TUCSON (CN) — A conservative think tank claims in court that local officials had stars in their eyes when they approved a $15 million subsidy for a balloon spaceflight company, touted as a high-tech economic boon for Southern Arizona.
Backed by the Phoenix-based Goldwater Institute, three taxpayers sued Pima County and its Board of Supervisors in Superior Court, claiming that a county deal with World View Enterprises violates the state’s gift clause and competitive-bidding rules.
World View is building a spaceport in Tucson from which it plans to launch balloons into the stratosphere. Eventually, the company hopes to take passengers to the edge of space —as high as 140,000 feet — in sealed capsules. Now it flies scientific payloads into near-space for NASA and Northrop Grumman.
Pima County approved the deal in January, saying it would bring more than 400 high-end jobs to the area and have an estimated economic impact of some $3.5 billion over 20 years.
“The biggest part of our business right now is serving these commercial customers who need a way to access the near-space environment,” World View’s director of marketing Andrew Antonio said in an interview. “That can range from applications for communications, to first-response and disaster recovery, to gathering better data for weather forecasting models.”
The Goldwater Institute, which represented the plaintiffs, highlights the space tourism aspect of the company’s business plan, saying in the complaint that it will cost $75,000 per ride, and that Pima County refinanced debt using public buildings as collateral to subsidize an “unproven, for-profit luxury adventure-tourism business.”
Under Arizona’s gift clause, taxpayer-funded economic development subsidies must have a genuine “public purpose,” which is lacking in the space balloon project, the complaint states.
“The benefits received by Pima County from this project, if they ever do arise, are grossly disproportionate to the payments Pima County has obligated itself to make and the risks it has undertaken to aid World View,” according to the complaint.
Responding to pre-lawsuit claims, Deputy County Attorney Regina Nassen defended the county’s investment in an April 5 letter to James Manley, the Goldwater Institute’s senior attorney.
“No reasonable person would argue that the stratosphere will, in the near future, replace Disneyland as a vacation destination for middle-class families,” Nassen wrote. “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.”
Nassen said the $15 million lease-purchase agreement approved by the Board of Supervisors is a legal “economic development initiative” that will create jobs and improve the local economy. She said the Arizona Supreme Court has ruled that such “indirect” benefits can establish a “public purpose” under the state’s gift clause.
“The Court has likewise repeatedly stated that it will defer to a political body’s determination of public purpose,” Nassen wrote.
World View’s Antonio said that the space tourism side of the company is only one part of its long-term plans.
“There’s a phenomenal amount of research and science that can be accomplished from these high altitudes in the stratosphere that isn’t currently being done,” he said. “So in a lot of ways we are developing this emerging stratospheric economy. We believe that there is a lot of growing demand for figuring out a different, more affordable accessible way to send payloads up to the stratosphere.”
The agreement calls for World View to complete and move into the new headquarters and spaceport by November. Antonio said Friday that date is still the goal.
“From an economic development perspective, you want to be at the forefront of technology, and everyone agrees unanimously that this is the era of commercial space,” he said. “For Arizona to have and build-out a footprint for commercial space, we think it’s really exciting.”
World View is led by Jane Poynter and Taber MacCallum, two of the original crew members of Biosphere 2. The company’s chief scientist is Alan Stern, who led NASA’s New Horizons mission to Pluto, and its director of flight crew operations is former astronaut Mark Kelly, husband of former Congresswoman Gabrielle Giffords.
The Goldwater Institute also objects to the agreement because Pima County awarded the building contracts to companies that it worked with in secret to develop the project, allegedly violating the state’s competitive bidding rules and mandatory public auction and appraisal laws.
But Pima County Administrator Charles Huckelberry, the lead defendant, said that he drafted the plan in secret because of competition from other states that were wooing World View. “In drafting the economic development agreements with World View, the county followed all of the enacted Arizona laws related to economic development incentives. Specific statutes that are used by a number of jurisdictions, as well as the state, provide that incentives can be made for economic development purposes,” Huckelberry said in a statement.
“World View principals worked directly with the highly qualified architectural firm of Swaim and Associates, Ltd., as well as the construction and cost-estimating firm of Barker Morrissey,” Huckelberry said. He added that “the companies did this work without compensation” before being awarded the contracts.
And, he said, Arizona’s competitive bidding law “allows for qualifications-based procurement of professional architectural services and construction-manager-at-risk services.”
“Hence, in any competitive process the county would have initiated in lieu of the manner in which we procured these services, it is likely that both the architect, Swaim and Associates, and the contractor, Barker Morrissey, would have been selected, given their prior uncompensated work helping to define the size, scope and extent of the facility required by World View.”
In her letter to Manley, Nassen also defended the deal as good business.
“Under the WV Lease, the County is obligated to spend no more than $14.5 million dollars building the County Facility,” she wrote. “Over the 20-year term of the WV Lease, World View will pay the County rent at a per-square-foot rental rate, which begins at $5.00 per square foot and periodically increases until it reaches $12.00 per square foot during the last 5 years of the term. During the term, the County continues to own the County Facility, which will not be conveyed to World View until World View has paid all amounts due under the WV Lease. At that point, the total amount paid by World View for the County Facility will exceed the County’s investment (including borrowing costs) by several million dollars. This transaction is clearly not so inequitable or unreasonable that it constitutes an abuse of the Board’s discretion.” (Parentheses in original.)
Goldwater Institute attorney Manley said in an interview Friday that the government’s role in economic development is to provide a healthy business environment, but that “doesn’t mean subsidies.”
“I hope private space exploration and tourism is the wave of the future,” he said. “But as long as the government is subsidizing it, we are just fooling ourselves.”
Lead plaintiff Richard Rogers et al. seek a declaration that the deal violates the gift clause and other laws, and an injunction stopping the lease-purchase from going forward.
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