Court of Appeals sides with Pima County, no bid necessary for project

The state Court of Appeals on Thursday said competitive bidding laws do not apply when counties are trying to lure a specific company to the area.

In a unanimous ruling, the three-judge panel acknowledged the purpose of competitive bids is to ensure that the county — and, by extension, the taxpayers — gets the most money for the property. But Judge Peter Eckerstrom, writing for the court, said that does not apply when the real goal is not immediate income but longer-term economic development.

Thursday’s ruling drew criticism from the Goldwater Institute, which represented three taxpayers who challenged the lease between Pima County and World View for a launch pad from which it hopes to launch individuals to the edge of space in balloons. The $15 million deal includes not only the lease of a 12-acre county-owned site but also construction of a launch pad and headquarters for the company.

“Competitive bidding helps guard against favoritism, fraud and public waste,” said Goldwater attorney Jim Manley. “By rejecting the necessity of this process, the court has opened the door to greater government abuse.”

Manley said the issue will be appealed to the state Supreme Court.

There is no question but that counties are generally supposed to seek bids when they lease out property.

But Eckerstrom said there’s no such requirement in another statute that governs economic development efforts. And he said that exception makes sense.

“The power to spend for the purpose of retaining or creating specific employer-tenants, by leasing at less-than-market value, is directly at odds with the competitive bidding process designed to produce full-market value without respect to the identity of the tenant,” he wrote.

In this case, the judge said, the county entered into a deal “with the express intent of creating specific numbers of jobs at defined salary levels.” And he said the county has concluded that World View’s operations — and, by extension, the lease — will have “a significant impact on the economic welfare of of Pima County’s inhabitants.”

Eckerstrom said that means the county, having concluded it was acting under its economic development powers, “was not bound by the competitive bidding process, but was free to negotiate and contract directly with World View.”
The judges brushed aside Goldwater’s contention that Pima County could have promoted economic development and still sought bids, perhaps by limiting potential bidders to those in the aerospace and technology business.

“Imposing a bidding process, under any terms and conditions, becomes both cumbersome and illogical when the goal of the underlying transaction is not to secure the highest price for the lease, but to induct a specific lessee to enter into an agreement,” the court said.

Manley, for his part, said the economic development argument does not hold up, saying World View, which has yet to take any space tourists aloft, has made “a vague, unenforceable promise that the company will create jobs.”

Thursday’s ruling, even if upheld by the Supreme Court, does not end the legal battle. Goldwater still has a separate claim against Pima County that the deal violates a provision of the Arizona Constitution that makes it illegal for governments to give or lend money to private enterprises.

World View is in direct competition for the nascent space tourism industry with Richard Branson’s Virgin Galactic.

The difference is both technology — a pressurized cabin beneath a balloon versus a jet-powered rocket — and the cost. World View contends it can take people to 100,000 feet, about 19 miles, and remain there for up to two hours at a cost of $75,000 per seat.

Virgin Galactic, by contrast, was most recently seeking $250,000 per seat, but with the promise of taking people up to 68 miles above the earth, with the entire flight lasting two hours.

At this point, neither technology has yet to transport its first tourist.

World View had said in 2014 it planned to have its first launch in 2016; by 2015 the date for taking passengers was predicted at late 2017.