Spaceport America Tax: The Levy that Keeps on Taking

The Virgin Galactic Gateway to Space building with a security fence around it. (Credit: Alex Heard)

Residents of New Mexico’s Dona Ana and Sierra counties will continue to subsidize Spaceport America’s operating budget for at least another year.

The New Mexico Finance Authority agreed to let the spaceport for one year use extra money from the taxes that shoppers pay in two Southern New Mexico counties. But the spaceport wanted the excess tax money in perpetuity, a proposal that the finance authority declined to grant as its chairman raised questions about the facility’s financial strength.

Though some politicians have supported the spaceport’s proposal, others have argued the tax money was only intended to help build the facility, not cover its day-to-day expenses.

The debate comes as executives of the spaceport seek to expand the facility and win a bigger share of business from a commercial spaceflight industry that has changed dramatically since it opened in 2011 with the promise of regular flights for wealthy tourists. The issue has turned into a test of New Mexico’s commitment to funding the facility….

Voters in Doña Ana and Sierra counties decided to raise their gross receipts tax by 0.25 percent and use the money to build the spaceport. Shoppers in those counties still pay the tax on everything from fast food to laundry detergent.

So far, tax money from the two counties has paid off about $43.8 million in bond debt for the spaceport’s construction. Another $74.2 million in payments are due through 2029.

The cost of the spaceport was originally tagged at $198 million. However, the cost has since risen to about $225 million.

Anchor tenant Virgin Galactic has suffered years of delays in developing its SpaceShipTwo suborbital space plane. The company is now predicting flights will begin from Spaceport America sometime in 2018, about 11 years behind Branson’s original prediction of 2007 for the start of commercial service.

Virgin Galactic will begin paying per-flight fees once it begins flying out of Spaceport America. The company is currently conducting flight tests of SpaceShipTwo Unity from the Mojave Air and Space Port in California.

Virgin Galactic’s lease payments are also scheduled to increase next year, which will improve Spaceport America’s operating budget.

However, Spaceport America Executive Director Dan Hicks says he needs to spend additional money for improvements to the facility to keep up with other spaceports across the country. Proposed projections include a link to a nearby railroad line and a payload processing facility.

The delays have left residents of the two counties frustrated over the lack of economic benefits they were promised from the spaceport when they voted to raise taxes on themselves  in 2007 and 2008.

“The people who are paying will never benefit,” says [Ron] Fenn, a retiree in Truth or Consequences who has long opposed the project….

Virgin Galactic has presold tickets to travel on its spacecraft at $250,000 a person. Yet about a quarter of the 6,200 residents of Truth or Consequences live in poverty, more than the average for a state that is already among the nation’s poorest. About 9 percent of Sierra County’s workforce is unemployed.

Fenn campaigned against the gross receipts tax in 2008 not only on the principle that state government should not prop up such projects but also out of a skepticism that it could ever live up to the vision outlined by then-Gov. Bill Richardson, who said the development would be an international tourist draw.

Fenn says that the town in recent years has thrown more resources at the dream of space tourism but has little to show for it. The City Commission elected to move the spaceport’s visitor center into a rent-free community center. Regular tours on charter have temporarily halted. And business owners like Hans Townsend, who runs the Desert View Inn on the main drag and was formerly president of the chamber of commerce, worry that many of the spaceport’s benefits will flow down the interstate to the much larger city of Las Cruces.

“A lot of people lean their businesses towards the improvements the spaceport would bring. Of course, it didn’t happen the way they thought,” he says.

During a recent interview, Virgin Galactic vice president Jonathan Firth talked up his company’s contributions to the southern New Mexico economy.

“Just the rent payments, and you know the user fees that we’ve paid to the Spaceport already exceeds $7 million so far,” Firth said. “If you look at our relationship with New Mexico, supplies in general, and other things that we need, we’ve looked locally wherever possible. We’ve spent more than $9 million dollars.”

Spaceport America officials have talked about the positive impacts the spaceport has had to the local economy. However, a claim that each dollar spent has had a 20 times return on investment appears to have no firm statistical basis.

On multiple occasions, Spaceport America officials claimed to have had a $20 million economic impact in FY2016.

However, when asked for a copy of the economic impact study or documents supporting the claim, Spaceport America’s chief financial officer, Zach De Gregorio, told NewsChannel 9 he didn’t use any documents and sent NewsChannel 9 a PowerPoint presentation with five slides.

“It’s just the PowerPoint,” said De Gregorio.

When asked about exaggerating their economic impact, Hicks said, “The chart was intended to show the economic value of the activities at Spaceport America compared the funding received from the NM General Fund. It was simply a comparison chart to convey value added. An Economic Impact Study was not needed to provide a qualitative assessment of our value per NM general fund spending. The focus of the discussion was for our CFO to explain the assumptions he used to compile the information in that impact chart.”

When asked how he did an economic impact study without any documents, De Gregorio said, “I had a lot of conversations and I talked with local business owners, customers and with city officials. I talked with my teammates and I got a really good sense of what was the activity in FY16.”