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Supreme Court rejects appeal on economic development case

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Pima County did nothing wrong when it did not seek bids for a site that ultimately became the World View high-altitude balloon launching site, the Arizona Supreme Court ruled Wednesday.

In a brief order, the justices refused to consider arguments by the Goldwater Institute that state laws specifically require governments to seek the best offer when selling off property. Instead, they left standing, without comment, the ruling of the Court of Appeals which concluded that competitive bidding laws do not apply when counties are trying to lure a specific company to the area.

Wednesday’s ruling is more than a victory for Pima County. It buttresses the power of all Arizona counties to make special lease deals with desired companies, regardless of whether others may be willing to offer more for the property.

But the order does not end the legal fight.

The Goldwater Institute, which represents three taxpayers, still has the right to pursue a separate claim that the other part of the deal — constructing a headquarters and launching paid for World View — violated the “gift clause” of the Arizona Constitution. No date has been set to hear legal arguments on that.

At the heart of the legal battle is a lease between Pima County and World View which wanted a site to launch balloons which would carry individuals to the edge of space. 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.

In general, state laws require competitive bidding when leasing or selling public property. The idea behind that is to get the best deal for the taxpayers. But a separate law specifically gives county supervisors the power to “appropriate and spend public monies for and in connection with economic development activities.”

Based on that, the state Court of Appeals concluded, in essence, that the specific power to spend money for economic development trumps the bidding requirement.

“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,” wrote appellate Judge Peter Eckerstrom.

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.”

But Goldwater Institute attorney Timothy Sandefur said that misses the point.

“There are plenty of ways to engage in economic development while still following the rules regarding leasing property,” he said.

Sandefur acknowledged that requiring the county to lease property to the highest bidder could, in fact, result in someone other than the desired company getting the property. He said, though, that’s the way the system should work.

“Government should not be in the business of trying to bribe businesses to come in and locate there and – quote – create jobs,” he said. Sandefur said he puts that phrase in quotes because creating jobs through government subsidies “is not the same thing as a healthy economy.”

“We could all have jobs if the entire country were hired to dig holes and fill them back up again,” he said.

“When the government is in the business of taking money from some people and giving it to other people with the excuse of creating jobs, what it’s really doing is wasting taxpayer money in a political game that rewards politically well-connected businesses and the politicians who favor them at the expense of taxpayers,” Sandefur said.

The gift clause argument that remains has nothing to do with the failure to seek bids on the property lease, at least not directly.

Instead, Sandefur said, it goes to the county spending $15 million to construct a headquarters, balloon-construction facility and a launch pad. That, he said, is a subsidy to World View.

“The Arizona Constitution prohibits subsidies to private businesses,” he said.

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 has said 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.

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