Ohio justices to hear development agency lawsuit over $1.4B lucrative liquor monopoly deal

1/24/2013

COLUMBUS — While Gov. John Kasich was in Switzerland on Wednesday preparing to tell Ohio’s story to global leaders, the lifeblood of the private economic development agency picking up the tab remained in danger back home.

The Ohio Supreme Court breathed new life into a potential legal roadblock to the planned transfer of Ohio’s lucrative liquor monopoly to finance the efforts of the private, nonprofit JobsOhio. Without comment, the high court agreed to consider whether two current and former state lawmakers and a liberal advocacy group have legal standing to challenge the constitutionality of the corporation as well as the $1.4 billion liquor deal.

The court will hear an appeal of a decision by the 10th District Court of Appeals in Columbus that former Rep. Dennis Murray (D., Sandusky), current Sen. Mike Skindell (D., Lakewood), and Progress Ohio did not have standing to sue. They contend that the court’s procedural ruling against them had the effect of insulating JobsOhio from any challenge because the law creating it required any suit to be heard within the 90 days between the Republican governor’s signature and the law’s effective date.

“I think the court has demonstrated a particular interest in making certain the citizens’ ability to challenge the constitutionality of legislative enactments,” said Mr. Murray. “The administration’s decision — and it is still the administration driving this bus — to proceed with the sale of bonds is contemptuous defiance of the court,” he said. “They risk provoking a constitutional crisis in this state.”

He questioned what would happen if JobsOhio proceeds with its plans to issue bonds to lease the liquor system over the next 25 years and then the court finds that the entity or the deal is unconstitutional.

One of Mr. Kasich’s first priorities after taking office in 2011, JobsOhio was established as a private nonprofit corporation to assume many of the job-creation duties of the former Department of Economic Development. It was given $1 million in state seed money and has been largely operating since on private-sector donations.

But the plan was always for the real lifeblood of the corporation to come from a 25-year lease of Ohio’s liquor monopoly in exchange for an upfront payment to the state. Of the $1.4 billion, $500 million would go into the state budget after constitutional obligations guaranteed by the liquor profits were met.

The state recently announced that liquor sales in 2012 totaled $849 million, up $55.3 million, or 7 percent, from the prior year. Jobs-Ohio would operate on future liquor profits while the state Department of Commerce would continue to operate the liquor business.

“We remain confident that the Supreme Court will eventually rule the same way that the lower courts have ruled, finding the plaintiffs have no standing,” Kasich spokesman Connie Wehrkamp said. “It continues to be beyond our understanding why anyone would fight against job creation when it’s so important to Ohio and our continued economic recovery.”

JobsOhio has prepared to issue bonds to consummate the deal despite the pending legal challenge. Two Wall Street credit rating agencies — Standard & Poor’s and Moody’s — recently expressed confidence by giving the bonds high ratings.

Last year, JobsOhio tried to clear the legal fog around the deal by trying to get the Supreme Court to directly settle the dispute once and for all. The court, however, refused to take JobsOhio’s case, saying the dispute could not circumvent the lower-court process.

If the Supreme Court should decide on this procedural issue that the challengers have legal standing to sue, it would send the case back to the lower courts to address the constitutionality questions.

Mr. Kasich, who has not led any foreign trade missions so far as governor, was invited to participate in several panel discussions at the Switzerland global economic forum on such issues as work-force development and leadership.

Contact Jim Provance at: jprovance@theblade.com or 614-221-0496.