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Ohio Economic-Development Bond Plan Survives Court Fight

June 10 (Bloomberg) -- JobsOhio, the state’s plan to sell $1.5 billion in bonds backed by liquor sales to spur private economic development, cleared a hurdle with a ruling by the Ohio Supreme Court that opponents couldn’t sue over it.

In a 5-2 ruling today, the state’s top court said ProgressOhio.org Inc. hadn’t shown Republican Governor John Kasich’s 2011 plan caused the group any direct injury.

Ohio went ahead with the bond sale in January 2013, after two lower courts reached the same conclusion.

JobsOhio paid the state $1.4 billion to lease its wholesale liquor distribution system for 25 years, providing the entity with a stream of income to make loans and grants and provide other funding for projects and enabling the state to retire then-existing bond obligations.

The goal was to complete deals more quickly and creatively to give Ohio an advantage over other states, Kasich had said. He has called the entity “the most important economic-development tool in America.”

In its first use of the funding for projects, the nonprofit awarded $1.28 million to Updox, a provider of customer relationship management for health care, and four other companies to keep or add jobs, according to a February report.

JobsOhio President John Minor, in a statement today, said he’s pleased with the court’s ruling and that the initiative is working as planned.

“Since its inception, we have helped generate $13.2 billion of capital investment and 230,624 new and retained jobs,” he said.

Advocacy Group

ProgressOhio, a self-described progressive advocacy group, argued that the use of public money to fund private development violated the state’s constitution. The Columbus-based organization said it had “standing” to sue over the program because it includes taxpayers and as a matter of public right.

The Supreme Court majority disagreed.

“If and when an injured party seeks to challenge JobsOhio, we may entertain such a case,” the justices said. “But those parties are not before us today.”

Justice William O’Neill, who filed a dissenting opinion, called the majority’s conclusion “a triumph of form over substance” and predicted the program would be challenged again.

“Hundreds of millions of dollars in public funds are being funneled into a dark hole to be disbursed without public scrutiny, and the highest court in the land is looking the other way,” he said. “Passing on this case is an abdication of our duty as protectors of the Constitution.”

Brian Rothenberg, executive director of ProgressOhio, said in a statement that the high court ruling was a decision on the group’s right to sue, not a decision on the program.

‘No Court’

“The fact remains that no court has ever ruled on the constitutionality of JobsOhio,” Rothenberg said. “It is now possible that no court ever will.”

Rob Nichols, a spokesman for Kasich, said the governor was pleased with the decision.

“JobsOhio is working, the state is getting back on track, and we’re happy that the Supreme Court is allowing our job creation efforts to continue,” Nichols said in a statement.

The case is ProgressOhio.org Inc. v. JobsOhio, 12-1272, Supreme Court of Ohio (Columbus).

To contact the reporters on this story: Andrew Harris in federal court in Chicago at aharris16@bloomberg.net; Mark Niquette in Columbus, Ohio, at mniquette@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net; Stephen Merelman at smerelman@bloomberg.net Peter Blumberg

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