Tim Steller's column: Beale misled public about Project Blue contract

The vice president of Beale Infrastructure could not have been much clearer about the terms of the Project Blue deal.

At the June 17 meeting of the Pima County Board of Supervisors, District 4 Supervisor Steve Christy asked the Project Blue team a key question about the proposed sale of county land for the data center project:

“What happens if there is no annexation approved by the city of Tucson?” Christy asked. “What happens to the property?”

Beale vice president Logan Craig stepped to the microphone to answer: “Annexation is a condition precedent to closing. If that annexation does not occur, we will not be closing on the land per the contract, so it’ll remain county-owned property.”

Three months later, we are learning that’s not true. Beale Infrastructure told Pima County in a Sept. 17 letter, that they’re going ahead with the project in a different form because the contract allows it.

“While annexation into the City of Tucson was originally contemplated as a protective provision of the PSA (Purchase and Sale Agreement), only Beale can elect to waive that closing condition,” the letter says. “The PSA and Specific Plan approval for the project remain active and valid.”

In other words, they didn’t mean what they told the supervisors and the public June 17. The possibility of a Plan B was written right into the contract. And now they want to take advantage of it.

‘It was a true statement’

Beale and the project’s supporters disagree with my interpretation of Craig’s June 17 statement as, basically, a lie.

It “was a true statement on that date, because his statement referred to the original plan design involving the use of reclaimed water and a new pipeline that we were going to build, and annexation was an integral part of that specific development plan moving forward,” a Beale spokeswoman said in a written statement.

“However, following the City of Tucson’s decision not to annex the land, Beale sought input from Pima County about its updated, air-cooled design and received positive feedback on the updated plan. Beale then decided to move forward on the original Pima County site with the updated plan design given Pima County’s feedback.”

Rex Scott, the chair of the Pima County supervisors, told me much the same thing: “It was true in terms of the deal as we understood it on June 17.”

Christy told me, “It appears to me that the plan of annexation was the Project Blue people’s Plan A, and that there was a Plan B always in the works that wasn’t as obvious to everybody including me.”

“There were certain rights and parameters available to the Project Blue people even if their plan A failed,” he added. “In a contract, what matters is what’s inside the four corners of the contract itself.”

Vulnerable to misinformation

Back to homepage

Subscriber Login

Keep reading with a digital access subscription.

Subscribe now

If Christy is right — that there was always a Plan A that involved annexation into the city and a Plan B that didn’t — then Craig, the Beale vice president, lied.

I asked Beale Tuesday if there was a Plan B when the county board considered Project Blue. Their answer seemed to be yes: “It is typical for developers to develop more than one plan option, including not developing on a site, if one plan option becomes not technically or financially feasible to move forward.”

Negotiating a contract to allow for a Plan B, without the city of Tucson, was the company’s right, but it shouldn’t have misled the public about it.

The question, then, is so what?

There remains a three-member majority on the board of supervisors that supports the massive data-center project, which represents $1.2 billion in local investment. I talked with Christy, Scott and Supervisor Matt Heinz. They all remain on board and are unbothered by the June 17 statement.

“I agree that that was confusing,” Heinz said. “I understand why people might think that if what he said was exactly reflected in the black and white of the contract, we wouldn’t even be here. But that’s just not the case.”

It bothers me, though, that the board didn’t know there was the possibility of a Project Blue Plan B, a plan without the city’s participation, when they made this decision, and now they’re contractually bound.

In recent weeks, the board had two executive sessions getting legal advice about the contract and the new Project Blue proposal. Why were they vulnerable to this misinformation at the time they made this key decision? Why did the county draw up a contract that allowed only the buyers, a Beale subsidiary called Humphrey’s Peak, to waive the agreed-upon conditions?

Majority seems content

There’s no clawback we can legally demand for being misled. No contract renegotiation. No fee per lie. I suppose the board could demand a new vote on the new Beale plan. That’s something they are not owed legally, but morally, maybe.

But the board majority seems content with the current situation.

Where I see room for an apology of sorts is in the discussion of “community investments” that Beale says remain a part of their plan.

In the previous plan, the one the city rejected, the main community investment was an 18-mile pipeline that would distribute reclaimed water to the southeast side, including to the data center. That pipeline project was estimated to be worth at least $100 million.

With that pipeline off the table, we should be asking for that money to go elsewhere. How much affordable housing could $100 million build? How much worker education and training? How much solar power?

It seems to me especially appropriate that the focus on water resources present in the first proposal would shift to the other key resource used in this project — power, which is the main concern with all data-center projects.

As it stands, Beale is already claiming credit for using future renewable projects by Tucson Electric Power that were scheduled before Project Blue was even conceived.

It would be some solace if Beale could contribute to building its own renewable power, something that wasn’t already in the works, as part of this unanticipated Plan B.