Cincinnati’s $1.6 billion investment fund — established after selling the city-owned railway — has grown about $14 million in the first two months.
The Cincinnati Southern Railway Board of Trustees heard an update Tuesday from investment advisors UBS. The goal is to grow the principal of the $1.6 billion over time, while still sending at least $26 million a year to the city to spend on maintaining current infrastructure like streets, parks, and recreation centers.
The total value as of May 17 is $1,614,377,572; a growth of just under 1% since March 15. The return rate is expected to vary quite a bit, reaching an estimated average of 5% growth annually.
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UBS Institutional Consultant Timothy Bayer says more than half of the fund is currently in fixed bonds, basically lending out money at fixed interest rates. Bayer says that means they know the exact income to expect for up to a year in advance.
"[That] is 100% guaranteed; it doesn't matter what the underlying portfolio performance is," Bayer said. "We're buying stocks for the long-term growth, but driving income for spending."
Current income from fixed bonds is expected to be $36,479,791 between June 2024 and May 2025, plus returns from other investments. The CSR Board will decide how much of those returns to send on to the city of Cincinnati for infrastructure, and how much to put back into the investment fund to earn more.
The CSR Board plans to send the first check from investment returns for the fiscal year that runs from July 1, 2025 until June 30, 2026. In the meantime, the city is no longer getting quarterly lease payments from Norfolk Southern, which totaled about $26 million a year prior to the sale. The CSR Board voted Tuesday to send the city $36 million next month to make up the difference.
"Which the city will allocate partially to the current fiscal year and then into the next fiscal year," said Board Chair Paul Muething.
That $36 million payment comes primarily from transaction fees paid by Norfolk Southern as part of the sale agreement. Like all funds coming from the CSR Board, the city can only spend the money on maintaining or improving existing city-owned infrastructure. That limit is spelled out in state law.
Cincinnati officials are currently in budget season for the fiscal year that begins July 1, 2024.
City voters approved the sale by a slim margin in the November 2023 election. Sixteen firms applied for the job of managing and investing the revenue; the CSR Board of Trustees decided in late January to work with UBS.
The sale officially closed in March.
The Board also acted Tuesday to hire a financial and administrative director, a part-time position to work as-needed.
"The plan here is that this person will not be an employee; this person will be an independent contractor working for the board," said CSR Board Treasurer Paul Sylvester.
The financial and administrative director will work to create a new website for the board.
"We want the website to be as user-friendly as possible," Sylvester said. "We want to be as transparent as possible, both [for] what's in the trust fund, and [so] people can see what we're anticipating being able to [send the city]."
The next CSR Board meeting is scheduled for August; the Board must decide by the end of September how much money to send the city for fiscal year 2026.
