Court pops Pima County's deal with World View, rules support violated Az Constitution
High-altitude balloon company recently began pumping up 'space tourism' plans, again, but jobs still well short of original contract
The Goldwater Institute won an appeal Wednesday, part of a years-long legal fight over an economic deal designed to boost the work of high-altitude balloon firm World View in Pima County.
The libertarian interest group succeeded after a series of losses in Pima County, convincing a three-judge panel at Arizona's Court of Appeals the economic deal between local government officials and World View violated the state Constitution's gift clause.
The decision comes as World View ramps up employment numbers, and announced renewed plans to begin offering "space tourism" rides to high altitudes for $50,000 per flight.
Last year, Judge Paul Tang ruled in Pima County's favor, finding that while Goldwater's arguments seeking to toss out the deal were "eloquent," the county met the requirements laid out by Arizona law to provide support for the private company as an economic development project.
In his ruling, Tang rejected Goldwater's claims that the county had violated the gift clause of the Arizona Constitution, ruling 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, which sits south of the Tucson International Airport on the aptly-named Aerospace Parkway.
However, Presiding Judge Karl Eppich—backed by Vice Chief Judge Christopher Staring and Judge Sean Brearcliffe—reversed Tang's decision. Eppich ruled the deal is an "unconstitutional subsidy" that is "grossly disproportionate to the value of the World View facility." The value of the facility would be $14 million in 2036, and would be usable for another 30 years, Eppich ruled. At the end of the 20 year lease, World View "has the option of purchasing the facility and land it sits on—which will be worth $14 million in 2036—for a mere $10."
"The 'give' then, by Pima County, is $14 million and its 'get' is $10. World View will be expected to pay .0000007 percent of the value of the Leased Facility to own it outright," Eppich found.
"We’re obviously disappointed in the decision by the Court of Appeals over the county’s economic development lease-purchase agreement with aerospace firm World View," said Pima County Administrator Jan Lesher.
"After numerous wins over the past six years in the politically-motivated lawsuit filed by the Goldwater Institute, the county was confident the appellate court would agree with Pima County Superior Court Judge Paul Tang that $25 million in rent payments—$5 million more than construction and financing costs—by World View over the term of the lease would be adequate consideration under the state’s gift clause for purchase of its headquarters building," Lesher wrote in a memo to the Board of Supervisors.
The county board will "consider the issue at its Nov. 1 meeting and decide whether to appeal the case to the Arizona Supreme Court," she wrote.
The Goldwater Institute called Wednesday's decision a "major win for Arizona taxpayers," adding Pima County officials violated the state Constitution by adopting what they called a "multimillion-dollar subsidy" for World View.
"The county adopted the plan in 2016 as part of a scheme to improve the economy in the Tucson area," wrote Timothy Sandefur, the vice president for legal affairs at the Goldwater Institute. "But the project did not deliver the employment numbers that county officials claimed it would, and after half a decade, the company still hasn’t succeeded in providing any passenger rides."
"The company’s promised return on investment never materialized, and the undertaking has proven to be a 'balloondoggle' of epic proportions," Sandefur wrote.
Although county officials could appeal the decision to the Arizona Supreme Court, Sandefur wrote, "it seems well past time for Pima County officials to admit that this entire deal was both illegal and foolhardy. County governments exist to protect the rights of citizens and allow them to pursue their own business in their own way—not to pick winners and losers in the marketplace, or gamble with taxpayer money. When they do, the consequence is often that taxpayer money simply floats away."
World View officials did not immediately respond to a request for comment.
World View expanding
Earlier this month, World View celebrated Space Week and said it will begin sending tourists to the edge of space on leisurely balloon rides by 2024. The company began selling tickets at a cost of $50,000 each, reserving 1,200 slots for fights to send up to 100,000 feet where they can see the curvature of the planet and the darkness of space, and "rediscover" Earth.
Phil Wocken, the marking director for World View told the Tucson Sentinel earlier this month, the company will eventually offer space flights for seven spaceports, each located near one of the Seven Wonders of the World. In Arizona, flights will be launched near Page, Ariz. so tourists can see the Grand Canyon.
The company plans to fly balloons from Queensland, Australia, to view the Great Barrier Reef; from Kenya, to view the Serengeti; from Norway to see the Aurora Borealis; from Brazil, to view the Amazon river; from Egypt to see the Pyramids of Giza; and from Mongolia, to see Great Wall of China. Because flights rely on good weather, as part of its package, the company will offer 5-day-long stays at resorts, and explore each location.
While flights will be spread around the world, Ryan Hartman, the CEO for World View told the Sentinel the company will "always remain headquartered" in Tucson, and the company "will always operate remote sensing systems here and the research and development."
Along with space tourism, the company has spent the last several years launching high-attitude balloons for commercial uses, including communications and remote sensing.
Employment levels fall short
In Feb. 2019, the Tucson Sentinel reported that the number of World View employees in Pima had fallen far short of expectations. In addition to rent over 20 years — projected to cover the construction costs and interest borne by taxpayers — the company agreed to hire a certain number of well-paid workers to justify the county's investment.
However, World View's staffing fell well below of those projections, and for years, the company failed to have the 100 minimum workers required under the lease agreement. During the COVID-19 pandemic, the company slashed most of its workforce and paid around only one-third of its rent for 2020, according to a revised lease agreement.
In June 2021, the county and World View agreed to "restructure" the company's lease agreement for the building on Aerospace Parkway to help the company "in its effort to return its workforce to pre-pandemic employment levels and to adjust the salary and employment requirements to better reflect World View's expected future operations."
The company had attempted to convince county government to allow it to not pay monthly rent in the summer of 2020. Even though that permission — granted to several nonprofit groups that rent county buildings — was refused, World View simply didn't pay rent on the property for months that year.
Under the original lease, the company was required to have at least 200 employees making an average salary of $50,000 by 2022, while an economic analysis used to justify the lease claimed the company could have as many as 448 employees by this year. The company has yet to meet even the lower mark.
Under the new agreement, the company must have 125 employees through 2022 with an average salary of $60,000, and add 25 more each year for the next decade, increasing the workforce to 400 by 2033.
According to affidavits from World View to Pima County, on March 23, the company had 104 full-time employees—including 84 employees in Pima County, with an average salary of $99,361.
By Sept. 23, the company added 28 full-time employees, increasing the roster in Pima County to 112 people, with an average salary of $99,707.
The deal with World View raised questions, and hackles, hours after it was approved. Former Supervisor Ally Miller, sniped at the deal and questioned World View's 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.
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."
Eckerstrom 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 "an unproven, for-profit luxury adventure-tourism business" facilitated by the county deal.