Sen. Grendell’s amendment would have added $300 million to Local Gov’t Fund


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I’m not going to lie, I haven’t really gone very in-depth into the whole JobsOhio liquor privatization boondoggle before today.  I’m sorry.  It’s just been really busy around here and whenever people started to talk about paying off bond holders my eyes started to glaze over and next thing I knew I was totally lost. So today I decided to get a little lesson in the process of selling a giant asset like the entire liquor business of the state of Ohio and determining the true value of it taught by none other than Senator Tim Grendell.

It might be helpful to back up a little and discuss why the Governor thinks he needs to sell the liquor business in Ohio. In the as introduced version of the budget the Governor included funding for JobsOhio, the semi-private entity that will be charged with creating jobs in Ohio. The Governor wanted a secure, yearly revenue stream that JobsOhio could rely upon to help fund its programs. In the as introduced version the Governor sold the liquor revenue that the state normally gets every year to JobsOhio for a one time price of $1.2 billion. In this deal the state gets $1.2 billion, $700 million to pay off outstanding liquor bonds and $500 million that went directly into the General Revenue Fund (I think it is helpful to think of the $500 million as profit for the state in sale of the liquor business). While JobsOhio spends $1.2 billion, in return they recieve a revenue stream of $100 million for 25 years, or $2.5 billion in total resulting in $1.3 billion in profit for JobsOhio. As you can see their is a clear difference in what the Governor thinks the liquor business in Ohio is worth and what JobsOhio thinks it is worth. $1.3 billion to be exact. Now, we have covered this a couple of times around here about how horrible of a deal this is for the state so I won’t go too much into that. Just know that this deal is a massive giveaway of a public asset that you and I own and we are getting squat in return for it.

As we reported last week Sen. Grendell attempted to add an amendment into the budget that would have netted a larger profit for the state but was unsuccessful. His amendment would have increased the cost of the liquor business for JobsOhio from $1.2 billion to $1.5 billion. Resulting in an extra $300 million for the state which would have all been directed to the Local Government Fund. Today though Sen. Grendell held a press conference to bring attention to his amendment and, boy, was there some awesome info. I strongly recommend you take a chance to check it out.

For starters, the Senator mentions that while meeting with the Governor’s staff they told him that they originally assessed the true value of the liquor business at $1.5 to $2.5 billion! This is mind boggling. If you were going to sell your car and you knew it was worth between $10,000 and $15,000 and some one offered you $6,000 for it you wouldn’t sell it, right? Of course not, why sell it for a loss when you can get more money for it. Well this is exactly what the Governor and the Republicans are doing in the legislature with this stat asset. Instead of getting anything close to what it is really worth the Republicans are selling the asset clearly below market price.

Several times throughout the interview Sen. Grendell repeatedly states that his amendment is simply an effort to have the state collect on what the true value of this asset is, and that this is the only obligation the state has when selling an asset like this. I would go one step further, considering the horrible state of the budget why aren’t we getting every last dollar that is on the table? At the best, this is just horrible negotiating, and at the worst this is down right criminal mismanagement of a state asset. So much for that whole at the speed of business thing.

It will be interesting to see what the Governor’s response will be to this amendment. Whatever it is though the press at the state house should first inquire if the Governor knew the true value was between $1.5 billion and $2.5 billion why didn’t he ask for more money upfront? What is the point of negotiating at all when, for all intents and purposes, the Governor represents the buyer and the seller in this situation? He owns the liquor business and he is the one creating JobsOhio so what is the point in trying to undervalue your own asset?

I don’t know what the answer to this is but I do know that if I ever have to sell anything I’m not asking John Kasich on what he thinks I should sell it for.

 

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3 Comments

  1. Who exactly is the semi-private side of JobsOhio? They appear to be the ones warrenbuffeting the liquor biz.

  2. Ted Strickland sold the tobacco lawsuit money for 50 years and spent it in 1 year. And he used Lehman Brothers as one of the firms to help sell the deal.

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