Coseau

So investments can't go bad in that payouts are consistently less than what was pitched in that the fund is not growing or growing less than the inflation rate on a long term basis?

If the city rejects the arbitrators' lease proposal, but Norfolk Southern accepts it: The city can seek to lease or sell it to a third party, but Norfolk Southern has the right of first refusal to lease or buy it at whatever price a third party offers. If there's no offer within a year of the lease's expiration or the arbitrators' determination, Norfolk Southern can extend the lease on the terms decided by the arbitrators. If Norfolk Southern rejects the arbitrators' lease proposal, but the city accepts it: The city can seek to lease or sell the railroad to another party with 4 these caveats. 1: If the city gets a third-party offer better than what the arbitrators' proposed: It can sell, and Norfolk Southern has no right to extend the lease. 2: If the offer is favorable to the city than what the arbitrators' proposed: Norfolk Southern has the right to extend the lease or buy the property on the same terms as the third-party offer. 3: If the best third-party offer is equal to the arbitrators' proposal: Norfolk Southern has the right to lease on the same terms but only if the city rejects the arbitrators' determination. 4: If the city does not get any offers to lease or buy the railroad within one year of the lease expiration: Norfolk Southern has the right to continue using the property on the same terms as the current lease on a year to year basis. Meanwhile, the city can continue to try to sell or lease the railroad to another poarty. The city also can try to run the railroad itself, something it has never done. If the CSR is continually dipping into the principal to pay the minimum payout, combined with inflation the fund will be permanently losing value and purchasing power.

Demand drives value and clearly there is demand or this line would not be the 2nd most profitable for NSR. Why would CSX dismiss an opportunity to lease a line for $50 to $70 million a year that is yielding revenues ranging from $2 billion to $4 billion a year? The STB could block such a lease but the inverse could happen also in which the STB could approve it. When did Norfolk Southern Railroad purchase Cincinnati's Union Terminal from the city of Cincinnati? How would the city will still be earning $65 million if return on the investment trust fund is in the negative for that year? What good is earning $65 million when $40 million of that amount has to be deducted from that amount for fees and reinvestment leaving only $25 million the city can spend. That is 33% less then the $37.3 million NSR has offered to renew the lease. Just like the conflict of interest that the Mayor's campaign manager is also the campaign manager employed by NSR for this sale.

There is someone else to lease it to. It would be their competitor CSX which have rail networks both here and at Chattanooga. NS do not own access to both sides of the rail line. The Cincinnati Southern Railroad starts at Union Terminal which is owned by the city of Cincinnati and is used by both NS and CSX. The line ends at Chattanooga where it is connected to the CSX Wauhatchie terminal. NS has rights of usage at that terminal which is connected by rail to their rail terminal just 10 miles away in Chattanooga. How is selling the railroad a more guaranteed way to get that $65 million from $1.6 billion when the city is planning to invest that money conservatively as to minimize risks expecting an interest rate of 5.5%, which would be $88 million but after 2% reinvestment and 0.5% management fee the city of Cincinnati would only net $48 million? The city if the process goes to arbitration has a high probability of getting that amount with a 4% escalator clause in the new renegotiated lease, which would be financially better for Cincinnati because the lease payments will be stable and safe from risks while the investment trust fund distributions will vary from year to year always subject to down market years in which the city could receive zero dollars. If for some reason the investment fund only earns 3% for a particular year Cincinnati would only net $8 million dollars that year after the 2% reinvestment and the 0.5% management fee is deducted. If the interest rate is 2.5% or less Cincinnati gets no money distributed to it from the fund because 2% would be reinvested back into the fund and 0.5% would be deducted for the management fee. Cincinnati has a budget of $76 million of which $26 million comes from the railroad lease. That is 33% of its revenues. At a 5.5 % distribution rate in which $48 million would be distributed from the fund to the city, at that interest rate it would constitute roughly half of Cincinnati's revenues. If the interest rate drop below 2.5% in which zero dollars is distributed to the city from the fund then half of Cincinnati's revenues for its budget would evaporate for that time period. That would be disastrous for Cincinnati's budget finances.

From what I read arbitration is not binding. Either party can reject it and then Cincinnati is free to offer the a lease to a third party. It is highly doubtful NS vacates a line that they have spent over a billion dollars improving it over the last 60 years in which the last project of double tracking a section of the line was begun in 2013. https://infogram.com/cbc-election-rail-scenarios-1h984woe8vpyd6p

Thank you for answering my question. I read that this line is Norfolk Southern 2nd most profitable line. CSX is the largest provider of rail service in the Cincinnati area, so it is unlikely that NS will give up their rights to this lease and let their biggest competitor get the leasing rights to this line. Why not just wait until the negotiating process for renewal of the lease is over to see how much the City will receive in lease payments ?

Thank you for answering my question. Why not pay a flat salary to experts from academia to manage the fund and use the bulk of that $8 million in fees to maintain existing infrastructure?

Will the city have to pay 8 million dollars in fees per year if there are zero dollars to distribute from the fund to the city for that year ?

I agree with you. I don't see how eliminating the character of what makes the neighborhood special an improvement unless you are into generic buildings.

The most lopsided win in a Cincinnati Mayoral election.

There is a sucker born every minute.

DSC_4798 by GGG BBB, on Flickr Corporation Alley: Mount Auburn, Cincinnati.

DSC_4808 by GGG BBB, on Flickr Corporation Alley: Mount Auburn, Cincinnati.

DSC_4796 by GGG BBB, on Flickr Corporation Alley: Mount Auburn, Cincinnati.

DSC_4834 by GGG BBB, on Flickr Corporation Alley: Mount Auburn, Cincinnati.