KRWG

Some Question Heavy Taxpayer Investment In Spaceport America

Dec 8, 2017

Credit spaceportamerica.com

Virgin Galactic says that more jobs are heading to New Mexico. The Santa Fe New Mexican reported the company was planning to move 85 more employees to the Las Cruces area, signaling the company may be closer to launching from Spaceport America.

This past summer the facility hosted local business and government officials to gather feedback for a major event for Virgin’s first launch.

Spaceport America officials are touting this as a positive step in bringing jobs to Sierra and Doña Ana Counties. Two counties that have already invested heavily in what some say are long term, risky investments. 

In 2011, Spaceport America opened with Virgin Galactic as its anchor tenant. Delays including a fatal test crash have prevented the company from taking people into space for a ticket price of $250,000.

Spaceport America cost taxpayers nearly a quarter of a billion dollars to build. Doña Ana and Sierra Counties approved a spaceport gross receipts tax that has drawn criticism due to the Spaceport using “excess funds” from the tax for daily operations.   The New Mexico Finance Authority voted to allow the spaceport to continue this practice for at least another year.

Economist Dr. Henry Hertzfeld is Director of the Space policy institute at George Washington University.  He says spaceports are long-term, risky investments. Hertzfeld researches the economic and legal issues of space policy and commercial uses of space technology.

“These are long-term investments, they are not one that oh you build a building and everyone will come and attract people. To be successful in this business you’re talking possibly ten, twenty years development and that’s longer than most businesses plan for, and that’s one of the reasons if the state does use tax money, we can’t predict today whether they’ll be successful in twenty years or not,” said Hertzfeld.

Dr. Henry Hertzfeld researches economic, legal, and policy issues of space and advanced technological development.
Credit Henry Hertzfeld

In a KRWG television forum, Spaceport America CEO Dan Hicks said the Spaceport is not even close to being the hub he wants it to be. 

“We’re only three percent of where we need to be to be a true transportation hub to have access to space,” said Hicks.

Hicks said New Mexico has to compete with coastal spaceports in other states to land more companies for Spaceport America. 

“We’ve got a lot of growth to do and a lot of progress to make to be competitive with the grade excess DOD, and NASA facilities that are on the coastal spaceports that are operating with some of the heavy lift capability,” said Hicks.

Credit Spaceport CEO Daniel Hicks

Proponents often sell Spaceport America’s appeal on its location, near one of the largest restricted air spaces available with three nearby military bases.

But private space companies like Space X and Blue Origin are investing in facilities near the coasts. We asked Dr. Henry Hertzfeld if he knows of any research to support an advantage for an inland spaceport.

“No I don’t, and if you look at where most spaceports are located they’re launching over water. There’s always a risk of a failure, and if you’re launching you don’t know where that may be,” said Hertzfeld. “Parse out the risks of damage to human beings on the earth, it is still pretty low, cause these are not densely populated areas.”

Taxpayers are the major investor in Spaceport America. In an independent auditor’s report issued to The Spaceport Authority and The New Mexico State Auditor’s Office, In Fiscal year 2016 just over $2.2 million dollars in revenue came from charges for services with over $8 million coming from government….including more than $6.5 million from gross receipts taxes and nearly a million dollars from the state general fund. 

http://www.saonm.org/media/audits/495_New_Mexico_Space_Port_Authority_FY2016.pdf

Dowd Muska is with the Rio Grande Foundation, a nonprofit that promotes the free market philosophy.  Muska says continued government spending on the spaceport doesn’t make sense.

“I think it’s time to start looking at privatizing this facility and walking away as difficult as it is on these sunk costs. The taxpayers of New Mexico have committed literally hundreds of millions of dollars to a facility that has yet to show much of a payoff and there’s not any strong evidence that it ever will,” says Muska. 

In an interview this past summer, Spaceport CEO Dan Hicks told KRWG that if the facility were privatized, other companies would not want to use the facility.

“They’re gonna wanna go to an impartial, an unbiased, governmental run capability, an agency-run capability, that’s for the good of the people, that’s for the good of the nation,” says Hicks.

Dowd Muska is research director at The Rio Grande Foundation.
Credit Dowd Muska

Muska says a big bet was made on the success of Virgin Galactic…and he says Spaceport America cannot survive without the company delivering.

“The technology and business plan have to work at this point for Spaceport America to work, but how long should we as taxpayers of New Mexico be allowed to linger in this world floating bond debt and also operational expenses,” said Muska. 

KRWG also asked Dan Hicks what it’s going to take for Spaceport America to be self-sustaining and an economic driver. Hicks says that those are two totally different perspectives.

“To be an economic driver is by law what I’m supposed to do, to be self-sustaining is something that makes no sense.” Hicks explains by saying, ”When you say your supposed to be self sustaining…there’s not an airport in the state that is self sustaining, there’s always types of federal funds that come in, but those are economic engines for each community where their at,” says Hicks. 

Hicks says other states are not asking questions about being self-sustaining.

“What they’re asking is what can we do to help you bring these customers in and more jobs to the state?”

However, Dowd Muska says taxpayers in this state have already waited years for this investment to work.

“At what point do we as taxpayers revolt against this and say we’ve had enough. You know we’ve given you years and years, and it’s time to walk away from something that just hasn’t worked,” said Muska.

Dr. Henry Hertzfeld says New Mexico has been at this a long time and it is nothing new for taxpayers to question about how money is being spent.  

“There are all sorts of competing issues for tax money and this one is a little bit of a harder sell, because it might affect the next generation more than the current one,” said Hertzfeld.

Meanwhile, New Mexico taxpayers, especially those in Doña Ana and Sierra counties, continue to wait for an economic boost from the Spaceport.  A boost sorely needed in a state with one of the highest unemployment rates in the country.