Norfolk Southern said on Monday it has reached an agreement with the City of Cincinnati to buy a rail line between the Queen City and Chattanooga, Tennessee, for $1.62 billion.
The transaction is expected to close during the first half of next year.
NS predecessor Southern Railway has leased the 337-mile line since 1893 and in recent years NS has operated upward of 30 trains a day over the route. The purchase agreement includes most of the rail line’s assets, including 9,500 acres of land.
The lease agreement between NS subsidiary Cincinnati, New Orleans & Texas Pacific to operate the route expires in 2026.
NS is paying $20 million annually to lease the rail line with the city using those proceeds to pay for city infrastructure projects.
In a news release, NS said it will finance the acquisition of the rail line “through a combination of internal and external sources.”
The City of Cincinnati has indicated it will use the proceeds of the sale to create an infrastructure fund to be used for the rehabilitation, modernization or replacement of existing infrastructure including streets, bridges, municipal buildings, parks, and green space.
The transaction must be approved by Cincinnati voters and the U.S. Surface Transportation Board.
Development of the line began in the 1800s before the Civil War as a competing rail route to the Louisville & Nashville route to the South from Louisville, Kentucky.
The line was completed after the war and at the time featured 27 tunnels and 105 bridges. Many of those tunnels have since been daylighted.
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