After waiting 16 years for Virgin Galactic to begin space tourism flights from Spaceport America, New Mexico legislators have hit upon a new idea to try to get some revenues out of the place once the company begins commercial service later this year. The Las Cruces Sun-Newsreports
A bipartisan billintroduced in the state Legislature seeks to close a loophole that excluded spaceflight passenger tickets from gross receipts taxes. The move aims to harvest revenue from ticket sales as Virgin Galactic prepares to begin regular commercial service later this year.
H.B. 72 would amend a statute that excludes receipts “from launching, operating or recovering space vehicles or payloads in New Mexico” from gross receipts taxes, clarifying that sales “for transporting any person into or near space” would be taxable.
A 2019 ruling by the state Taxation and Revenue Department on the question of taxing flights to space essentially treated passengers as freight, stating: “… it seems reasonable to consider passenger revenues as receipts received for the operation of a space vehicle.”
“When those exemptions were drafted, it was not in anyone’s mind that people would be a payload,” state Rep. Jason Harper, R-Rio Rancho, told the Las Cruces Sun-News. Harper is a co-sponsor of the bill.
Virgin has sold about 700 tickets to customers at three different prices: $200,000 (until 2013); $250,000 (2013-2021); and $450,000 (2021-present). The amount of the tax would depend upon where it was leveled in Dona Ana County (where Virgin Galactic has its headquarters) or Sierra County (home of Spaceport America).
Gross Receipts Tax
Dona Ana County
The state government would receive most of the tax revenues, with the county receiving a smaller portion.
After more than a decade of delay, Virgin Galactic says it plans to complete flight test of its SpaceShipTwo VSS Unity spacecraft this summer. Commercial suborbital tourism flights are set to begin in the fourth quarter of this year.
Outside investigation concluded former Executive Director Dan Hicks ignored spending regulations, submitted falsified travel documents, and wasted hundreds of thousands of dollars on unnecessary travel and unrealistic projects
Hicks portrayed by staff as an incompetent manager who bullied employees
Ex-CFO Zach DeGregorio facilitated Hicks’ violations by improperly approving travel and ignoring rules and statutes
Former New Mexico Spaceport Authority Board Chairman Rick Holdridge accused of allowing violations to continue
by Douglas Messier Managing Editor
A highly critical investigation of Spaceport America has determined the New Mexico state government should consider formal criminal and/or administrative charges against former Executive Director Dan Hicks and former Chief Financial Officer (CFO) Zach DeGregorio for their mishandling of the spaceport’s finances.
“As detailed above, there is evidence to conclude that Dan Hicks violated criminal and administrative statutes, as well as the State of New Mexico Governmental Compliance Act, and Governor Lujan Grisham’s Code of Conduct, during his tenure as Director of the Spaceport,” the report said.
Virgin Galactic Chairman Chamath Palihapitiya was on a financial news network yesterday denying the stock was a bubble, a claim that hasn’t aged well in the short term.
With shares soaring to a high of $41.55 only a week ago, they are hovering at around $23 as I writing this story. The shares were offered at $12 when Virgin Galactic went public last Oct. 28 and rose sharply in recent weeks.
The shares slid after Virgin Galactic reported a larger than expected loss for the fourth quarter 2019 and hinted at delays in the start of commercial suborbital flights, which were to have started in June. Analysts have downgraded the stock based on the earnings report.
Fourteen years ago, Virgin Galactic and New Mexico promised “tens of thousands” of tourists would fly to space from Spaceport America by 2019. Total thus far: 0.
by Douglas Messier Managing Editor
When they announced in December 2005 that Virgin Galactic would locate its space tourism business in New Mexico, Virgin Founder Richard Branson and Gov. Bill Richardson made a number of eye-popping claims about why taxpayers should back a plan to build the Southwest Regional Spaceport to serve as the space tourism company’s home base:
$331 million in total construction revenues in 2007;
2,460 construction-related jobs;
$1 billion in total spending, payroll of $300 million and 2,300 jobs by the fifth year of operation; and,
$750 million in total revenues and more than 3,500 jobs by 2020.
Virgin Galactic would sign a 20-year lease as anchor tenant and pay fees based on the number of launches it conducted. New Mexico would use the spaceport, Virgin’s presence and the funds generated to develop a large aerospace cluster.
Surprisingly, New Mexico would spend more money, $225 million, to develop a facility now known as Spaceport America than the $108 million that Branson planned to spend on developing a fleet of five SpaceShipTwos and WhiteKnightTwo carrier aircraft.
Among all the big numbers in the announcement, there was a truly astounding one that was deemed so important it was mentioned twice. (Emphasis added)
Sometime in 2020, if all goes according to plan, British billionaire Richard Branson will board Virgin Galactic’s SpaceShipTwo VSS Unity at Spaceport America in New Mexico and take the first commercial suborbital space flight in history.
The landmark flight, which Virgin has been trying to conduct for 15 years, will also be the culmination of a 30-year effort by New Mexico to become a commercial space power.
The nonbinding memorandum of understanding involving $1 billion in investment from Saudi Arabia is Richard Branson’s latest success in obtaining financial support from governments for his Virgin Group’s space companies.
The table below shows funding invested directly into the group’s space ventures and indirectly for infrastructure.
VIRGIN GROUP SPACE COMPANIES — DIRECT & INDIRECT GOVERNMENT INVESTMENT
Custom built spaceport named Spaceport America constructed on 18,000 acres of land — Virgin Galactic signed 20 year lease to serve as anchor tenant
Government-owned sovereign wealth fund Aabar Investments obtained 31.6 percent share of Virgin Galactic — plans for a spaceport where SpaceShipTwo would fly in Dubai — future commitment of $100 million more when Virgin Galactic developed viable plan for small-satellite booster (LauncherOne)
Aabar Investments increased share of Virgin Galactic to 37.6 percent
Under non-binding MOU, government-run Public Investment Fund (PIC) would obtain undisclosed share of three Virgin Group space companies: Virgin Galactic, Virgin Orbit and The Spaceship Company — Virgin Group to maintain majority ownership
PIC has an option to invest nearly a half-billion more in Virgin Group space services
Ten years ago, New Mexico released an economic impact study conducted by the Futron Corporation that assessed the potential benefits of Spaceport America and the state’s newly announced partnership with Richard Branson’s Virgin Galactic.
“The suborbital market features a strong increase in launches because of growing demand for space tourism, with the potential number of launches from the New Mexico spaceport increasing from 61 in 2010 to 426 in 2020,” the report states. “Futron estimates that the spaceport has the potential to provide the basis for creating approximately $460 million of additional economic activity in New Mexico, with some 3,460 new jobs in 2015.”
Arizona is looking to emulate its neighbor, New Mexico, by passing a bill protecting space companies from being sued for injuring or killing passengers:
A bill at the Arizona Legislature would give space flight companies — yes space flight companies — protections against being sued.
The measure is aimed at helping possible space tourism and commercial space flights being planned in southern parts of the state.
House Bill 2163 creates some legal protections for commercial and private space flight companies by codifying liability release forms the companies could have passengers sign.
“This is actually important,” said Steve Zylstra, president and CEO of the Arizona Technology Council. “Arizona, especially Southern Arizona, is in the Space Flight Corridor that extends from Texas to California. One of my members in Tucson, Paragon Space Development Corp., is planning trips to the outer edges of space, to the moon and to Mars.”
Paragon is not actually going to send people to space; they have a high-altitude balloon project in the works. But, the legislation will apparently cover their activities.
The New Mexico House has unanimously passed the spaceflight informed consent law, providing legal protections that Virgin Galactic said were required to keep it from moving out of the state and to attract other tenants to Spaceport America. The measure now goes to Gov. Susana Martinez, who has promised the sign the measure into law.
“I see this as a stepping stone to broaden space flight activities … not only for New Mexico but for the entire country,” said Rep. James White, an Albuquerque Republican. “There may be time when we launch spacecraft from here with passengers and land them within minutes on the other side of the world.”
Yeah, maybe. In about 20 years. In the meantime, New Mexico will have to hope that Virgin Galactic can begin commercial flights into space next year. Once that starts, the project can begin to deliver on its many promises to taxpayers.
Rep. Bill McCamley, a Las Cruces Democrat, said the spaceport can boost the state’s economy and provide high-paying jobs for New Mexicans, who otherwise might leave the state to find work in science, technology and engineering.
“This is something that southern New Mexico absolutely has to have,” he said.
Let’s hope he’s right. The expectations for the $209 million spaceport are, pardon the pun, sky high. New Mexico has done its part. Time for Virgin Galactic to stand and deliver.
The National out of the UAE has the latest schedule prediction from Virgin Galactic, which features the usual if, then we hope qualifiers and promises of great benefits once the blessed day arrives when commercial operations actually begin:
“Depending on the progress of the last portion of the experimental test flight programme and the federal aviation authority licensing process we hope to be undertaking full space test flights by the end of 2013 and in commercial operations within a relatively short period thereafter,” says Sean Wilson, a Virgin Galactic spokeswoman.
Editor’s Note: Well, there you have the argument in a nutshell: New Mexico has fallen behind Florida and Texas in the race to restrict the rights of passengers and their heirs to sue Virgin Galactic and other companies for injuries and deaths from spaceflights. If they don’t catch up, their $209 million investment could be for naught. And all this is happening even before the first SpaceShipTwo flight has taken off from Spaceport America.
The proposal failed in the Judiciary Committee on a 6-5 vote.
Democrats said the bill went too far in eroding the rights of consumers. The measure would have prevented passengers or their families from suing manufacturers of parts and equipment used in space flights.
Sen. Mary Kay Papen, D-Las Cruces, sponsored the bill on behalf of Spaceport America and businesses interested in New Mexico’s space industry. Papen said the vote was a disappointment and a setback for the $209 million Spaceport in Sierra County.
Never out of the public eye for very long, former New Mexico Gov. and Spaceport America champion Bill Richardson is once again making headlines — and for all the wrong reasons. The Wall Street Journalreports:
A federal grand jury is investigating former New Mexico Gov. Bill Richardson over possible campaign-finance violations stemming from his 2008 presidential run, including allegations that he arranged for supporters to pay off a woman who planned to say they had engaged in an extramarital affair, according to people familiar with the inquiry.
Several of Mr. Richardson’s close associates have been granted immunity from prosecution in exchange for their testimony before the panel in Albuquerque, the people said. The panel is one of several grand juries in recent years to examine aspects of Mr. Richardson’s administration and campaigns….
The New York Times looks at how Spaceport America — launched by Gov. Bill Richardson in 2005 when New Mexico was flush with tax revenues — is faring today amid an economic downturn and years of delay in launching commercial suborbital spaceflights.
Governor Susana Martinez issued the following statement following Senator Harrison Schmittâ€™s decision to withdraw his nomination to serve as the Stateâ€™s Secretary of Energy, Minerals and Natural Resources:
â€œSenator Schmitt is a former NASA astronaut who underwent a complete background check by the Department of Public Safety as part of his nomination process.
â€œSenator Schmitt was willing to allow a private investigator access to his personal information, but he was not willing to waive that investigatorâ€™s liability for any improper actions or use of that information. While one can understand Senator Schmittâ€™s concerns, complying with the Legislatureâ€™s request is necessary to restore public confidence in state government. Thatâ€™s why I am requiring all of my cabinet secretary designees to comply with that request and this has led to Senator Schmitt withdrawing his nomination.
â€œI wish Senator Schmitt the best in his future endeavors and I will work swiftly to find a qualified replacement to lead New Mexicoâ€™s Energy, Minerals and Natural Resources Department.â€