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What the Devil won't tell you

Balloon payment: County foray into space as dubious as it is inspired

World View venture could be great for Tucson, if it doesn't fail to launch

Last summer I wrote one of my favorite lines talking about how Tucson needs to attack public policy to change the area's low-wage reality. "If you aren't indicted, you aren't trying hard enough."

Well, thanks for reading the Sentinel, Pima County Board of Supervisors.

The Board is facing the real prospect of a lawsuit to stop a January agreement that commits the county to build a headquarters for space tourism startup World View, along with a launch pad and other infrastructure costs adding up to $15 million. In return, the company has agreed to increase its workforce from 75 to 448 by 2020.

The deal may be illegal but I like the gumption. Or maybe I should say, I like the gumption but the deal may be illegal, with a degree of nepotism thrown in just to stir story more. So I admit. I'm torn. There's no magic bullet here because it's about taking a stand against corporate welfare — the kind of stand most can agree on right until our puritanical position lands us on unemployment.

The idea of Pima County supervisors rocketing into the space biz provides guffaws that write themselves. However, manned spaceflight has been turned over to the private sector and I'll tell you the folks at the Kennedy Space Center weren't laughing. They were eager to rip World View from Tucson and relocate it on the shores of Cape Canaveral. The county's move to keep the company here has been met with hostility, derision and legal threats. I concur and completely disagree. 

If the county's Technology Park is going to compete with the NASA launch center for manned spaceflight operations, it's gotta get aggressive.

Southern Arizona families have been struggling financially for decades compared to the rest of the country. This aging Pueblo's economy is finding it hard to keep TGI Fridays afloat and grocery stores in business with a per-capita lower than just about every other city its size.

Local leaders need to get off the schneid, and they did just that when space venture firm World View threatened to bolt from Tucson for either New Mexico or Florida. Those states were offering sweet deals to lure the company to them.

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Last summer local leaders started something — I swear to God — called "Project Curvature" to put together a package of incentives to keep World View in Tucson.

The company's near-term bread and butter will be hauling freight such as scientific instruments into near-space for government and industry. It gets its sexiness from future plans to send tourists into the stratosphere, using a high-tech balloon to lift six passengers in a gondola 100,000 feet off the ground right up to the edge of space. The price of a six-hour flight will run $75,000, so think of something else to do for Father's Day.

The county agreed — and it's always the county because the county is always the one with its act together — to take out a loan to build the company a manufacturing center, headquarters and launch pad. The cost plus interest is $20 million. Under the deal, it will be the proud owner of a spacepad. World View will then pay rent until the county recovers the $23 million.

Enter the Goldwater Institute — a rightwing group out of Phoenix with a libertarian aftertaste — demanding that the county cease and desist. The Arizona Constitution restricts government from handing over cash or credit to private businesses. The county would appear to be in violation of the constitution's "Gift Clause." It is threatening a lawsuit if the county doesn't cancel the deal by the end of the week.

There is no disputing that Pima County is footing the bill up front so the company doesn't have to do it themselves. The county has done it before. Back in 2012, it attracted Accelerated Diagnostics out of Denver by building their lab for $2 million to be paid back in rent. That firm increased its employment from 20 to 100, at an average wage of $80,000. No one bitched.

Fly 'em toward the stars and the same deal becomes a punchline.

County Administrator Chuck Huckelberry wrote a memo Monday that took on the Goldwater Institute point-by-point. According to him, Goldwater completely neglected World View's rent payment requirement, it misstated which certificates of participation are being used and neglected to mention other incentive-based deals successfully negotiated by conservative communities like Mesa and Chandler.

Most key, Huckelberry accused Goldwater of sending its letter the day before the county bonds went up for auction, as if to screw the county with proposed creditors or jack the interest rate — which would screw the taxpayers.

As a reader of Huckelberry's memos for going on 20 years, I've never read him sound so fantastically and bureaucratically pissed before. Indeed, county spokesman Mark Evans took a similar gloves-off tone against Goldwater.

"It is unprecedented that solely for political reasons a locally grown company such as World View would be so thoroughly denigrated and ridiculed for choosing to stay in Tucson and grow their company and add jobs and economic value to the region," Evans said in an email.

Gift rap

Great. Fine. Wonderful. I get you. All this may be true. However —  county isn't widening a sewer line or paving a dirt road. It's building something World View needs to the tune of $15 million. Others may have done it too, and maybe they had to to keep up with the competition, but that doesn't mean the deal doesn't violate the gift clause. No one has challenged them but don't confuse that with the argument that those deals aren't ripe for challenge.

So, do these deals violate the gift clause?

Here's the text of the provision, with its plethora of commas:

Neither the state, nor any county, city, town, municipality, or other subdivision of the state shall ever give or loan its credit in the aid of, or make any donation or grant, by subsidy or otherwise, to any individual, association, or corporation, or become a subscriber to, or a shareholder in, any company or corporation, or become a joint owner with any person, company, or corporation, except as to such ownerships as may accrue to the state by operation or provision of law or as authorized by law solely for investment of the monies in the various funds of the state.

Article IX, Sec. 7 of the state Constitution is not some dusty passage oft-forgotten. It has proven over the years to be a hellbitch when it comes to Arizona's competitiveness in recruiting companies to the state. It's also a ban on corporate welfare we should all get behind until somehow it turns around and bites us in the ass.

Economic development officials here can get really crafty in packages to entice a UltraCorp to come to the state and then Colorado officials get on the horn with the CEO and say "how about $5 million cash?" and suddenly snow tires aren't looking so bad. OmniGroup may seem happy at Williams Center but here comes Connecticut waving an eight-figure check in its face and anchors aweigh.

The Goldwater Institute cites the case Turken v. Gordon (and spells Gordon wrong) as the precedent proving the county broke the gift clause. Well, there's a problem because the facts are different. In that case, the court struck down a City of Phoenix agreement to pay a developer $97 million for parking spaces and were to recover the cost through sales taxes. In this case, World View is on the hook to repay the county more than the County is kicking in ... maybe.

The consortium of state and local leaders behind Project Curvature paid for a study that found the county's $15 million investment would bring a return of $3.5 billion to Southern Arizona as the company expands its employment roster during the next four years from 75 jobs to 400 jobs.

The Supreme Court held that only tax revenues counted as benefits and not more "indirect" costs.

The authors of the study, Phoenix research firm Applied Economics, found that the total tax revenues could reach $31 million. The researchers called it thusly:

"Project Curvature would be a significant contributor to the region's economy. The 448 high‐ paying jobs associated with the company's operations would be net new jobs thereby growing the economy both locally and nationally. The growth of this company in Pima County could also support a significant amount of additional economic activity, jobs and payroll at related local supplier and consumer businesses throughout the region, plus it will attract additional visitors to the area who are interested in space tourism. Supporting manufacturing operations in the aerospace industry is critical to maintaining Pima County's future role in the global aerospace industry."

Principle or partisanship

Don't discount the possibility/likelihood that the Republican-loving Goldwater Institute may be playing games with the 2016 election. Ultimately, what may matter most is how Supervisor District 3 voters react to this deal. If they find it inspiring, then the county is fine. If they find it a crony giveaway on a gondola-in-the-sky adventure, then they might swing control of the board to Republicans and put Ally Miller in charge of county government. Phoenix conservatives love little more than meddling in the Democratic bastion of Tucson.

Huckelberry's memo notes similar sounding arguments in both the Goldwater Institute's letter and Miller's Facebook posts.

It clear from Supervisor Ally Miller's Facebook posts regarding World View and the Goldwater Institute, together with her efforts, that the Goldwater Institute has joined forces with Miller in her effort to defeat incumbent Supervisors. The March 28, 2016 Goldwater letter is filled with politically charged rhetoric that has no basis in fact exaggerates or admits points and omits facts. It appears designed to influence the outcome of an election.

So Goldwater may be exposed to charges that it is providing an illegal gift to the Miller campaign. Irony abounds.

The conservative group has proven equal-opportunity in the name of conservative principles, making it hard to discriminate between a righteous stand and shady politics, and provided the attorneys on behalf of Meyer Turken to sue Phoenix.

Pima County, meanwhile, insists that it will build and own the launchpad then lease it to World View. Yet they only decided to build it because World View needed it.

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The upside is sick. Tightwads by definition don't drop 75 grand to see the curve of the earth from 10,000 stories up. So these space tourists are likely great tippers is what I'm saying. They probably aren't going to stay at the Tucson Inn. Plus, think of all the feeder businesses that could be sustained with great jobs at high wages who get work subbed out to them for Spaceport Tucson. With that support infrastructure in place, new businesses in the burgeoning space industry could see Tucson as a great place to set up shop.

Still, after voters murdered the county's 2015 bond program, some slow going might have been advisable. Instead, the county has joined the Space Race.

The constitution is the constitution and a fine line separates getting creative to circumvent the gift clause and breaking it outright. So long as World View makes good on the loan, the county can kinda say they followed the rules with a straight face.

A giant downside 

That's where I see the problem: For the county to ever see return on the investment World View must succeed in an industry so new everyone involved is barreling through the wild blue yonder. For better or worse, Pima County would be married to World View as partners in a risky venture, even if it has an enormous upside.

Politically, the downside is a doozy. If World View craters, it would land straight on the Pima County administration building. The first thing it would hit will be the top floor where the supervisors work. Taxpayers would be on the hook for millions and the only force acting on the county's launch pad will be erosion.

See, this is high-risk, high-reward all the way to the top to the clouds. No one in this business knows what's in store for the industry, which is key because the project becomes a liability for taxpayers if it goes out of business. The manned space flight sector of the private economy is so new and so fraught with unknown that any management team would be stressed. Are balloons going to be the preferred mode of travel? Even if the company is a Swiss watch, we don't know yet if it's VHS or Beta, Blue Ray or DVD, MySpace or Facebook, Brittany or Beyonce.

Since NASA stopped strapping folks to rockets, there are a lot of out-of-work space pros looking for a gig and we know the folks in Florida have some ready made hardware to attract competing space flight entrepreneurs.

World View's leadership includes two former Biosphere scientists and former astronaut Mark Kelly. Personally, I would love it if the senior apparatus included someone familiar with the tourism industry and someone who was a dispassionate counter of beans. Though they were smart enough about the beans to leverage the best deal it could get.

Kelly, as director of space flight, is no doubt fantastically qualified. And I'm not crazy enough to pick a fight here with a guy Esquire Magazine put on the cover and all but called the best male in the species. However .... Kelly's marriage to former U.S. Rep. Gabrielle Giffords makes this look a bit too much like a family affair for a risky investment. The fact that local leaders had to code name the project rather than deal up front with the issue makes the deal politically troubling.

No easy call

If I had $15 million to set on fire, I might gladly take a risk on World View and count up my winnings at my estate in Virgin Gorda. The county doesn't have that kind of cash if the deal goes awry, though.

But I'm immediately back to the other hand, thinking that Southern Arizona doesn't have a lot of cards to play and the virtue which the gift clause is built on crumbles in the jugular-slashing game of economic development. It's not like we can offer a highly skilled work force. The Legislature has seen to that.

We gotta do something about our economic fortunes but the gift clause does ban the kind of corporate welfare that most of us oppose right up to the point where it provides us a job at 50 percent more than our current salary.

The deal does raise questions though about how much wheeling and dealing will be required in the future and what — in God's name — would Raytheon Missile Systems expect if some other state put together a deal for it? Would we expect our leaders to meet that demand if it was doable?

The only thing I'm convinced of is that there's not a lot of room for moral clarity on this issue. The county shouldn't do this deal in about an equal measure to how much it should be congratulated for getting it done. Maybe if Huckelberry ran the center, I'd be happier.

Blake Morlock covered Arizona government and politics for 15 years, including 11 in the Tucson Citizen. He also worked on Democratic Party campaigns in the field of political communications. Now he’s telling you things that the Devil won’t.


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2 comments on this story

2
152 comments
Apr 6, 2016, 4:59 pm
-0 +3

Bet Raytheon - a multi-billion dollar stock-owner company - has received its share of goodies from Pima County. Don’t worry about the factory in Huntsville. Nothing could have stopped it because all of the other Beltway Bandits are there and RayCorp had to be where one of its customers is.

1
116 comments
Apr 5, 2016, 3:12 pm
-0 +6

Blake…you need look no further than U of A and their CS and Aerospace and ECE degrees blah blah.  We HAVE educated geeks here…oh yes we do.  The challenge is keeping them HERE.  The ones I know the last few years go east to work for WalMart central processing…up north to work for the Microsoft or Apple or fill in the blank tech god that a way.
I may have a emotional tug when it comes to space, considering my family history and I was born in the Space Capital of the World, Huntsville, due to early space stuff….so admittedly my objectivity may not be there…but damn it….selfishly I’d love Tucson to become a little hub like Huntsville did nearly 60 years ago…look up that city’s history…it happened because a few visionary pie in the sky engineers set up shop….and the rest of the story speaks for itself.

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