In a major win for Arizona taxpayers—thanks to the work of the Goldwater Institute—a state appellate court yesterday declared that Pima County officials violated the state Constitution when they adopted a multimillion-dollar subsidy for the World View company, a business that’s supposed to take passengers on rides to the stratosphere in specially modified high-altitude balloons. The company’s promised return on investment never materialized, and the undertaking has proven to be a “balloondoggle” of epic proportions.
The Goldwater Institute filed a lawsuit on behalf of taxpayers to challenge the deal, which devoted some $15 million in public resources to the private benefit of a for-profit corporation. The county adopted the plan in 2016 as part of a scheme to improve the economy in the Tucson area. But the project did not deliver the employment numbers that county officials claimed it would, and after half a decade, the company still hasn’t succeeded in providing any passenger rides.
Pima County’s contract with World View involved the county borrowing $15 million, using government-owned buildings as collateral, and then spending the money to construct a headquarters building, a balloon manufacturing facility, and a balloon launch pad—all for Word View’s exclusive use. The company was then expected to repay the $15 million through monthly payments over the course of 20 years. At the end of that period, World View was allowed to buy the buildings for a mere $10.
In its decision yesterday, the court of appeals found that part of the deal to be the most objectionable. Even assuming the company survives for two decades and makes its monthly payments, the buildings the county constructed for World View will be worth some $14 million. To sell that “for a mere $10,” the judges wrote, would mean the county receives “.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.
That constitutional proscription is found in Article 9 of the Arizona Constitution, which 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.” That anti-subsidy provision is actually the strongest ban on corporate welfare in the United States, and the Goldwater Institute has pioneered enforcement of the prohibition, protecting taxpayers against schemes to enrich private interests at public expense.
The Goldwater Institute case against the balloondoggle began in 2016, and involved three stages of litigation—first in challenging the county’s cut-rate lease of the property, then challenging the county’s violation of Arizona procurement statutes through its back-room deal with the architect and the contractor, before reaching the constitutional issue decided today. (Although courts upheld the legality of the lease rates, a trial judge found that county officials disregarded the procurement laws when hiring the contractor and architect; an appellate court vacated that decision for technical reasons.)
Although they could appeal the decision to the Arizona Supreme Court, it seems well past time for Pima County officials to admit that this entire deal was both illegal and foolhardy. 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.
You can learn more about the case here.
Timothy Sandefur is the Vice President for Legal Affairs at the Goldwater Institute.
