A judge ruled Thursday that Pima County broke the law in its $15 million deal with the space balloon company World View.
The conservative Goldwater Institute sued the county over the deal in April, and in October asked a county judge to “declare (the lease) invalid” for violating state law regarding appraisals, auctions and rental rates.
In her decision, Pima County Superior Court Judge Catherine Woods sided with Goldwater and voided the lease deal the county made with the space firm.
The ruling deals with just one of four counts in the lawsuit, another of which alleges the county violated the Arizona Constitution’s gift clause in the World View deal. The other two counts deal with competitive bidding for construction of the facilities and county procurement requirements.
Jim Manley, Goldwater’s lead attorney, described the ruling as a win for taxpayers and said the county “is free to renegotiate the lease if they want to, but they’re going to have to comply with the law.”
County Administrator Chuck Huckelberry said he intends to recommend that the Board of Supervisors appeal the decision, which he said will not have any immediate effect on World View’s operations. With that appeal, the county would ask for a stay on the ruling.
“Our view is that until a court of record rules, which is the appeals court, the issue is open,” he said, adding that the county “followed the law” with the World View deal.
In early 2016, the Board of Supervisors agreed to build a launch pad and headquarters worth nearly $15 million on behalf of World View, and issue debt to pay for it.
Those facilities were recently completed and the company has moved in and begun operations near Tucson International Airport, according to Huckelberry.
Over the course of the 20-year lease, World View would pay back to the county the principal and interest, and a little more, according to memos on the deal from Huckelberry.
According to the lease terms, World View is required to employ 400 people by the 15th year of operation at an average salary of $60,000, Huckelberry has said. The facility is expected to generate $3.5 billion in economic activity over the 20 years, said a study commissioned by the county and Sun Corridor Inc.
When it comes to leasing county-owned property, Arizona law requires the property be appraised, that a competitive auction be held, and that any winning bid be at least 90 percent of the appraised value.
In its court filings, the county acknowledges those requirements and concedes that it did not follow them. However, it argued that a separate statute — one granting economic-development authority to counties, approved by the Legislature in 1994 — gave it all the power it needed to pursue the arrangement with World View and supersedes the law regarding leasing of county property.
That law allows Arizona counties to “appropriate and spend public monies” to promote economic development, which includes “leasing or conveyance of real or personal property ... that the board of supervisors has found and determined will assist in the creation or retention of jobs” or otherwise improve “economic welfare.”
Because counties already have the power to lease land, the law would be “superfluous” if it didn’t allow them to do so “in a different manner,” county court filings read.
“There are various ways for a property lease or sale to promote economic development, but none of them are consistent with” the leasing statute cited by Goldwater, county attorneys went on to say.
Huckelberry said if Woods’ ruling stands, it would render the economic-development law meaningless.
He previously told the Star if that law doesn’t allow for deals like World View, “why have it?”
But in her ruling, Woods wrote that if the state intended to exempt counties from leasing requirements with the later economic-development law, it likely would have done so “explicitly,” as “it has done many times for other worthy public purposes.”
She also argues that the leasing requirements do not render the economic development law “meaningless.”
“‘Economic development’ is not a magic phrase that vanishes taxpayer protections,” Manley said in a release praising Woods’ decision. “In fact, when the county conspires to subsidize a private company, that is exactly when you want the most robust protections in place.”
With regard to the other three counts, Manley said, “how we resolve the rest of the case really depends on what the county’s reaction is here.”
Huckelberry said the supervisors will be briefed on the ruling in an executive session Tuesday.