Our companion blog, Ohio Budget Watch, has done an initial review of the Administration’s figures on “privatizing” and then “securitizing” the State’s revenues derived from liquor sales.
In short, it appears Kasich is proposing what is considered thirty years of revenue which based on historical data would amount to roughly over $6 billion for the price of $1.5 billion today. He uses a third of that money, half a billion, to create one-time money to help balance the State’s budget, in return for denying Ohio a pretty reliable quarter of a billion for the twenty-eight years after Kasich’s budget.
JobsOhio would be the entity essentially “leasing” the liquor control profits from the State… which it, of course, would buy those rights by selling bonds since JobsOhio has no money. You heard that right, to give JobsOhio funding, Kasich is leasing for the next 20-30 years in liquor control profits to Jobs Ohio. Jobs Ohio will pay $1.2 billion up front to the State. Half a billion goes into the General Revenue Fund (GRF); the rest to refinance or pay off bonds already backed by the State’s liquor profits. And to pay for it all, JobsOhio, because it has no actual money, will turn to Wall Street to issue bonds to finance the deal.
Wall Street, which obviously expects a return on its investment, won’t finance the deal unless Ohio (i.e. Kasich) is willing to allow them to essentially buy a twenty to thirty year revenue stream for pennies on the dollar by paying roughly 21% today what that total revenue will be worth over the lifetime of the lease. After all, its JobsOhio’s only asset and there’s no guarantee that the investors will get the projected revenue, it’s a length commitment, and there’s lost opportunity costs, inflation, etc.
JobsOhio gets a revenue stream, but in a way that puts it entirely in debt, and in a manner in which the State gives up a revenue stream at fire sale like rates because JobsOhio has to be able to 100% finance this State asset it’s “leasing.”
Yeah… maybe we SHOULD take a closer look at this idea, huh?