- Parabolic Arc
- June 2, 2023
New Mexico Seeks to Attract Virgin Galactic’s Manufacturing Facility to Spaceport America
Updated on March 5 at 8:34 a.m. PST with additional information about space companies located in the Los Angeles area and the benefits of industry clusters to employers and employees.
by Douglas Messier
The state of New Mexico has proposed that Virgin Galactic establish a production facility at Spaceport America, which is where the company plans to begin flying tourists on suborbital space rides later this year. KRQE TV reports:
The New Mexico Economic Development Department says they have a proposal to bring Virgin Galactic’s manufacturing to the Spaceport. Right now, the manufacturing location is in the Mojave desert. Spaceport America has five permanent tenants that are conducting a variety of experiments; including one company that uses laser technology to help land on the moon.
Details of New Mexico’s proposal are not available. However, a deal might include financial incentives, such as tax incentives, paying for construction of the new facility, or covering the cost of relocation. The state has already spent about $225 million building Spaceport America for Virgin Galactic, which serves as the facility’s anchor tenant.
Virgin Galactic builds SpaceShipTwo and WhiteKnightTwo vehicles and tests rocket engines at the Mojave Air and Space Port at Rutan Field in California. Virgin Orbit, a sister company spun off from Virgin Galactic, bases its Boeing 747 Cosmic Girl carrier aircraft and tests engines for its LauncherOne rocket at the Mojave spaceport.
Virgin Galactic’s production hangar in Mojave has limited space for one WhiteKnightTwo and up to three SpaceShipTwo vehicles at a time. During a Feb. 22 earnings call, company officials said they are closing in on a decision about where to locate a new production facility capable of building six SpaceShipTwo vehicles per year.
Virgin Galactic plans to eventually conduct 400 suborbital tourism and research flights annually from Spaceport America. With each SpaceShipTwo vehicle flying an estimated 50 times per year, the company would need at least eight spacecraft and two or three WhiteKnightTwo carrier aircraft. Virgin Galactic is also looking to establish spaceports in Italy, United Arab Emirates and other locations that would each host 400 flights annually.
Is New Mexico Facing Long Odds?
While relocating production to Spaceport America would help Virgin Galactic consolidate more of its operations in New Mexico, the move has a number of potential drawbacks for the company. A key one involves the ability to attract and retain top talent.
Virgin Galactic and other companies operating out of Mojave have had a difficult time with this task due to the facility’s remote location and harsh desert climate, which can range from 110 degrees F (43.3 C) in the summer to subfreezing in the winter. Local housing is limited; many workers commute in from Lancaster and Palmdale, two desert cities that are subject to the same climatic conditions.
Located in the New Mexico desert, Spaceport America is arguable even more remote than Mojave. The city of Las Cruces, located about an hour’s drive away, has a population of 102,000, about one third of the combined population of Lancaster and Palmdale. The two California cities have the advantage of being not far from the many attractions and activities available in the greater Los Angeles area. But, still employee retention is a challenge.
During the earnings call, Virgin Galactic CEO Michael Colglazier said that employee recruitment was a factor in Virgin Galactic’s decision to locate a new research and development center south of Los Angeles in Tustin, Calif.
“Our design and engineering team has been located at our facility at Mojave. We’ve strong roots at Mojave. It’s a great facility for us and we will been a great facility for us and we will continue to maintain our presence there. But we also recognize that growing the business requires us to be in locations where we can access additional talent at scale,” Colglazier said.
“We’ve made the decision to locate our Center for Design and Engineering in the southern LA Basin where there is a strong aerospace corridor, ranging from El Saputo all the way to San Diego,” he added. “Just recently, we leased a location in the heart of this aerospace quarter that will serve as the primary hub for R&D and the design and engineering of our new vehicles specifically the Delta Class spaceships and our next generation of motherships. We expect to ramp up engineering and support team talent against these programs over the coming three quarters.”
The Los Angeles area is home to major space companies, including SpaceX, Rocket Lab, Virgin Orbit, Relativity Space and The Aerospace Corporation. The U.S. Space Systems Command is located at the Los Angeles Air Force Base.
Industry clusters are beneficial in that they attract smaller companies that can provide equipment, parts and support services. Workers have the opportunity to move to new companies if they are unhappy with their current jobs or their employers lay them off or go out of business. These benefits help explain the success of Silicon Valley in attracting companies.
Virgin Galactic and Spaceport America have helped to expand aerospace in southern New Mexico. But, the impact has been limited, in large part because the company and spaceport have delivered only a fraction of the promises officials made when they announced plans to build the spaceport more than 16 years ago.
A Massive Investment with Minimal Return
In December 2005, Virgin Group Chairman Richard Branson and then-Gov. Bill Richardson announced the state would spend $200 million to construct a purpose-built spaceport in the desert for Virgin Galactic to use. Officials projected commercial flights would begin as early as 2009, with a fleet of SpaceShipTwos carrying up to 50,000 people on suborbital spaceflights during the first 10 years of operation.
New Mexico officials projected that Spaceport America would become a nexus of a thriving aerospace sector that would bring high-tech jobs, well-heeled tourists, and millions of dollars in economic activity and tax revenues to the state and local governments.
More than 16 years later, Virgin Galactic has yet to fly a single paying customer. It has managed only four suborbital test flights, two of which were flown from Spaceport America last year. (The first two were flown from Mojave.) Virgin Galactic plans to complete suborbital flight tests this summer with commercial service beginning in the fourth quarter of 2022 — 13 years behind the original schedule.
The question for New Mexico is: would spending money to bring Virgin Galactic’s manufacturing operations to Spaceport America be a wise investment? Or would it simply be throwing good money after bad given Virgin Galactic’s history of over promising and under performing?
Continuing Subsidies for the Spaceport
While Virgin Galactic’s schedule has moved to the right, New Mexico taxpayers have been spending millions of dollars annually just to keep Spaceport America operating for the space tourism company and a handful of other tenants.
Residents of Dona Ana and Sierra counties continue to pay a half-cent gross receipts tax they voted to impose on themselves to help fund development of Spaceport America. (A gross receipts tax is similar to a sales tax.) That money, which has been collected since 2009, has been used to pay off construction bonds and to fund operations of the spaceport. The counties keep part of the money to fund education programs.
Dona Ana County officials protested that the gross receipts taxes were not intended to pay for operational expenses. In Feb. 2021, the New Mexico Attorney General’s office agreed. Chief Counsel Matt Baca wrote that the statutes governing the tax stipulated that 75% of the revenues would be “the financing, planning, designing, engineering and construction of a regional spaceport,” with 25 percent retained by the local county governments.
The decision has resulted in a $2 million hole in the budget of the New Mexico Spaceport Authority (NMSA), which runs the facility. That funding would need to come from the state’s General Fund, which was already subsidizing NMSA’s budget by nearly $2 million.
If the additional funding isn’t provided, NMSA would need “to make severe cuts to the operational budget, staff, and onsite services. These cuts will directly affect obligatory contractual services, and negatively impacting tenant operations,” CEO Scott McLaughlin said in a presentation to the New Mexico Science, Technology and Telecommunications Committee in November.
KRQE TV reports that the proposed budget got a frosty reception from the Senate Finance Committee. Legislators proposed cutting $300,000 from the spaceport’s nearly $11 billion budget request.
Virgin Galactic pays $5.5 million annually in rent and fees, covering just over half of the spaceport’s $10.95 million budget for fiscal year 2023. Revenues from other tenants and users of the facility total $1.3 million, increasing spaceport revenues to $6.8 million.
Tax Proposal Rejected
Taxing travelers is a popular way for governments to bring in money. For example, a Virgin Galactic ticketholder flying suborbital from Spaceport America will pay taxes on the airline tickets and rental car they will use to get there, the hotel room they will stay in during three days of training, and on meals, drinks and almost everything else they buy during their trip.
The one part of the trip a Virgin Galactic ticketholder will not be taxed on is the flight to space, which the company is selling for $450,000. In 2019, the New Mexico Taxation and Revenue Department ruled that passengers on SpaceShipTwo would be treated essentially as freight and exempt from GRT. They would be no different from scientific experiments launched on SpaceShipTwo research flights or aboard suborbital sounding rockets launched from Spaceport America’s range.
State Reps. Jason Harper, R-Rio Rancho, and Matthew McQueen, D-Galisteo, sponsored a bill, H.B. 72, that would close the tax loophole relating to Virgin Galactic’s passengers while keeping in place the exemption for science payloads.
The taxes brought in on a $450,000 ticket would depend on whether the tax was levied in Dona Ana County, where Virgin Galactic has corporate offices in Las Cruces, or in Sierra County, where Spaceport America is located. The state government would receive most of the tax revenues, with the county receiving a smaller portion.
|County||Ticket Price||County Gross Receipts Tax||Total Tax||Total Cost|
|Dona Ana County||$450,000||8.3125||$37,406.25||$487,405.25|
The Las Cruces Sun News reports that two analyses of the impact indicated the tax would bring in millions of dollars annually while having little effect on ticket sales.
A legislative fiscal analysis projected the policy would have brought in $3.7 million in annual state and local tax revenue, using the GRT rate that would be applied in Las Cruces and Doña Ana County, where the company is headquartered.
The state Tax and Revenue Department stated in the fiscal impact report that demand for tickets with Virgin Galactic, currently priced at $450,000, was strong enough that a tax break was likely not necessary to maintain demand for the service.
However, the proposal to tax ticketholders was likely at cross purposes with the effort by the New Mexico Economic Development Department to get Virgin Galactic to locate its manufacturing facility at Spaceport America.
The measure went nowhere as opposition from Virgin Galactic, local officials, chambers of commerce and other legislators combined to kill it. The House Commerce and Economic Development Committee tabled the bill by a 9-1 vote.
Virgin Galactic has had no problem charging its wealth customers ever higher prices for their suborbital flights. The company raised prices from $200,000 to $250,000 in 2013, and then again to $450,000 last year. But, the company drew the line at taxing them.
Sirisha Bandla, Virgin Galactic’s vice president of governmental affairs, claimed the company decided to become the anchor tenant at Spaceport America in 2005 due to the tax exemption. Bandla, who flew to space with Branson on a flight test last July, further argued that a tax would punish a company bringing jobs to the state.
The bill’s supporters denied the state had committed to not taxing tickets in 2005. They pointing out the New Mexico Taxation and Revenue Department didn’t grant an exemption until 14 years later in 2019. Co-sponsor McQueen expressed amazement at Virgin Galactic’s position.
Following the vote, McQueen stated in an emailed comment, “It’s remarkable to me that Virgin Galactic talks about what a great partner they are for New Mexico and in the same breath hints that they might have to up and leave if their special treatment ends.”
Opponents also argued that the tax, which would apply only to Virgin Galactic, would make New Mexico appear less business friendly, break a previous commitment to providing a tax break, and deter the development of aerospace in the state.
Las Cruces Mayor Ken Miyagishima argued against the tax, saying it was unfair that the state would take the bulk of the money and benefit even though only Dona Ana and Sierra counties taxed themselves to pay for it.
In an interview before the hearing Monday, Miyagishima argued it would be unfair to institute a GRT benefiting the state as whole: “The state wants to tax it so that they can spread it out to all 33 counties? That’s not right.”
“I just want them to get going first, instead of just throwing things at them,” he continued. “Why now? Help them. Be a little more friendly towards getting here and getting literally off the ground.”
With the defeat of the tax bill, the state still has to find money to fill the $4 million hole in Spaceport America’s budget. The cost will be spread across the entire state.
Bill co-sponsored Harper expressed exasperation over the defeat of the bill.
“It perplexes me that we would invest over $200 million in building the facility and then also decide the activity for which the facility was intended needed to operate tax free,” Harper said.
35 responses to “New Mexico Seeks to Attract Virgin Galactic’s Manufacturing Facility to Spaceport America”
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TV Mad Money – Jim Cramer’s lightning round: Virgin Galactic is not an ‘investable frontier’
Makes sense to centralize the production and maintenance in New Mexico. In addition to incentives there will be opportunities to lower cost both by streamlining operations and simply the much lower cost of doing business while it will be a much safer environment for test flights of new equipment.
The “problem” of remoteness could easily be solved by basing the manufacturing at Las Cruces International Airport, an metropolitan region with a major university and a population of over 200,000 a short drive from El Paso Texas which also has a major university. Both universities have Schools of Engineering with majors in aerospace engineering allowing the talent to be produced locally.
It’s not just remoteness. Mojave is located in the Antelope Valley, which is also known unofficially as the Aerospace Valley because of Edwards and the Skunk Works down in Palmdale. Industry clusters tend to attract smaller companies that can supply parts and equipment. When I first moved here I lived across the street from a guy who built parts for the companies at the spaceport in a workshop next to his house.
The other benefit is employees can move to a new company if they’re unhappy or their current employer lays them off or goes out of business.
I added a couple of paragraphs on these points. It leads into how Virgin Galactic’s slow progress has failed to build the space sector one would ideally like to have to support spaceship manufacturing.
However Dona Ana County has WSMR, WSTF, PSL, and Holloman AFB, all of which have a long history of space development going back to WWII with two major universities graduating engineering students. Friends I knew there worked on everything from sounding rockets to high altitude balloons to high speed rocket sleds. New Mexico is home to over 107 space companies.
Even more important workers are able to afford a decent house in New Mexico with a lifestyle that includes watching live theater, concerts and sports teams play without driving for an hour or more in traffic.
Industry clusters exert a certain gravitational attraction, to be sure, but are not immune to going nova and blowing apart. SoCal was once a major center of airframe and aircraft production, for example, but the vast majority of such work has long since relocated elsewhere. If SpaceX someday closes its Crenshaw Blvd. Mothership in Hawthorne and moves entirely to TX, it is problematical just how long the SoCal NewSpace cluster would remain.
Oh, and where in the world is this “El Saputo,” CA of which Mr. Colglazier is alleged to have spoken? Could he have, perchance, meant El Segundo – which is an actual place?
It is also interesting that he has decided to locate VG’s future engineering center in Tustin. Tustin is quite a way from the Hawthorne-to-Long Beach NewSpace axis in the South Bay of SoCal. But it’s not very far from Mr. Colglazier’s former stomping grounds in Anaheim. Perhaps Mr. Colglazier expects to recruit more engineering talent from his former employer Disney than from any of the other NewSpace companies.
Finally, if VG’s future proves short, perhaps some New Mexico entity can snap up the remains of VG for a song at the liquidation auction and transplant what’s left to Spaceport America.
New Mexico is already in a $225 million hole betting on a company that has proved time and again that it will severely overpromise and underdeliver, and now NM wants to dig the hole even deeper?
This is a no-brainer. NM needs to tell SPCE “hell no.”
This goes far beyond just VG and is the tip of the iceberg of a much larger strategy as I noted in another post. Also remember that even if VG goes under the technology will be left behind presenting an opportunity for another firm to pickup in bankruptcy. Freed of Wall Street it will then be possible to develop it using a more practical business oriented strategy.
One of the tragedies of XCOR is that its technology was acquired by a STEM group “build-a-plane” in Lancaster California that appears to have done nothing with it. Indeed, given that their domain name is now for sale I wonder if they are still in existence.
Doug, Some additional information on what is behind this initiative and in the interest of full disclosure Sul Ross State University, whom I work for, is part of the grant UTEP is seeking and I have been consulted on it.
Coalition of five New Mexico organizations aim to boost the aerospace industry with federal dollars
By Collin Krabbe – Technology reporter
December 22, 2021, 11:00am MST
This is basically along the lines of the New Mexico Space Institute that I recommended in the original feasibility study and white paper for the Southwest Regional Spaceport in the 1990’s. It was why the bill proposed by those two legislators to grab the money earned at Spaceport America to spend on their pet projects in Rio Rancho and Santa Fe was so soundly defeated.
As noted, the University of Texas at El Paso (UTEP) is also seeking to be part of the effort by extending the Space Valley into Texas.
UTEP Receives $500K Grant to Grow Aerospace and Advanced Manufacturing Sectors in West Texas
Last Updated on December 14, 2021 at 12:00 AM
Originally published December 14, 2021
By MC Staff, UTEP Marketing and Communications
“There is vast untapped opportunity in the region for job creation in aerospace and defense manufacturing, including three military bases – Fort Bliss, White Sands Missile Range and Holloman Air Force Base,” said Ryan Wicker, Ph.D., executive director of the W.M. Keck Center for 3D Innovation at UTEP, and co-principal investigator of the project. “West Texas is part of the fourth-largest manufacturing hub in the world, which also includes Juárez, Mexico, and Doña Ana County, New Mexico.”
Another pie in the sky scheme, https://www.nmlegis.gov/Ses…
Investing $6 million in funding to get over $100 million in funds the federal government would spend anyway to build the New Mexico’s space industry is not a bad gamble. By contrast the proposal by Kern County to create the Aerospace Valley Coalition Industry Cluster Initiative was rejected likely due to the lack of support, including financial, by California in contrast to strong support the proposals in New Mexico and Texas had. California needs to step up its game if it wants to reverse the decline in its space industry
Kern vies against other regions for aerospace cluster money
BY JOHN COX [email protected]
Oct 20, 2021
“Aerospace has long been considered one of Kern’s economic strengths. But a recognition has set in during about the past decade that other U.S. regions have surpassed the county, together with the neighboring Antelope Valley, such that hopes for greater local job creation diminished.
Waste more on this carnival ride for the rich? I say – NO.The technology is obsolete.
I would suggest that the money is not wasted when it provides good jobs for good people.
The entire venture is a financial disaster. They’ll be out of jobs in 12 months time
You might want to rethink that one a bit. By that standard, SLS and Orion have both been rousing successes. Paying lots of people a $15/hr. minimum wage to dig holes and fill them back up, for example, would also provide a lot of jobs for probably mostly good people, but it would be neither sustainable nor economically rational to do so.
Yeah…that thought has crossed my mind. How about this? SLS and Orion are cases where politicians suck money out of the economy, to hand it to their political cronies, who have often been misusing it. In New Mexico’s case, they are trying to attract private business, to help reimburse local taxpayers, who are still waiting for their increased tax burden to result in a better local economy. There is a difference.
Also…I definitely don’t begrudge the SLS-Orion workers their paychecks. I just wish that NASA would hire them to do more useful work.
Finally…if paying homeless people minimum wage to dig holes and fill them up got them off the streets…I’d rather that my tax dollars went to them than to most California politicians and their cronies.
Why would the fact that the customers are rich be a reason to not want that industry? If a small town on the coast had an opportunity to bring in a large luxury yacht builder, should they turn it down because the yachts will be used by rich people on joyrides?
Now if the yacht builder had strung the town along for several years that would be a different story. Well actually it would be this story.
I don’t think it is really stringing them along as it was Burt Rutan and Scaled Composites making bad development decisions starting with making SpaceshipOne a one trick pony just to win the Ansari X-Prize combined with a proposed development schedule based on more enthusiasm than reality.
But than look at the Boeing Starliner which started out in 2010 as a project to support Bigelow Aerospace and is still probably at best a year away from carrying any astronauts. Similarly Orion started out as a NASA study contract for an Orbital Space Plane in 2003 and is also a year or two away from carrying astronauts while Blue Origin took over 20 years to carry astronauts.
Burt Rutan and Boeing have nothing to do with New Mexico, your comment does nothing to refute my statement that Branson has been stringing along New Mexico for over sixteen years. And counting, they still haven’t carried a single paying passenger and won’t until later this year at the earliest. Branson has now pulled most of his money out of the project.
I’m not saying it was outright fraud, but when it comes to human spaceflight Branson has proven to be a dreamer who persuasively convinced others to believe in his dream and spend money on it. What I mean by stringing them along is that year after year he year kept maintaining that they are right around the corner, it’s just about to start, and he continues to say that year after year with so far no results. The very definition of stringing someone along. They might actually carry a few paying passengers this year, if nothing else goes wrong or any other delays, but based on their track record there is no reason to have high hopes of seeing anything substantial come of out of this project.
Blue Origin has been slow also but they aren’t stringing anyone along, it’s Jeff Bezos’ money. As for Rutan’s design, if Virgin Galactic was the space company they claim to be they would have discarded that design long ago when it became apparent that it would not scale up well, and designed something else to replace it.
Unfortunately Sir Richard Branson is one of many that bought into the myth of Burt Rutan and the Ansari X-Prize believing that they would actually deliver a functional design quickly, and his dealings with New Mexico were based on that belief. But Sir Richard received a jolt with the ShipshipTwo crash and I believed that really marked the start of him distancing himself from Virgin Galactic.
However Spaceport America also has to share a part of the blame for not wanting to look beyond Virgin Galactic. I pointed out as early as 2006 to the folks running Spaceport America there were numerous near term revenue opportunities in solar energy, drone research and space STEM that would improve cash flow, but they bought so completely into the X-Prize hype and space tourism they just ignored those opportunities.
I still believe Burt Rutan is one of the heroes of aviation design. I only met him once for a few minutes and managed to disagree with him in that short period of time. I’m told that it was a low bar. I thought the hybrid was the horrible choice that should have been designed out years ago. It may be that the airframe is a contender for the title. In any case, the time and problems suggest that the original approach was wrong. Hindsight mostly for me.
He does well with the design of specialty aircraft like Voyager and kit planes like the BD-5 and EZ-Flyer, but his Starship business aircraft was a commercial disaster.
Spacecraft however are a very different beast as SpaceshipOne showed and his experience in aviation seemed to be more of a handicap than an asset in designing it. I was surprised in the accident report how primitive the cockpit was for SpaceshipTwo which was described as something out of the 1950’s if I recall.
True. At the intersection of aircraft and spacecraft many concepts fall off the wagon. Burt shined on the specialty aircraft, but clearly not spacecraft or commercial aviation. Also, it appears that the modernizations possible were not in his wheelhouse.
I don’t have to believe that heroes are perfect or infallible, just far above the average. I believe Elon is one, though neither perfect nor infallible.
Bingo! Yes, they try their best but are only human.
Systems engineering is apparently not as common as it should be. I first noticed it in rocket engine where pumps and thrust chambers were seemingly designed by different teams that were barely on speaking terms.
Yes, folks forget it was one of the reasons Project Apollo succeeded.
The other is that the industry is blindly designing transportation systems without researching the possible business models and their needs. Most of the industry is still focused on decades old ideas, (Mars Direct, O’Neill Colonies, SBSP, etc.) that have little relevance to the modern economy in their faith based belief that if costs fall to a “magical point’ good things will “happen” demonstrating economic illiteracy.
Decent summary of one of my concerns about Starship. Beyond the needs of Starlink, and Mars doesn’t seem a likely market to me. Hopefully there’s a business model in there that works. IMO people that want to go* might be it though I would want a lot more information if it were my investment.
*To Mars, Luna, honeymoon suites, just floating around, or something I haven’t thought of.
Yes, I see Starship as supporting
perhaps a small outpost of Mars, perhaps 30-40 astronauts and no more. Similarly on the Moon to start but than perhaps enabling the start of lunar industrialization. But the problem is that no one is really prepared for it to work so no one is looking at possible business models, at least in public. So it will be a slow climb to finding jobs for it after it captures the majority of the comsat business.
Initially yes he trusted in Rutan’s design, but Branson has clearly been over his head in all of this. No way to know when he began to comprehend that this was not working out as intended. The crash eight years ago was in my opinion an oddity that is difficult to know who was to blame, as it was the equivalent of an airline pilot lowering the landing gear at cruising altitude. It was something that the SpaceShipTwo designers apparently didn’t anticipate since only very experienced pilots would be flying it. And consistent with the overall philosophy of minimal automation. Of course after the crash they built in a safeguard.
I don’t think Branson is a crook or a swindler, again I think he was just technically over his head. But even as he realized things were not going to plan he continued to put out the “this year” mantra year after year, as well as timing different test events just prior to stockholder phone calls. I realize that all makes business sense and is probably not out of the ordinary that much, but this is not an ordinary business, and good intentions or not Branson has been stringing people along with his never ending public optimism and enthusiasm. How much he really believed what he was saying only he knows.
I really hope it all turns around and once they get revenue coming in they can make this work, I’m just not as confident as I used to be.
True, and remember since the pandemic hit Sir Richard has been focused on saving his travel industry empire, looking for cash where ever he is able to raise it to bail out other brands in the Virgin Group.
Havent’ they gotten screwed enough on this adventure yet ?
Maybe they are nymphomaniacs.
Although not reported in the space media, the new 1.9 mile long road between Highway 4 and the Port of Brownsville is finished. This will make it easy for SpaceX to ship large items out of Starbase. There are also reports that a power line will be extended to Starbase to eliminate the need for the local power plant the environmentalists are unhappy with. Both are good examples of how states like Texas and New Mexico support their space industry.
New connector road to assist SpaceX with its expansion
March 03, 2022 8:53 PM