PIMA COUNTY – The Goldwater Institute will appeal a ruling by the Arizona Court of Appeals in the case of Pima County’s construction contracts for the headquarters building leased to World View in 2016. The Court ruled against the Institute on the basis that the plaintiffs lacked standing.
Goldwater sued the County in 2016 over the construction of the building to be leased to World View, asserting several violations of state law. Goldwater argued that there was no need to forgo standard competition requirements.
Pima County Superior Court Judge Catherine Woods in August, 2018, granted the County’s request for partial summary judgment with respect to one of the claims in Goldwater’s complaint based on the false premise that there were a number of communities vying for the company.
Goldwater appealed Wood’s baseless decision. The Appeals Court, though, declined to rule on it because Goldwater, which is representing three county residents, did not pursue enjoining the County from continuing with construction while asserting that the contracting was improper.
The court, Monday, wrote: “… the taxpayers could have preserved the possibility of a meaningful remedy by seeking to temporarily enjoin performance of the disputed contracts pending the outcome of the lawsuit. They did not do so, however, despite ample opportunity. The taxpayers filed suit less than three months after the contracts were entered, and more than eight months before the facility was substantially completed. Indeed, the taxpayers maintained that the design and construction contracts still had not been fully paid in June 2017—fourteen months after they filed their lawsuit. A live controversy therefore evaded review only because the taxpayers did not take appropriate legal action to attempt to preserve one. We therefore decline to decide this moot issue.”
Goldwater Institute Tim Sandefur told Capitol Media Services that he will appeal the case in the Supreme Court. Sandefur said the Appeals Court ignored “the essence of the case,” which was the “decision of the county to accept free services from the architect and the contractor ahead of the no-bid contracts they eventually were awarded.”
“Huckelberry hired his cronies because they give him freebies and they know people,” Sandefur told Capitol Media Services. “And so people like you and me, we can’t compete if we were contractors because we don’t know the right people and can’t afford to give freebies.”
At the time the Institute filed the lawsuit, many questioned the failure to request an injunction.
The Institute’s lawsuit against the County for a violation of the Gift Clause remains in the courts as well. The Institute argues that the County violated the Gift Clause by spending over $15 million in taxpayer funds on a private enterprise.
World View has sparked controversy a number of times. Questions about Chinese investors in World View Enterprises haunt Senate candidate Mark Kelly. Yet the company is still struggling to get off the ground in Pima County.
In 2015, Pima County taxpayers made the initial investment in the risky start-up.
That $15 million dollar investment by Pima County was made on the theory that World View’s private business would help boost the local economy. The County financed construction of a 135,000 square foot facility on 12 acres of county-owned land, to be used by World View as its headquarters. The facility included a balloon launching pad, and a building for manufacturing the balloons.
At the time of the investment, Pima County Administrator Chuck Huckleberry and his team were advised that a balloon launch was not guaranteed from the location due to its proximity to the Tucson International Airport, and Davis Monthan Air Force Base.
In 2017, World View reached out to the City of Benson in order to launch from there. According to meeting minutes “Worldview likes the airport and they’ve launched several high-altitude balloons from there, adding it has been going really well. Mr. Hamilton then stated Pima County built Worldview a facility in Tucson that they are leasing, but the problem is when they want to launch, due to the controlled airspace, Tucson will only give them 15 minutes and they need 4 or 5 hours, whereas in Benson, they usually come in at 9 or 10 at night and begin setting up, and then they launch the next morning at dawn and after cleaning up, they are gone by 7:30 or 8:00 a.m. Mr. Hamilton stated this has been a very positive relationship.”
In early October 2019, Huckelberry sent out a memo touting the successful test flight. In his memo, Huckelberry shared a news article regarding the “milestone” test flight. As expected, the flight launched from Page, Arizona. Once off the ground, the 32-day mission was controlled from the Pima County site, according to the article.
World View is best known now for an explosion of balloon as it was being filled with hydrogen in 2017. Not since the Hindenburg disaster has hydrogen been used to fill balloons in North America.
In his memo, Huckelberry claims “World View Enterprises Headquarters employment has now reached 114 employees, on track to get to 135 employees by the end of 2019, and to 160 full time employees by June 2020.”
One of those employees is Mark Kelly’s daughter, Claudia. According to her Linkedin profile, Claudia works for World View as a “Business Opportunity Manager.”
In April 2016, World View announced it had raised $15 million Series B led by Canaan Partners. The round also included investments from the Chinese company Tencent.
Tencent, a multinational conglomerate, is one of the investors in Tucson, Arizona-based World View Enterprises, a space-tourism startup cofounded by Kelly. Kelly served as a strategic adviser to World View until earlier this year, when he officially launched his Senate campaign, according to his spokesman Jacob Peters. While Peters told the Arizona Capitol Times that Kelly “supports those protesting for democracy in Hong Kong,” Kelly himself has not come out publicly to express his support.
While Kelly is no longer serving in his adviser role at World View, he still has major investments in the startup, according to a financial disclosure filing from July 30. The filing shows he has between $100,001 and $250,000 worth of non-public stock from World View, and between $15,001 and $50,000 in stock options.
Kelly’s campaign did not respond to a request for comment as to whether he still has investments in World View.
In February 2019, World View laid off 10 employees in an effort to reorganize.
The Goldwater case:
This case challenges the legality of actions taken by Pima County as part of “Project Curvature,” whereby the County provides facilities at taxpayer expense to a private company called World View—which is supposed to operate a luxury tourism business taking passengers on rides to the stratosphere in specially made high-altitude balloons, and also running high-altitude scientific experiments.
The County embraced the project on the theory that World View’s private business will help boost the local economy. As part of the project, the County financed construction of a 135,000 square foot facility on 12 acres of county-owned land, to be used by World View. The facility consists of a balloon launching pad, a building for manufacturing these balloons, and a headquarters building for World View’s corporate operations.
The County paid for the design and construction of these buildings, and retains title to them and the land. In this stage of the case, the focus is on the County’s selection of the architect (Swaim) who designed, and the contractor (Barker) who built those facilities for the County. Appellants are taxpayers who contend that the County violated state and county procurement laws in selecting Swaim and Barker for the project.
● Beginning in the summer of 2015, Pima County officials sought to entice World View to locate its business operations in the County, as part of an economic development plan.
– Among other things, the County built facilities for World View—including a construction facility for the manufacturing of high-altitude balloons, a launch pad for these balloons, and a headquarters building for World View.
– The County owned and still owns these buildings, but they are used exclusively by World View.
● As the Superior Court correctly concluded, County Administrator Chuck Huckelberry “selected” (indeed, “hand-picked”) Swaim and Barker to work on the project in August 2015.
– He did so without going through the procurement process required by state or County procurement laws, and without sufficient justification to invoke the exceptions to those rules provided by A.R.S. § 34-606 or Pima Procurement Code § 11.12.060(A)(1).
● The Superior Court rightly found that from the beginning, he “had no intention of pursuing a competitive bidding process, or encouraging the Pima County Board of Supervisors to do so.”
– Instead, he chose Barker and Swaim at the project’s inception in August 2015, and began “receiv[ing]” their services at that time—“when, because there was no looming deadline to complete the project on an accelerated schedule, it was not ‘impracticable’ to allow others the opportunity to bid for consideration on the project.”
– To be more specific, some time before August 12, 2015, Huckelberry selected Swaim to design the World View facilities.
– Shortly thereafter, he selected Barker to construct those facilities.
– Neither Barker nor Swaim had any experience designing or building a balloon launch pad or a balloon manufacturing facility, and had no particular expertise in this area.
● A week later, on August 20, 2015, County officials met with Barker, Swaim, and World View, and this became the first of a series of meetings and exchanges by email and telephone, during which Barker, Swaim, World View, and the County planned the facilities and created and revised construction cost estimates.
– There were between five and ten in-person meetings (in addition to countless phone calls and email exchanges) between August 2015 and January 19, 2016.
– During that time, Barker provided between five and ten estimates, and Swaim revised its plans several times.
– Swaim devoted the working hours of Mr. Swaim both himself and an employee to the project.
● The planning was quite extensive, and involved such specific details as the degree of flatness in the construction facility’s floor, the number of columns inside the warehouse, and the exact cost of the chip seal.
– In fact, the planning was so extensive that by January 19, 2016, the planning was already 30 percent complete.
● No other architect or contractor was ever invited to participate in any of these meetings, discussions, or plans, or given any opportunity to provide design or preconstruction services or to work on the project in any way.
– Sometime around October 2015, this team (the County, Barker, and Swaim) learned that World View wanted the project completed by November 2016.
● On October 23, 2015, Huckelberry submitted a formal project proposal to World View on the County’s behalf.
– In it, he recommended that Swaim be the project architect and Barker be the contractor. On December 23, 2015, World View accepted that proposal—including officially agreeing to Swaim as the architect and Barker as the contractor—and stated its desire that the facilities be completed by November 2016.
● On January 19, 2016, Huckelberry submitted to the Board of Supervisors a memorandum he had prepared in the preceding weeks in which he laid out the proposal for the World View project.
– (Prior to that time, he had not discussed the project or his meetings with members of the Board.) No written request for an emergency or limited-competition procurement was prepared prior to January 2016, nor was a limited procurement process for the World View project created prior to January 2016.
● In his January 19 memorandum, Huckelberry recommended that the County approve the project and award the contract to Swaim as architect and Barker as contractor. He gave two reasons:
– first, that “[t]hese two firms [had] provided months of substantial services without compensation to provide the necessary architectural programming and design and cost models” on the project
– and second, that “[g]iven the required facility delivery date of November 2016 and because of [Barker and Swaim’s] prior involvement and detailed understanding of World View[’s] requirements,” it would be “impracticable” to “compl[y] with the full provisions of the [procurement] statute” by allowing other firms to bid on the architecture or construction contracts.
-Barker and Swaim were not paid, and will not be paid, for their pre-January 2016 work on the project.
-Messrs. Barker and Swaim testified that they provided their services for free during that period because they hoped they would be awarded the contract in the end.
-Moffatt testified that it is “not unusual” for firms to do this as “part of their marketing.”
– Their hopes proved fruitful: the County did indeed award them the contract, in part as a reward for those free services.
● It was only because Swaim and Barker had already been providing services to the County for five months before the January 19, 2016 Board meeting that the Board concluded that Swaim and Barker could complete the project in time.
– Not only had Swaim and Barker already completed 30 percent of their planning for the project before January 19, 2016, but what the trial court called Swaim and Barker’s “five month ‘head-start,” was so extensive that these two firms were able to proceed with the project at a record-setting pace after it was officially approved. The plans they had prepared before that time required only minor modifications afterwards.
-They were able to obtain steel and other materials on what Mr. Swaim called “one of the fastest project schedules I’ve ever seen.”
● Simply put, Huckelberry and his staff circumvented Title 34 and County procurement ordinances by procuring these services in August 2015 and working with these firms in private to such an extent that by the time the Board was asked to consider the matter, the preconstruction services were already a third of the way complete and it appeared impracticable to hire anyone else. In January 19, 2016, the County decided it would be hard to switch horses midstream. But it chose which horse to ride in August 2015, when Huckelberry “select[ed]” them and the County began “receiv[ing] their services.”
● The Superior Court agreed with this interpretation of the facts. But it held as a matter of law that this did not qualify as unlawful “procurement” because Huckelberry is not an “agent” under state procurement laws, and since only agents are legally permitted to procure, his actions were not actually procurement, and were therefore lawful.
● This holding was illogical and incorrect as a matter of law and should be reversed.