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Court again busts Goldwater's balloon, rules in favor of Pima County deal with World View

Pima County has won again in court in what may be the last gasp of the Goldwater Institute's pursuit to end the 2016 deal that helped high-altitude balloon firm World View set up shop here.

The libertarian interest group saw the remaining portion of its lawsuit over the arrangement popped by a state superior court judge this week. Pima County Administrator Chuck Huckelberry said "the county prevailed on every single argument."

The ruling, filed Monday night by Judge Paul Tang, called Goldwater's arguments seeking to toss out the deal "eloquent," but found that the county met the requirements laid out by Arizona law to provide support for the private company as an economic development project.

The judge rejected Goldwater's claims that the county had violated the Gift Clause of the Arizona Constitution, ruling in detail over 25 pages that the payment of $24 million in rent over the 20 years of the deal would more than cover the county's spending $14-15 million to construct a facility for World View.

"The county prevailed on the issues and the facts," said Sharon Bronson, chair of the Board of Supervisors, told TucsonSentinel.com on Wednesday. "This cost us; we could've put this money into roads, and early childhood development."

Goldwater said the group will appeal the ruling.

"We are confident that the court of appeals will strike down Pima County's unconstitutional and wasteful giving away of taxpayer money to private interests," said Goldwater spokeswoman Jennifer Tiedemann.

World View representatives did not respond to requests for comment.

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County officials called Goldwater's lawsuit "specious" in a tweet Wednesday, saying that "after five years, a few appeals and 1,000s of attorney hours, GWI is 0'fer everything."

As Huckelberry summarized in a memo to the supervisors: "Shortly after the county entered into our economic development agreements, the county was sued by the Goldwater Institute claiming that the county violated the Arizona Constitution's gift prohibition, leased the property using the wrong statute, and improperly employed the project's architect and contractor. The county prevailed on the latter two issues with rulings from the Court of Appeals in favor of the county. The last legal issue remaining was the gift clause claim, which is resolved in the county's favor...."

The conservative group "could appeal this ruling as well, and likely will. But the court's reasoning is compelling and should withstand any further challenge," he said. "We hope this action now closes a chapter of five years of litigation with the Goldwater Institute that has been costly and lengthy for both the county and the Goldwater Institute."

Goldwater, based in Phoenix, has appealed previous decisions that went against their moves to have the county's deal with the company declared illegal. The state Supreme Court declined to hear two appeals, including one last April, letting an Appeals Court ruling in favor of the county stand.

"We've prevailed a number of times; I hope the Goldwater Institute will reimburse us for the sake of the taxpayers," Bronson told the Sentinel in October 2019, after a previous court ruling in favor of the county. "How many times do we have to win before they stop?"

She echoed her concerns about the cost of the years-long suit in a press release from the county on Wednesday.

"I hope this is the end and the Goldwater Institute doesn't further waste more of its donors' money on this specious, politically motivated lawsuit," she said. "We were very careful to comply with the law when drafting this agreement with World View, as court ruling after court ruling after court ruling has proven."

"While Goldwater has played games in court, World View has continued to grow and expand, bringing more than 130 good-paying jobs to the County and helping solidify Pima County as one of the nation's key centers of aerospace technology, innovation and manufacturing," Bronson said.

Goldwater suit

From the start, the deal with World View raised questions — some in TucsonSentinel.com's reporting published within hours — along with eyebrows and even hackles.

Disapproving of the deal was Supervisor Ally Miller, who heatedly questioned its founders during a public meeting and later bragged to one of her staffers about covertly working with the Goldwater Institute to have the county sued to void the contract. Ally Miller voted against the contract in 2016, repeatedly mentioning the lack of details released by the company, and saying the deal was too risky an investment for the county.

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While the suit by the right-wing group proceeded, so did construction — the building was completed in December 2016. In February 2017, a lower-court judge ruled that the deal broke state procurement laws that require open bidding, and said the lease should be voided. But that December, a state appeals court overruled that decision, holding that the county acted within its economic development powers.

That decision, written by Judge Peter Eckerstrom for a three-judge panel, referenced the county's forecasts of World View's employment and economic impact in finding in favor of county's ability to sign the deal.

The ruling cited the lease, which said that "based on an economic impact study by Applied Economics, commissioned by Sun Corridor, Inc., which takes into account World View's anticipated employment and salary levels, the Board has determined that World View's operations ... will have a significant positive impact on the economic welfare of Pima County's inhabitants."

The judge referenced that finding in ruling that the county "did not enter the agreement pursuant to its general leasing power, but appropriately acted pursuant to its economic development power. Having made the requisite findings, the County was not bound by the competitive bidding process, but was free to negotiate and contract directly with World View."

Goldwater's suit maintained that World View plans a "an unproven, for-profit luxury adventure-tourism business" that will be facilitated by the county deal.

County officials have mocked Goldwater for focusing on the "space-tourism" aspect of World View's operations while not mentioning the expected economic impact of their plans.

"No reasonable person would argue that the stratosphere will, in the near future, replace Disneyland as a vacation destination for middle-class families. But providing affordable recreational opportunities for county residents, though a legitimate public purpose, is obviously not the public purpose the county is seeking to further in its transaction with World View," wrote Regina Nassen, a deputy county attorney, in an April 2016 letter to a Goldwater lawyer.

Jobs fell short of promises

Although Pima County taxpayers invested $15 million in a facility for the high-altitude balloon company, the number of workers at the firm wasn't taking off as officials had forecast — or even as World View's lease requires, a TucsonSentinel.com investigation showed in early 2019.

Far from a projected 400 workers, the company in February had fewer than the 100 employees it should have had under its deal with the county, even before a layoff of 10 employees. Although the county could void the lease with World View, its prospects for recourse are limited and pushing a firm with growth potential out and leaving a vacant building instead isn't on the table, officials said at the time.

In 2016, the county agreed to build a factory and launch facility for the Tucson-based company, which was just getting off the ground with plans to launch scientific instruments nearly to the edge of space — and touted plans for "space" tourism via manned balloons ascending into the stratosphere.

While the company's undertaken numerous launches of its "Stratolite" balloons — which can carry small payloads into the upper reaches of the atmosphere for a fraction of the price of a rocket launch — mostly for NASA and undisclosed (read "military") government agencies, it's since dialed back on those marquee claims of carrying passengers aloft for profit. Its balloons can carry gear to altitudes of 100,000 feet — at 20 miles up, nearly the edge of space.

In addition to rent over 20 years — which is projected to cover the construction costs and interest borne by taxpayers — the company pledged to hire a certain number of well-paid workers to justify the county's economic development investment.

The company more recently cited the impact of the pandemic for falling short of those staffing forecasts. World View did bring back a small number of line workers to produce personal protective equipment, including some gowns made under contract with the county in mid-2020.

Changes at the top

The company has slowly floated away from attraction of "space" tourism that garnered so much early attention. While the balloons don't fly nearly as high as most conventional definitions of space — most say the edge of space is 50-60 miles up — the company said in its first promotional materials that the experience for passengers would be much the same as a space launch, if more gentle.

In July 2016, Huckelberry told the supervisors that World View has "unfortunately, received a great deal of notoriety about space tourism; even though 90 percent of their current business model relies on commercial communication, research, business and defense applications of their balloon technology."

The focus seems to be even tighter since new corporate management took them helm in early 2019. Rarely do company representatives mention manned balloon capsules, whether carrying passengers paying $75,000 per ride or not.

World View's CEO is now a veteran leader in the drone industry, Ryan Hartman, former president of Insitu, Boeing's unmanned aircraft subsidiary. That company builds drones for the U.S. Navy, and others.

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Dropped from the top of World View's list of executives and board members to the bottom at the start of 2019 was Jane Poynter, the first CEO and a co-founder of the company. Poynter has now moved on to found another company that claims to be pursuing the "space tourism" business.

Former astronaut Mark Kelly, now a U.S. senator, was formerly described by the firm as its "director of flight crew operations" and then listed as a co-founder and "strategic advisor" to the company prior to being elected.

Burst in 2017

A hydrogen-filled World View balloon exploded at the company's "Spaceport Tucson" launch pad in December 2017, causing about a half-million dollars in damage to the headquarters and manufacturing building and shaking up businesses and residents for miles around.

Sky-high projections

Poynter and Tabor MacCallum, who were crew members of the Biosphere 2 experiment and also partners in local tech firm Paragon before leaving in 2014 to pursue investors for World View, refused to make public many financial details of the company before it was approved by the supervisors on a 4-1 vote in January 2016.

In pitching the deal to the supervisors five years ago, Poynter said the company planned to manufacture "hundreds of balloons" by its second year of operation at the facility.

County officials said then that the project should have total economic impact of $3.5 billion over 20 years, with the company having a $25.3 million annual payroll by 2020.

While saying on the day of the 2016 vote that there were "parts of this proposal that look like pie in the sky," then-Supervisor Richard Elias said he thought the potential upside was too great to pass up, and voted in favor of it.

In January 2019, learning of the contractual shortfall in staffing from TucsonSentinel.com, Elias said, "I don't think it's outstanding yet, but they're heading in the right direction."

In August 2020, Huckelberry described a "return to flight" for World View, which had curtailed operations for months due to the pandemic.

At the time, the company told Huckelberry that they expected to launch balloons "monthly" in 2021.

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Click image to enlarge

A rendering of the World View building.

Arizona Gift Clause

Article IX, Section 7 of the Arizona Constitution:

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

World View lawsuit timeline

January 2016: Board of Supervisors approves economic incentive agreement for World View

April 2016: Goldwater Institute sues Pima County

April 2017: Superior Court enters judgment in favor of Goldwater on the lease-statute issue

December 2017: Arizona Court of Appeals reverses trial court, ruling in favor of county on the lease-statute issue

August 2018: Arizona Supreme Court denies Goldwater's petition for review of the ruling on the lease-statute issue

September 2018: Superior Court enters judgment in favor of county on procurement issues

October 2019: Court of Appeals rules that Goldwater's claim regarding the procurement issues was moot

April 2020: AZ Supreme Court denies Goldwater's petition for review of the procurement issue

January 2021: Superior Court enters judgment in favor of county on Gift Clause issue

— from Pima County

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