|
Cleveland
Plain Dealer...
Ohio Gov. John Kasich
counts on liquor consumption to bring jobs
Tuesday, March 22, 2011
By Reginald Fields, The Plain Dealer
COLUMBUS, Ohio - The success of Gov. John Kasich’s plan to recruit new
business to Ohio will hinge heavily on just how much Ohioans drink
alcohol.
Kasich last week unveiled his state budget proposal, which includes a
plan to lease the state’s liquor distribution operation -- which of
late has drawn record profits -- and use the cash to fund his private
economic development machine.
Since floating the idea earlier this year, the Republican governor says
there have been plenty of potential takers. In fact, Ohioans’
propensity to consume more than ever, according to recent figures, has
influenced the governor’s idea most.
“Over the years people drink more. It’s just a natural revenue stream,”
Kasich said last Tuesday while outlining his proposal, drawing a
smattering of laughter from reporters. “So, everybody wanted to buy it.
Everybody was interested in it.”
But the governor says he isn’t making the liquor sales operation
available to the open market. Instead, he’s keeping it in-house. Kasich
has created JobsOhio, a private economic development corporation that
will eventually replace the Ohio Department of Development and take
over that agency’s main role of job recruitment and retention.
The governor intends for JobsOhio to be part venture capitalist,
spreading around seed money for business in return for a piece of
future profits, and part marketer, promoting the virtues of running a
company here and bringing jobs to the Buckeye State.
To do that, JobsOhio needs start-up money and steady cash to sustain
itself, and Kasich knows he cannot tap taxpayer dollars alone to foot
the bill.
“When the economy is going down you have less money to invest in job
creation. That’s the time you need (money) the most,” said Mark Kvamme,
a venture capitalist who is Kasich’s director of job creation and
architect of JobsOhio. “So, we need a sustainable funding source to
make this happen.”
Here’s how drinking more liquor could help the Republican governor
bring jobs to Ohio:
Q. How much will JobsOhio pay to lease the alcohol operation, and where
will it get the money?
A. Kvamme said the deal will be for a 20- to 25-year lease for a price
that will be determined when the transaction occurs, likely on Jan. 1,
2013. Over that many years, based on today’s liquor sales, Ohio could
rake in more than $6 billion in profit. Figuring out a fair market
price for a lease covering the next quarter century with that amount of
profit potential will be a key item to watch.
In the meantime, JobsOhio plans to grab $1.2 billion soon to help
Kasich balance the state operating budget right now by issuing revenue
bonds backed by future liquor profits.
The up-front money will be split: $700 million to pay down existing
liquor backed bonds to clear the way for the operation to be taken over
by JobsOhio and $500 million in one-time money to Ohio’s general
revenue fund to help balance the state’s budget.
Q. How much money does Ohio make from liquor store sales?
A. Ohio controls the licensing, manufacturing and sale of all
spirituous liquor (containing more than 21 percent alcohol) in Ohio
through 452 privately run state liquor stores.
In fiscal 2010, the Ohio Division of Liquor Control reported a net
profit of $228.8 million, an increase of $4.6 million over the previous
year. The 2009 figure at the time was a record.
Or, to look at it another way, Ohioans purchased 10.8 million gallons
of booze last year. Yes, another record.
Q. Will liquor control employees lose their jobs?
A. No. For now the division will remain under the Ohio Department of
Commerce, but its fiscal transactions and other day-to-day operations
will be transferred to JobsOhio.
Q. Would JobsOhio also take over issuing liquor permits to bars and
restaurants and other places where alcohol is sold and consumed on the
premises?
A. No. Permitting and license enforcement will remain under a separate
division at commerce.
Q. Why not make leasing the liquor operation available on the open
market to potentially increase revenue?
A. Kasich said that he wants Ohio to be able to continue controlling
the day-to-day operation of liquor sales, which would not be guaranteed
if he sold it to the highest bidder.
For example, by controlling the operation in-house, Kasich can direct
liquor profits for public purposes such as job creation or to aid the
general revenue fund. This approach also guarantees JobsOhio can take
what it wants from the profits for its own operating procedures.
Q. How will JobsOhio use the liquor profits?
A. It is expected to use the money to help companies either start up or
relocate to Ohio. But instead of giving loans, JobsOhio could ask to be
partial owners or investors in the business and thus gain equity in
companies.
“The profits from this will go back into supporting job growth, not
government growth,” Kvamme said Tuesday.
Q. Will selection or prices change at the liquor stores?
A. Certainly not between now and January 2013 when the transfer of the
operation from commerce to JobsOhio is expected to become official.
After the transfer is official, Kvamme said changes are not likely.
In other states where liquor sales are private it has been reported
that liquor and wine selections are more plentiful. And in some cases
prices are higher. But Ohio would not bring in a private operator under
Kasich’s plan.
Q. Will any stores be added or closed?
A. Again, not between now and January 2013. And Kvamme said no drastic
changes should be expected after that point. In other states where
liquor sales are private, stores are thought to be more visible.
Q. So, privatizing state liquor sales is not that unusual?
A. Not at all. Thirty-two states already in some way privatize their
liquor sale operations. Ohio is among the other 18, known as “control”
states, that do not.
However, in just the past year, nine control states -- Pennsylvania,
Virginia, North Carolina, Mississippi, Idaho, Utah, Washington, Vermont
and now Ohio -- have introduced legislation or voter referendums or
otherwise started discussions about privatizing liquor sales to raise
money.
What is different about Ohio’s approach is that Kasich wants to lease
one state entity to another state entity -- albeit a privately run one.
Read it at the Cleveland Plain Dealer
|
|
|
|
