Court to decide if Pima County World View deal violated state leasing law

The Goldwater Institute and Pima County don’t see eye to eye on many things involving the 2016 World View Enterprises deal, but they agree on this much: The $14.5 million county-financed project did not go to the highest bidder at a public auction for a price at least 90 percent of the rental valuation, as state law normally requires for county leases.

The question now before Division Two of the Arizona Court of Appeals is whether the county should have followed that law, or if there are exemptions to it when counties are pursuing economic development projects.

In a February ruling, Pima County Superior Court Judge Catherine Woods agreed with Goldwater that the deal violated the state leasing law, a decision then appealed by the county.

While acknowledging it did not comply with the leasing law, the county argued that a later statute granting broad economic development powers to counties allows it to pursue leases that do not abide by the older law. That law’s definition of economic development activities includes the “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 will otherwise improve or enhance the economic welfare of the inhabitants of the county.”

If that statute granted no new powers to counties with regard to leasing, Deputy County Attorney Regina Nassen argued before the three judge panel Wednesday afternoon, “then that language really is completely meaningless.”

“A more natural and harmonious reading of the two statutes is that (the newer law) creates an exception to (the older law) ... for a specific class of leases: those entered into for economic-development purposes,” the county argued in a July brief to the court.

The hearing dealt with just one of the four counts included included in a 2016 complaint filed by Goldwater in response to the World View deal, in which the Board of Supervisors agreed to build a launch pad and manufacturing facility near the airport for the space balloon company.

World View is expected to pay that debt-financed investment back — and then some — over the course of a 20-year lease whose rents start below market rates but increase steadily over time. It also committed to employing hundreds of people at salaries above regional averages. Beside violating the lease law, Goldwater argues the World View deal also runs afoul of the Arizona Constitution’s gift clause, as well as state and county laws governing competitive bidding.

In August, Woods declined to dismiss the competitive bidding counts. The gift clause claim was stayed pending the outcome of the current appeal.

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Jim Manley, Goldwater’s lead attorney on the case, told the court if the Legislature intended for the economic development law to provide an exemption to the leasing law, it would have done so explicitly, as it has done previously.

Furthermore, such an exemption could be abused by counties that simply declare that any number of projects are related to economic development, thus circumventing rules designed to protect taxpayers from sweetheart deals with private businesses. Nassen disputed that this was a likely prospect.

“The appraisal, auction, and minimum price safeguards … place common sense limits on the county’s economic development authority,” Goldwater argued in an earlier brief.

The county is still able to pursue economic development with companies while abiding by the leasing law, Manley argued. He pointed that out under its terms the county can still offer a 10 percent discount on the appraised value and set other terms that would have to be met by the winning company.

Asked by Chief Judge Peter Eckerstrom if the requirements of the leasing law would conflict with such negotiations, Nassen said they likely would.

“It’s pretty hard to negotiate with a company meaningfully when everything always has the caveat, ‘oh but by the way, remember that we have to get it appraised and we have to auction it off for 90 percent, so somebody else might come in and take it out from under you.’”

The panel did not issue a ruling on the matter Wednesday, though a draft opinion has been provided to Goldwater and the county. After the hearing, Manley told the Star the draft — whose authorship was not revealed to the parties — is not in Goldwater’s favor, though the final decision of the full panel could reverse the draft’s opinion.

“Either way, the decision could be appealed to the (Arizona) Supreme Court,” Manley said.