maintain infrastructure projects that promoted racial discrimination, such as the streetcar system, interstate highways, and segregated public housing units.

Michelle Dillingham, who works for the Cincinnati Federation of Teachers, a group that has not taken a position on the sale, pointed to the lack of public trust that has built up from years of stadium deals gone rotten: “There have been a lot of votes, a lot of projects, a lot of promises, particularly to the African American community, that have never been delivered on.” When asked about the city’s language concerning the Ferguson Act, she remarked that “people understand the shell game,” adding that “most people are savvy enough to get that the business and political community can play around with those words to get whatever they want.”

I spoke with Matt Weaver, Ohio legislative director of the Brotherhood of Maintenance of Way Employes Division of the International Brotherhood of Teamsters (BMWED-IBT) 2624 and a founding member of Railroad Workers United, on his way to talk to the Cincinnati AFL-CIO Labor Council — which had recently voted to support the deal by a narrow margin. His message to local labor was that “sunshine is the greatest disinfectant” and that the deal held “no guarantees for the workers” and “really no substantial guarantees for the public.” The labor council has since retracted their endorsement, taking a neutral stance.

Opposition Grows

Local opposition to the sale has only grown in recent weeks, crossing established ideological lines. Emily Spring and Dylan Bauer from Derail the Sale commented on this “strange bedfellows” moment, adding that city officials are “proposing a deal that is so bad” that they’ve managed to unite people at a time of hyperpartisanship. Dillingham echoed this sentiment, calling it “a rare unifying moment.”

While the sale has received legislative support across the aisle, it arrives, awkwardly, as many Ohio politicians are attempting to “crack down” on Norfolk Southern. Earlier this year, language was added to Ohio House Bill 23 that requires Cincinnati voters be made aware that Norfolk Southern is the potential purchaser of the CSR. Meanwhile, the Ohio House Democratic Caucus is actively advocating for a set of state rail reforms in the new transportation budget.

Both these actions underline the absurdity of the situation: legislators are advocating for the sale of an invaluable public asset to the very company they are attempting to rein in.

Since February 3, 2023 — when Norfolk Southern detonated eleven of twenty-eight derailed train cars containing a variety of carcinogenic materials in East Palestine, Ohio, followed one week later by a derailment in Dearborn, Michigan — it has upheld its shameful safety record with continued derailments as well as the on-site death of a conductor in a rail yard outside of Cleveland. In 2022 alone, 185 NS employees died while on the job.

And the economic, health, and ecological outcomes of the East Palestine accident, which is being called one of the worst environmental disasters in US history, are yet to be determined. As Werner Lange, a former neighbor to East Palestine and activist with the Ohio Peace Council, noted during a Derail the Sale teach-in, “Every yes vote constitutes a kick in the teeth to East Palestine residents.”

That is the caustic void that proponents of the sale are attempting to coax voters across via a tenuous tightrope: officials in the city say that the guaranteed yearly income that has earned the rail high praise in prior financial reports could eventually disappear due to the uncertain future of the rail industry. But betting against railways runs in opposition to the green future the mayor’s office has claimed to be pursuing. It also runs counter to the Biden administration’s own infrastructure investments, which allocated $1.4 billion to improved railway safety and boosted capacity. And betting on the market to consistently outperform what have historically been stable lease payments also makes little sense.

When faced with the question of why voters should trust Norfolk Southern with private ownership of the rail, Mayor Pureval answered: “Certainly, the environmental catastrophe that we’re seeing in East Palestine. . . . no one here wants that and if we continue to hold on to this asset, we could be on the hook for liability if something like that happened here.” But the current lease specifies that the lessee — that is, Norfolk Southern — is already held liable for such disasters, and the lessor — i.e., the city — is only accountable should they be proven negligent.

Based on comments like this as well as its messaging about its attempt to negotiate the lease, the city seems to be putting up a white flag of surrender to NS. At a time of extended emergencies, collapsing public services, economic insecurity, and health and ecological disasters caused by Norfolk Southern’s negligence little more than three hundred miles upstream from Cincinnati, the city’s civil servants are apparently trying to get ahead of a future crisis by abdicating responsibility before it happens.