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The Rail Sale Is on Track

UBS is tasked with managing $1.6 billion in sale proceeds to fund city infrastructure work.

by Carrie Blackmore

Now that the sale of Cincinnati Southern Railway is complete, $1.6 billion in sales proceeds will be invested on behalf of the city of Cincinnati by the CSR Board of Trustees, with investment returns flowing into the city’s treasury starting in fiscal year 2026. The city will collect roughly $36 million in transaction fees from the sale in the first half of this year and spend it on infrastructure projects until the fund’s investments begin to bear fruit, says Cincinnati Director of Communications Mollie Lair.

The CSR Board of Trustees officially sold the 337-mile stretch of railroad to Norfolk Southern in March, after gaining approval from a majority of Cincinnati voters last November, when Issue 22 passed with 51.7 percent of the vote. Cincinnati had been the last U.S. municipal government to own an interstate railroad, constructing the line in 1879 from Cincinnati to Chattanooga, Tennessee, to promote economic development.

Norfolk Southern, or one of its subsidiaries, had leased the railway for 143 years before becoming its owner. Cincinnati City Council had earmarked lease proceeds solely for infrastructure improvements since the 1980s, and that will remain the case. The railroad fund is expected to generate $40 million-$50 million in annual returns, compared to the $26.3 million collected in the last year of the lease, and will chip away at $500 million in deferred maintenance and infrastructure needs identified by city leaders.

In January, the CSR board selected UBS Financial Services over 16 other candidates to oversee the $1.6 billion trust. Board members said UBS was selected because it committed to the best return rate and asked for one of the fairest fees, between $1.46 million to $2.1 million per year. UBS also won the bid because of its dedication to diversity and equity. The board will work to “develop an investment policy and then, with expert fund managers, ensure the responsible, diversified, and professional management of this new financial asset,” said Board President Paul V. Muething after Issue 22 passed.

UBS is headquartered in Zurich, Switzerland, and has offices all over the world, including one in downtown Cincinnati and another in Sycamore Township, which together employ around 230 people. Founded in 1862, UBS had $91 billion in managed assets under advisement, including $17 billion in public funds, before being selected to manage the railroad fund.

Now that the board no longer owns the railway, its primary responsibilities will be to oversee the trust and to preserve and grow the fund, says Lair. The board will determine how much to pay the city each year from the trust’s returns.

Ahead of the vote last fall, the city released Cincy on Track, a 10-year plan to spend railroad fund proceeds on streets and sidewalks, parks, recreation facilities, police and fire stations, and health centers. “Funds will be appropriated each year by City Council as part of the budget process,” Lair says. “Cincy on Track was a suggested plan with department directors identifying their most critical infrastructure needs. All allocations will occur annually through the budget process.”

The budget process begins in March and culminates each year with a June vote.