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Appeals court OKs Pima County deal with World View

Judges rule economic development authority trumps state bidding rules

A state appeals court ruled Thursday that Pima County had the ability under state economic development laws to bypass requirements for collective bidding. The county was sued over a lease provided to high-altitude balloon company World View.

A three-judge panel found that the county did not break state laws in directly negotiating a 2016 lease with the company for a custom-built facility south of the Tucson International Airport.

The ruling is a "strong affirmation of the state statutes controlling economic development," said Sharon Bronson, chair of the county Board of Supervisors. "It will allow us to grow jobs and play to our economic strength in aerospace and defense."

The decision is a "is a clear victory for county economic development," said Pima County Administrator Chuck Huckelberry. "The Goldwater Institute was off-base in attacking economic recovery in Pima County. While I can understand their opposition to sweetheart development deals in Maricopa County, they should keep their hands off the real job growth and economic development plans in Pima County."

Goldwater representatives indicated they were set to appeal to the state Supreme Court — a possibility that Bronson acknowledged.

Saying the decision allowed for "secret backroom deals," Goldwater said the court "opened the door to greater government abuse."

"Competitive bidding helps guard against favoritism, fraud, and public waste," said Goldwater attorney Jim Manley.

A World View representative declined to comment directly on the ruling, saying that was up to county officials.

"World View remains excited to call Pima County and Tucson home," said company spokesman Andrew Antonio. "We’re incredibly grateful for all of the local support we continue to receive."

The Board of Supervisors voted in January 2016 to front $14.5 million to build a factory and launch facility on the South Side. World View agreed to pay rent for 20 years to repay the costs of the structure.

The deal was questioned by Supervisor Ally Miller, who then — according to messages to her staff that she attempted to keep from the public — worked behind closed doors with the libertarian Goldwater Institute to craft a lawsuit to reverse the deal. Despite the documents, Miller has denied working with Goldwater.

While the suit 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.

The county appealed, and the appeals court agreed with Thursday's decision, overturning the earlier ruling.

Judge Peter Eckerstrom, joined by Judges Garye Vásquez and Karl Eppich, ruled that Arizona's economic development law allows counties to lease property at less than full market value if there is a demonstrated benefit to taxpayers.

The county had argued that agreements made under the economic development statute did not have to comply with the auction provisions of another state law. The appeals court judges agreed.

"By its own terms, § 11-254.04 contains no competitive bidding requirement. To the contrary, competitive bidding directly opposes its language and the purpose conveyed thereby: to empower counties to negotiate directly with specific lessees and create deals favorable to those entities," Eckerstrom wrote.

"That a county may spend monies upon determining the lease 'will assist in the creation or retention of jobs,' necessarily contemplates that a board may do so by offering a favorable lease to a particular employer. § 11-254.04(C)," the ruling said. "To require competitive bidding in such a circumstance would only frustrate that purpose by driving up the price and thereby nullifying the very power the statute grants: the power to spend monies for economic development."

The decision noted that the state law mandating a competitive bidding process to lease property includes a clause limiting it to instances in which other laws grant counties the ability to craft leases.

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"We interpret this limitation to mean that not every power granted to those boards is constrained by the competitive bidding requirement," the decision said.

World View

The startup plans to offer top-dollar balloon rides to the stratosphere as a marquee attraction for what will at base be an operation carrying scientific instruments and communications gear to high altitudes. Company representatives have said that World View has lined up government and corporate contracts to loft the instruments, including military and NASA applications. The deal with the county calls for World View to eventually employ 400 workers at the site.

World View founders Jane Poynter and Taber 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 the new company, refused to make public many financial details of the company. During the 2016 meeting in which the deal was OKed by the supervisors, Miller heatedly questioned them about their plans, but didn't receive many specifics during the public session.

In addition to space tourism flights that are projected to cost $75,000 per passenger on what Poynter described as "very high-tech, high-altitude ballons," World View fill focus on carrying scientific instruments and communications gear nearly to the edge of space.

World View agreed to pay rent on the facility for 20 years, totaling about $23.6 million. The cost to taxpayers, after interest is included, will be about $20 million.

County officials said in early 2016 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.

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.

Although Supervisor Miller is named as a defendant in the suit, as are each of the other supervisors, the District 1 Republican worked behind the scenes with Goldwater on the suit before it was filed, documents she attempted to cover up demonstrate. Miller lost a 4-1 vote as the county board approved the contract.

Although Miller repeatedly denied any connection to the suit filed by the Goldwater Institute over the county's backing of the tech firm, her private message exchanges with a former staffer show otherwise.

In April, a number of local business groups called on Goldwater to drop the suit, including the heads of of the Metro Chamber, Sun Corridor, SALC and Arizona Hispanic Chamber of Commerce.

"We believe that sound public-private partnerships are critical tools in fostering a strong climate for economic growth and new job creation throughout Arizona. A lawsuit stemming from Pima County’s project with World View Enterprises, Inc. not only could result in Southern Arizona forfeiting a hard fought economic victory but also unnecessarily would call into question our state’s capacity to grow its innovation economy," a letter from the business leaders said.

Appeals court ruling

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1 comment on this story

Dec 14, 2017, 4:56 pm
-1 +0

“No reasonable person would argue that the stratosphere will, in the near future, replace Disneyland as a vacation destination for middle-class families.”

Umm, $75,000 per person compared to $500 for Disneyland and THAT’S considered middle-class?

I must be living far below UNESCO sub poverty levels.  I needs my $1,000,000/mo. welfare check to help bring me up to middle class levels.

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A rendering of a World View balloon.