Voids $15 Million Development Deal With Pima County, AZ
A $15 million development deal closed more than a year ago between Pima County, AZ and World View, which hopes to carry passengers to the fringe of space under a massive balloon, has been struck down by an Arizona judge, raising questions about the status of the project.
Working under the agreement, World View has already constructed a 700-foot wide launch pad and headquarters facilities, with some offices already occupied by World View employees. The plan called for World View to lease the facility for 10 years, paying between $675,000 to $1.62 million annually in lease fees.
A suit challenging the deal was filed before anyone moved into the building by the Goldwater Institute, which said the lease was in violation in Arizona laws. Late last week, Judge Catherine Woods agreed, saying the lease should be cancelled, according to a report from GeekWire.
“Judge Woods’ ruling protects Pima County taxpayers from having to foot the bill for World View’s untested business model,” said Jim Manley, Senior Attorney at the Goldwater Institute in a statement posted on the organization's website. “Instead of relying on a sweetheart deal from taxpayers, World View will need to pay market rates to lease its building, just like every other business in Pima County.”
In November 2015, Pima County voters resoundingly rejected six ballot measures that proposed to let the County borrow hundreds of millions of dollars for economic development and tourism. Two months later, County officials secretly negotiated a deal to borrow $15 million to build World View’s headquarters, without taxpayer approval.
The deal used government-owned buildings as collateral to borrow money to build a 135,000 square-foot headquarters and balloon pad for World View. The company planned to charge $75,000 per balloon ride, but was only required to pay the County a fraction of the market lease rate for a custom-designed building.
“The County is free to renegotiate the lease,” said Manley, “but only after they appraise the building, hold a public auction, and lease the building to the highest bidder. All of that will protect taxpayers from illegally subsidizing a private business.”
The World View deal also violates the state constitution. The Arizona Constitution makes it illegal for the County to “give or loan its credit in the aid of, or make any donation or grant, by subsidy or otherwise, to any . . . corporation.” In Turken v. Gordon the Arizona Supreme Court decided that public expenditures must be for public purposes. The Court held that general economic improvement or potential job growth do not satisfy the Constitution.
The County conceded that it ignored Arizona laws that forbid counties from leasing land without auctioning it to the highest bidder. However, the County claimed economic development projects were exempt from this law. Judge Woods rejected that argument.
"‘Economic development’ is not a magic phrase that vanishes taxpayer protections,” said Manley. “In fact, when the County conspires to subsidize a private company, that is exactly when you want the most robust protections in place. Judge Woods’ ruling ensures those protections still apply to Pima County.”
(Source: Goldwater Institute news release and as cited. Images from file)
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