CHICAGO — Ohio officials have asked the state Supreme Court to consider the constitutionality of a $1.4 billion plan to privatize the state's liquor distribution system, saying they need certainty before they head to the bond market to finance the deal.
JobsOhio, a private, nonprofit entity that was created last year to take over the liquor system, filed a so-called writ of mandamus Friday morning with the Supreme Court in an effort to advance the plan, which has been stalled by a lawsuit since last year.
The writ of mandamus asks the court to force the director of the commerce department, David Goodman, to sign an agreement enabling the transfer to JobsOhio. The transfer agreement was signed earlier this week by JobsOhio officials but, according to a prearranged plan, Goodman refused to sign it.
That allowed JobsOhio to file the writ with the Supreme Court, a move that state officials hope will speed up the judicial process and clear the way for JobsOhio to come to market with up to $1.5 billion of debt to finance the deal.
"This [writ] is a legal avenue we have decided to utilize to give the court the chance to review the merits of the legal issues," JobsOhio managing director John Minor said during a conference call with Goodman, JobsOhio president Mark Kvamme and state budget director Tim Keen.
Minor said the bond deal, originally planned for early 2012, would be delayed until after a court ruling, assuming the court agrees to hear the case.
"There are a lot of different factors here, and we want to resolve all of the issues and remove any cloud of uncertainty and then we'll sell the bonds at that point," he said.
Republican Gov. John Kasich proposed the liquor privatization soon after taking office in 2011, as a way to balance the 2012 budget.
Under the current financing plan, JobsOhio would come to market with up to $1.5 billion of bonds to finance the 25-year deal. That includes $750 million to pay off existing liquor-profit-backed bonds issued by the state.
The privatization would provide an annual revenue stream of around $200 million that JobsOhio would use for job creation and economic development projects.
The deal was to close by the end of fiscal 2012 but was blocked by the lawsuit filed by Democratic opponents and a nonprofit group called ProgressOhio. Two lower courts rejected the lawsuit on the basis of standing, but both courts indicated that the constitutional question — whether the deal violates the constitution's ban on giving public money to a private entity — is valid.
"Two courts have suggested that [the constitutional concerns] are understandable, and these issues need to be resolved with certainty before we execute this complex transaction," Goodman said.
"It is not my call, it is up to the Supreme Court, but we're confident that what we've done is constitutional and we're looking forward to moving forward," he said.
The executive director of ProgressOhio said the state's lawsuit will bring the kind of judicial review that opponents have wanted all along.
"That's the main issue that I've wanted to have a hearing on, and I believe very strongly it's unconstitutional," said Brian Rothenberg.
"I do hope the court addresses the standing issue as well," he said. "Taxpayers need to be given the right to sue over constitutional issues."
JobsOhio officials said they have already assembled a finance team to bring the bonds to market, but have declined to name the firms.
Ohio has a monopoly on liquor sales, one of the state's most reliable and growing revenue sources. Many states monopolize liquor sales, but Ohio is one of the few to issue bonds backed by the profits.