Ohio to Get $1.4 Billion From Development Agency’s Bond Sale
A nonprofit organization created to keep and attract jobs will lease Ohio (STOOH1)’s liquor-distribution enterprise using $1.4 billion from long-term bonds backed by its profits, said Tim Keen, the state budget director.
The state is transferring its wholesale liquor enterprise for 25 years to JobsOhio, a private, nonprofit entity the Legislature brought into being last year at the behest of Republican Governor John Kasich. Ohio doesn’t have government- run liquor stores; it buys and distributes alcohol to retailers.
“This model that we are creating in the state of Ohio is one that’s going to be studied across the country,” Kasich said during a conference call with reporters today. “If we do it right, it will be one that will be envied.”
Liquor profits averaged $221.9 million annually from fiscal 2008 to 2010, the Ohio Department of Commerce has said. The state projects about $100 million will be available each year for job creation and retention after debt service on new bonds, said Mark Kvamme, JobsOhio’s interim chief investment officer. That would be larger than similar arrangements in Michigan, Kentucky and California, and would be one of the biggest such dedicated funding sources in the U.S., the International Economic Development Council in Washington said last year.
Bond Sale Coming
JobsOhio will pay the state $500 million for the transfer plus an estimated $750 million to pay off existing debt backed by the liquor money and $150 million for economic revitalization projects, Keen told reporters in a conference call today.
The agency will make additional deferred payments equal to 75 percent of all annual liquor-profit growth above 3 percent, as well as $43 million per year to fund economic revitalization projects, according to a fact sheet from Kasich’s office.
The agency expects to issue revenue bonds during the first quarter, said Kvamme, a former Silicon Valley venture capitalist. He said a final amount of the issuance is being determined.
JobsOhio will contract with the Ohio Department of Commerce to continue overseeing liquor distribution and with the state’s existing development department to provide job-creation work, Kvamme said.
The new entity will have a dedicated funding source for development projects not subject to variations in state funding from year to year, and it and will be able to complete deals more quickly and creatively than a state agency could, Kvamme has said.
Critics of the arrangement, including Good Jobs First, a Washington-based center that tracks economic-development deals, have said private entities that seek jobs on government’s behalf lack accountability and transparency.
JobsOhio is led by a nine-director board appointed by Kasich, including Bob McDonald, president and chief executive of Cincinnati-based Procter & Gamble Co.; Gary R. Heminger, president and chief executive of Marathon Petroleum Corp. (MPC), based in Findlay, Ohio; and Steven A. Davis, chief executive officer of Bob Evans Farms Inc. (BOBE) in Columbus.
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