Spaceport America Issues Economic Impact Report

A new economic impact study has found that Spaceport America, a commercial spaceport located in New Mexico, contributed $138 million in economic output, $45.8 million in labor income, and $60.4 million in value-added production to the state’s economy in 2022.

The study was conducted by New Mexico State University’s (NMSU) Arrowhead Center and the university’s Center for Border Economic Development (C-BED). It was commissioned by the New Mexico Spaceport Authority (NMSA), which operates the facility.

“At its core, Spaceport America is an infrastructure-developed project designed to spur economic development, specifically in the space industry for the region. It was paid for by the state of New Mexico and Sierra and Dona Ana counties,” NMSA Executive Director Scott McLaughlin said in a press release. “As such, it is incumbent upon us to show what impacts and benefits the investment has created, and whether its operations create jobs and business opportunities. This report shows that the investment is paying off, and that the counties and the state are benefiting from this long-term effort.”

Total Economic Impact, Spaceport America, 2022

NMSU issued the report two months after Spaceport America’s anchor tenant, Virgin Galactic, began to fly paying customers on suborbital flights following more than a decade of delays. It remains to be seen whether the report will mollify spaceport critics who view the nearly $220 million, taxpayer-funded spaceport as a boondoggle built for the ultra-rich that has yet to live up to the expectations for economic windfalls that were set when it was announced in 2005.

McLaughlin acknowledged that progress at the spaceport has been slow, but he expressed optimism about the future.

“It is a cliché to say, ‘space is hard’, but nothing travels to space without a spaceport. My staff and I, and the state of New Mexico, can honestly say ‘spaceporting is hard’ as well,” he said in the news release. “This has been a long road requiring patience by the citizens and policymakers of New Mexico.

“It is also impressive that Virgin Galactic has continued their hard work and operations over the years, and now has gone to space three times this year,” he added. “Their efforts, combined with those of our other tenants and numerous additional customers, are truly making a positive impact for jobs and the economy. Importantly though, we shouldn’t look at the spaceport in insolation, but should view what it does for the entire region, and how it catalyzes building a complete aerospace ecosystem.”

Jobs & Revenues

The study said the spaceport directly supported 549 jobs last year. An additional 262 jobs were indirectly supported or induced by spaceport activities.

In addition to Virgin Galactic, NMSA has attracted nine other tenants to the spaceport:

• SpinLaunch, which is developing technology to launch payloads into orbit using a giant centrifuge accelerator,
• UP Aerospace, a suborbital launch provider that files periodically from the spaceport,
• C6 Launch Systems, a Canadian company developing a micro-satellite launch vehicle,
• White Sands Research & Developers, an engineering company developing suborbital sounding rockets,
• AeroVironment, which is developing high-altitude, long-duration solar-powered unmanned aerial vehicles and unmanned vertical takeoff and landing aircraft,
• Prismatic, which is developing a solar-powered, high-altitude, long-endurance aircraft,
• Stratodynamics, which is developing high-altitude aerial systems for Earth observation,
• Swift Engineering, a company that designs, engineers, and builds intelligent systems and advanced vehicles, and
• U.S. Air Force Thunderbirds, a demonstration squadron that conducts practice sessions at the spaceport.

Spaceport America Revenues, FY 2022

The impact study said that Spaceport America generated revenues of more than $7.5 million from rents, launches, public tours, and lease interest. The spaceport’s budget is $11 million per year. State funding is used to plug the budget gap.

Space & Taxes

The impact report said Spaceport America generated $12.9 million in tax revenue, including $9.2 million in federal taxes and $3.7 million in taxes in New Mexico.

No state or local taxes are collected on the sale of Virgin Galactic’s tickets, which are currently priced at $450,000. State law exempts launch operations and payloads from gross receipts taxes (GRT). In 2019, the state’s Taxation and Revenue Department ruled that Virgin Galactic’s passengers qualified as payloads, thus exempting ticket sales from taxation.

A bill to close the loophole was introduced in the state Legislature in January 2022. Its sponsors said the tax would not deter people from purchasing tickets. The assertion was backed up by the legislative analysis of the bill.

“Consumers purchasing tickets for commercial space flights have higher income and more disposable income, given the $450,000 cost of a ticket,” the analysis said. “Demand appears strong for commercial space flights. Thus, subjecting these ticket sales to GRT appears reasonable as the incentive is not needed to induce demand for flights. The current deduction, along with other incentives, have contributed to the development of space flight in New Mexico and the state and local economy can now benefit from recurring flight activity.”

The tax would have added roughly $31,000 or $37,000 to the price of a ticket depending on whether it was imposed in Sierra County, where the spaceport is located, or the city of Las Cruces in Dona Ana County, where Virgin Galactic and NMSA have offices. New Mexico has a state GRT; counties and some municipalities impose their own smaller GRTs at varying rates.

The legislative analysis estimated the ticket tax would have brought in $2.3 million in tax revenues annually for the state government and $1.4 million per year for local governments that funded the spaceport’s construction.

New Mexico allocated $142.1 million to build Spaceport America. Voters in Dona Ana and Sierra counties approved increases of 0.25 percent in their local GRTs in 2007 and 2008, respectively, to raise $76.4 million that was put toward construction. Residents continue to pay the tax today. Seventy-five percent of the taxes collected go to pay off construction bonds, with 25 percent going to the counties.

The ticket tax bill faced strong opposition from NMSA, Virgin Galactic, legislators, chambers of commerce, and supporters of the state’s aerospace industry.

The Las Cruces Sun-News reported the following:

Opponents argued that the tax would deter aerospace development in the state broadly, although Virgin Galactic is the only company offering tourist flights to space.

Sirisha Bandla, a Virgin Galactic executive who flew on the spaceliner’s July flight with founder Richard Branson, claimed that the exemption had been a factor in the company’s decision to locate operations in New Mexico, saying the bill would impose “a tax on a company bringing business and jobs to the state.” 

The sponsors denied any binding commitment was in place,  while opponents on the committee expressed concern it would make New Mexico seem less “business friendly” and appear as though the state was breaking a commitment. 

The House Commerce and Economic Development Committee tabled the bill by a 9-1 vote. It has not been revived.

A Long Road

The spaceport’s economic contribution to New Mexico remains relatively small in comparison with the state’s real gross domestic product, which Statista reports was $94.66 billion last year. It also falls well short of the rosy projections made when the project was announced nearly 18 years ago.

In December 2005, Branson and then-Governor Bill Richardson unveiled plans to build what at the time was called the Southwest Regional Spaceport. Virgin Galactic agreed to sign a 20-year lease to serve as the facility’s anchor tenant. The company would fly launch tourists on suborbital flights using SpaceShipTwo rocket planes and WhiteKnightTwo carrier aircraft under development at the Mojave Air and Space Port in California.

Virgin Galactic and Spaceport America were to serve as a magnet for the development of an aerospace cluster in the southern part of the state. Richardson and Branson fanned these hopes with extravagant promises.

“New Mexico stands to gain thousands of jobs, and hundreds of millions of dollars of payroll and capital investment,” a New Mexico Economic Development Department press release said. “A New Mexico State University study looked at construction; overall spending from suborbital and orbital activities; and research and development activities. In the first five years, the study projects spending of $1 billion, payroll of $300 million, and employment reaching 2,300 by the fifth year of operation.”

“Construction will begin in 2007 and should be completed by 2009/2010. Branson and Richardson confirmed that Virgin Galactic plans to inaugurate space flights out of New Mexico once construction of the spaceport is complete, and plans to send 50,000 customers to space in the first ten years of operation,” the press release added.

By the time Virgin Galactic signed a 20-year lease with NMSA in 2008, the passenger projections for the first decade of service had fallen to 33,269. The number of flights would exceed 5,800, according to the lease.

Minimum Number of Daily/Yearly Flights

Due to construction delays, Virgin Galactic would begin paying its $1 million annual rent on the terminal hangar facility in January 2013. The company did so under protest, claiming the building was not ready for occupancy due to a number of unfinished items. Virgin Galactic threatened to walk away from its lease if the issues were not resolved by March 31, 2013.

In response, NMSA’s then-Executive Director Christine Anderson noted a provision in the lease that allowed the authority to cancel the lease if Virgin Galactic didn’t conduct a minimum number of launches. The lease said:

If Virgin does not fly at least 25 Missions in any calendar year (prorated for any partial calendar year) NMSA will have the right to terminate the Lease by written notice to Virgin on or before January 31 of the following year unless Virgin, within ten (10) business days after receipt of the termination notice, notifies NMSA, in writing, that Virgin will commit to pay User Fees for a minimum of 50 Missions for the upcoming calendar year, regardless of the actual number of Missions Virgin conducts.

The unfinished work at the terminal hangar facility was completed to Virgin Galactic’s satisfaction. However, the projected flight and passenger numbers proved unrealistic. Technical delays and the loss of the first SpaceShipTwo, VSS Enterprise, in 2014 pushed back the start of commercial flights to June 29, 2023. Virgin Galactic has conducted two suborbital flights with six passengers aboard, with a third scheduled for September 8.

Virgin Galactic has a single WhiteKnightTwo mothership, VMS Eve, and one SpaceShipTwo, VSS Unity, capable of flying once per month with up to four passengers aboard. The company will be able to conduct 12 to 13 flights per year with up to 48 or 52 passengers on board using its existing vehicles. The company has about 800 ticketholders signed up for flights.

Virgin Galactic would be able to conduct more launches if it completed work on a second spaceship, VSS Imagine. Company officials say it is an option, but they have not committed to doing so. Instead, Virgin Galactic has focused its money and engineering resources on developing an advanced fleet of Delta-class spaceships that will be capable of flying up to six passengers every two weeks. Additional WhiteKnightTwo motherships are also being developed.

The Delta-class spaceships are scheduled to enter service in 2026. Virgin Galactic officials have said the new spaceships will allow the company to ramp up to 200 launches annually.