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Arizona court shuts down 'corporate welfare' to high-altitude balloon flight company

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Tom Joyce

(The Center Square) – Pima County officials violated Arizona state law by giving a company a multi-million dollar subsidy, an Arizona appellate court ruled this week.

The Goldwater Institute filed a lawsuit challenging the legality of a deal made between Pima County and World View, a company that says it will take passengers on rides to the upper stratosphere using high-altitude balloons.

The Goldwater Institute challenged the $15 million in public resources to benefit a private, for-profit corporation. The county struck the deal in 2016, arguing that it would improve the Tucson-area economy. However, the project failed to deliver the employment numbers it promised and has not taken any passengers on rides yet.

The deal involved the county borrowing $15 million, using government-owned buildings as collateral, and then spending the money to construct a headquarters building, balloon manufacturing facility, and balloon launch pad. All of these things were for the exclusive use of World View. The company was expected to repay the $15 million with small monthly payments over 20 years. At the end of that span, the county would then sell the buildings to World View for $10.

In its decision, the court of appeals found the latter part of the deal to be the most objectionable.

The judges wrote that the buildings would likely be worth $14 million then, so it makes little sense to sell them for “.0000007 percent of the value” of the facilities.

“We find it difficult to believe that a facility with an approximate value of $14 million in 2036 can fairly be exchanged for $10 without violating our constitutional proscription against subsidies or gifts to private entities,” the judges wrote.

Article 9 of the Arizona Constitution says counties may “[n]ever give or loan [their] credit in the aid of, or make any donation or grant, by subsidy or otherwise, to any individual, association, or corporation.”

The Goldwater Institute says that this is the strongest corporate welfare ban in the country and that the organization “has pioneered enforcement of the prohibition, protecting taxpayers against schemes to enrich private interests at public expense.”

The Goldwater Institute first began opposing this subsidy back in 2016. The opposition involved three stages of litigation.

First, the Goldwater Institute challenged the county’s cut-rate lease of the property, then the “county’s violation of Arizona procurement statutes through its back-room deal with the architect and the contractor,” and finally the constitutional issue decided by the court this week.

The courts upheld the legality of the lease rates, but “a trial judge found that county officials disregarded the procurement laws when hiring the contractor and architect,” according to the Goldwater Institute. For technical reasons, an appellate court vacated that decision.

The decision could be appealed to the Supreme Court, but the Goldwater Institute says that would be a bad idea for Pima County.

“It seems well past time for Pima County officials to admit that this entire deal was both illegal and foolhardy,” the Goldwater Institute wrote. “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.”

A spokesperson for World View could not be reached for comment.