It’s not so surprising that political campaigns are talking about Pima County’s 2016 deal to build a headquarters for a near-space balloon company.
The proposal to build a headquarters for World View Enterprises was a justifiably controversial incentive deal at the time, and the company has been sporadic in meeting its promised levels of employment. Naturally, some people in Pima County still talk about it with consternation.
What’s strange is that the debate has emerged in the campaign for U.S. senator rather than, say, Pima County supervisor.
The deal seemed questionable, intriguing and inevitable from the day it was first announced. I remember sitting in our office on Jan. 14, 2016, talking it over with colleagues, wondering how the public and board of supervisors were supposed to analyze the incentive package, digest it and take a position in the five days between the announcement and the vote.
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One thing that never came up, though, was the idea that it amounted to Mark Kelly stealing from the taxpayers. One of four founders, Kelly stood to benefit if the deal passed, which it did by a 4-1 vote, but he would benefit mainly if the company thrived, not directly from the county’s incentive package.
The idea he individually took taxpayer money, though, has become central to one of the country’s most closely watched U.S. Senate races. Sen. Martha McSally and the National Republican Senatorial Committee have focused their attacks against Kelly on the idea that he took $15 million in money from Pima County taxpayers.
It’s an absurd claim, a lie in fact, but it helps build their preferred narrative about him, encapsulated in their slogan “He’ll do anything for a buck, say anything for a vote.â€
One thing he didn’t do is “pocket†$15 million of taxpayer money. Chris King, a local Republican activist, is unnamed in one of the McSally ads, but is presented as an everyman upset about the deal.
“I was disgusted to learn that Mark Kelly pocketed $15 million of our money for his business, then laid off workers instead of creating new jobs,†King says in the ad.
That sentence combines a lie with a misleading statement. The lie is that he pocketed the money. The truth is that Pima County spent $15 million building a headquarters and spaceport for World View. The company is leasing the building back from Pima County and through March had paid the county $2,325,250. The county has suspended rent payments for its tenants, including World View, till the end of the year due to the economic crisis, but they are set to resume in January.
World View has the option to take ownership of the building once its 20-year lease is up, at which point it is scheduled to have paid more than $20 million in rent. In other words, if the deal goes according to plan, county taxpayers will make a decent profit.
Kelly, by the way, initially had an administrative role in the company at the outset but no longer does. He still has a stake in the company worth at least $100,000, according to a financial disclosure document.
The second part of McSally’s claim is that World View laid off workers. It’s true that they laid off 10 people in February 2019 out of a workforce of about 100 in what they called a restructuring. That brought the company’s workforce down below the threshold it is supposed to maintain through the first five years — 100.
The contract lays out minimum employment and wage numbers the company is supposed to maintain over the 20-year lease, rising to 200 employees for the second five years, 300 the third five years, and 400 the fourth five years. If it fails to do so, the county can pull out of the deal.
Even with the February layoffs, by October last year, World View said in an affidavit that it had 107 employees, and in March this year it had 112, making an average of about $92,000 per year, before the pandemic shutdown occurred. It was planning the deployment of a fleet of its high-altitude balloons, called, stratollites, across the North and Central America.
So, the company has not fulfilled the hopes raised by Pima County Administrator Chuck Huckelberry, who said in 2017 he expected the company to have 400 employees by now. But it was fulfilling its employment requirements for the first five years of its lease, of maintaining 100 employees at an average of greater than $50,000 per year till COVID-19 hit.
CEO Ryan Hartman says the company is down to about 90 employees now but is planning to launch the fleet that it had planned to deploy this year, next year instead.
Hartman launched a counter-attack on the claims about the company Thursday, sending a cease-and-desist letter through attorneys to television stations, asking that they stop running the NRSC ad.
“It is not OK for uninformed people to make false and defamatory claims about this company,†Hartman told my colleague Henry Brean. “It’s damaging, and we’re always going to speak up.â€
The attacks by McSally and the NRSC are perhaps best understood as extensions of criticisms the company and the deal have received since that day in 2016 when it was announced.
Supervisor Ally Miller was the only one of five board members to vote “no,†describing the incentive package as an example of “crony capitalism†involving political insiders like Kelly. She and her allies have tried to paint the deal in the worst possible light ever since.
Miller also supported a 2016 Goldwater Institute lawsuit against the deal, which claimed that the procurement practices and lease contract were illegal, and that the whole project violated the ÃÛèÖÖ±²¥ constitution’s gift clause.
Goldwater has lost on the first two claims, about procurement and the lease, after appealing to the state supreme court, and the Gift Clause litigation is still pending. In other words, at this stage, we can consider the deal legal, barring a surprise in the final stage of the lawsuit.
That doesn’t mean we can’t maintain our concerns about how the deal came about. It still bothers me that the county government worked on the project for months only to bring it to the public five days before the vote, when the votes necessary to support the deal had apparently been secured.
And it bothers me that, even if we put “clawback†provisions in the contract, demanding minimum employment and pay levels, there is little likelihood the county will ever exercise its right to pull out. Once we were in for the dime, we were in for a dollar.
But I shake my head at the misinformation being peddled in a U.S. Senate race, of all places, and I think we all ought to root for World View’s success.
Although the ads would have you believe the company’s story is over, it’s actually in its early years and could still work out well for all of us.