Arizona shows that corporate welfare can be defeated if your constitution prohibits it and if you have dogged champions of free enterprise ready to challenge it.
The state appeals court Thursday struck down a $15 million subsidy from Pima County to a hot air balloon business. The “baloondoggle” violated the state constitution’s gift ban.
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World View is a private company from Tuscon whose business is flying hot air balloons up to the edge of space. They do this for scientific reasons as well as tourism. In 2015, the company started begging for handouts, threatening to leave the state. To show they meant business, World View began asking various state governments to bid for their business, claiming that a supposed 400 to 800 jobs would come to their state if the politicians would only give enough corporate welfare.
Pima County, Arizona’s second most populous county, “won” the bidding war. As the appellate court ruling puts it, “Pima County agreed to build an administrative and balloon manufacturing facility on a twelve-acre, county-owned parcel in the city of Tucson (‘Leased Facility’) and to lease it to World View for twenty years; the LPA also granted World View an option to purchase the improved parcel for $10 at the end of the term.”
Pima County spent $15 million building the spaceport for World View — again, with the promise to sell the land and facility to World View for $10 (yes, like a $10 bill with Alexander Hamilton on it) in 20 years.
This sort of special corporate welfare deal happens all the time. Typically, such schemes fail economically but pay off politically, as politicians get loyal donors and backers out of them.
So why did this one fail legally? Because Arizona’s constitution bans gifts from the government to private companies.
“Neither the state, nor any county, city, town, municipality, or other subdivision of the state shall ever give or loan its credit in the aid of, or make any donation or grant, by subsidy or otherwise, to any individual, association, or corporation,” reads Section 7 of Article 9.
The Goldwater Institute, which aided in this litigation, writes, “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.”
With this victory as inspiration, more states should pass gift bans into their state constitutions.
