Analysis: Virgin Galactic may be close to taking off, but Spaceport remains earthbound, Part 1

by Kathleen Sloan | November 19, 2021
9 min read
Branson and team floating inside their rocketship during their July 2021 flight to near space
Silver-haired Richard Branson and his fellow "astronauts" revel in their moments of weightless aboard a Virgin Galactic rocketship that took the team to the edge of space in July. Source: Virgin Galactic video

Sir Richard Branson and New Mexico Governor Bill Richardson shook hands on a deal in 2005 that precipitated a huge public investment—still ongoing—in  Spaceport America by the citizens of this state.

“Build us a world-class spaceport and we’ll bring you a world-class space line,” Branson has said he recalled telling Richardson.

The public held up Richardson’s part of the bargain. Since the Spaceport opened in Sierra County 10 years ago on Oct. 18, 2011, more than $300 million in state funding and local gross receipts taxes have been funneled into the construction and operation of the 18,000-acre facility adjacent to the U.S. Army White Sands Missile Range.  

Branson is inching closer to delivering on his part of the bargain. In July, VG’s mothership WhiteKnightTwo rolled out of its leased main terminal at the Spaceport, the launch pad for a rocketship that carried Branson and members of his team to and from suborbital space. The rocket ship veered out of its permitted flight path over White Sands, triggering VG’s grounding by the Federal Aviation Administration for almost a month in September while the company made “required changes” to its communications systems.

Less than a month later, in mid-October, the company announced that it would not begin commercial service until the fourth quarter of 2022—the latest in a string of broken deadlines for inaugurating VG’s space tourism business at the Spaceport. Branson originally predicted that the first commercial flights would begin in 2007.

In a previous article, the Sun reported on the findings of the only serious study of the Spaceport’s return on investment—an economic and fiscal impact analysis released by the Spaceport Authority in January 2020—and on a critique of that study by the Rio Grande Foundation. RGF shot holes in the authority’s claim the public had already received its return on investment. RGF toted up the public dollars spent on Spaceport America from its inception to 2019. It arrived at a total investment of $310 million, compared to its calculation that the ROI was about $53 million.

Since 2019, the Spaceport Authority has begun capital improvements projects that will expend $20 million more in New Mexico capital outlay funding and severance-tax bond funding, bringing the total public investment to about $330 million. Other multimillion-dollar capital projects are in the wings. And, just this week, the Spaceport’s executive director testified before a state legislative committee that he was going to ask the New Mexico Legislature for an additional $2 million to supplement the Spaceport’s annual operating budget of about $10 million. Revenues from anchor tenant Virgin Galactic and other users account for only 60 percent of the facility’s current operating budget.

WhiteKnightTwo taking off with Branson aboard in July
VG’s WhiteKnightTwo, the mothership of the rocket that carried Branson into space, takes off from Spaceport America on his July flight. New Mexico taxpayers have subsidized the construction and operation of the Spaceport to the tune of more than $300 million and counting, but neither the state nor the county will reap a dime in gross receipt taxes on ticket sales if and when regular passenger spaceflights begin. Source: Virgin Galactic video

While the public waits for its ship to come in—the highly anticipated economic boost and revenue flows to the state and region that will be generated by Virgin Galactic’s Spaceport America flights—the Sun looked more closely at the prospects for overall economic development and the expected revenue streams. They turn out to be trickles, not torrents, even if and when the flight cadence picks up.

VIRGIN GALACTIC’S SUCCESS IS NOT NECESSARILY NEW MEXICO’S

Virgin Galactic is unique among spaceline companies. It is the only venture using a horizontal-takeoff plane carrying a spacecraft that, upon parting from its carrier, fires rockets to reach “suborbital space.” Other competing space companies, such as Blue Origin and SpaceX, send rockets up from a launch pad, usually from leftover Kennedy-era race-to-space infrastructure the public’s money built long ago.

Virgin Galactic’s phase one business model is to sell tickets for a short flight to the edge of space, where “astronauts” will experience about five minutes of weightlessness and the life-changing reversal of perspective—looking down on Earth. Seeding each flight’s passenger list with movie stars, such as Tom Hanks, Leonardo DiCaprio and Lady Gaga, with whom their fellow astronauts would probably share three days of training to prepare for the flight, may be rationalization enough for the wealthy to pay nearly a half million for the price of a ticket. Tickets were first priced at $200,000, then $250,000 and lately $450,000. According to the Virgin Galactic website and recent Securities and Exchange Commission filings, required since Virgin Galactic went public in 2019. Virgin has more than 600 reservations so far, resulting in the collection of $80 million in ticket deposits.

Virgin Galactic’s online investor relations page states that the company expects to make 400 flights per year per spaceport, which brings us to VG’s future plans. 

Virgin Galactic has made no secret of its intentions of eventually flying passengers suborbitally from spaceport to spaceport, greatly reducing the time it takes to get from Paris to Abu Dhabi, for example. VG’s other envisioned spaceports have yet to be built, but a regular airport may be all that’s needed to become a VG hub, because the company’s launch technology does not require a launch pad and its July flight with Branson aboard proved that its rocket ship can be safely guided back from the edge of space to land on an airstrip.

These capabilities open up a wealth of departure and destination points, providing options that might make choosing to fly out of rural Sierra County much less attractive to jetsetters upgrading to rocket-setters.

Blue Origin and SpaceX are also offering suborbital flights, but neither company intends to confine its operations to low orbit. Both are promising future flights to the International Space Station, space hotels and even the moon. While all three companies are competing for first adopters who want to quickly get their astronaut wings, after the first phase of commercial spaceflight occurs, Blue Origin and SpaceX will be competitors for customers wishing to spend days in orbital space. VG will be in a class of its own as the only company flying passengers suborbitally to different points on earth.

The question is whether Virgin and its supposed beneficiaries—Spaceport America and the citizens of New Mexico, who continue to subsidize the startup investment in the world’s first purpose-built spaceport—will survive phase one of Virgin Galactic’s plan. Is the market of first adopters deep enough for VG to get a significant share? During phase two, Virgin Galactic and Spaceport America must become one of the points in point-to-point suborbital travel to ensure longevity and return on investment.

LOOKING FOR STATE AND LOCAL RETURN ON INVESTMENT

JOBS

When Richardson made that handshake deal on New Mexicans’ behalf, he should have insisted that public investment in a spaceport run consonant with Branson’s delivering an ever-increasing number of jobs to the state. Job creation is the quid pro quo of most state economic development subsidies and grants. Virgin Galactic has created 150 new jobs total in the space industry, according to Spaceport America Authority’s 2020 analysis. That report does not, however, specify how many of those jobs came to Sierra County or at least were filled by New Mexicans.

Branson has spun off business expansion that could have produced new jobs and revenue for Virgin Galactic when he formed California-based Virgin Orbit in 2017. A small-satellite launching company, Orbit claims to have $300 million in active contracts and another $2.3 billion in “identified sales opportunities currently being pursued.” The payloads are carried to a launch point 45,000 feet above the earth under the wings of a fleet of renovated planes left over from Virgin Airlines, whose operations have been reduced and assets mostly sold off. Orbit’s Boeing 737s, which can take off from regular airports, do not need the expensive runway the public built Branson at Spaceport America.

Recently, Virgin Galactic CEO Michael Colglazier announced that the company is shopping in at least three states for the best incentives to locate plants to build more spacecraft to meet its projected 400 flights per year at the multiple spaceports it intends to operate. In exchange, VG promises to create 1,000 new manufacturing jobs. It is not known if New Mexico is even being considered as a site.

Job guarantees ensure a return on public investment that is a combination of hard-number salaries and soft-number living expenditures and home buys by well-paid employees. Harder to measure are tourist-dollar returns that may be generated by astronauts and curious visitors coming to Spaceport America once regular VG spaceflights begin there. Nonetheless, “heads in beds” expenditures by visitors at local hospitality businesses and the associated GRT that goes to the state and the county appear to be the only ship that may come in. The Sun looked at other hard-dollar revenue streams Virgin Galactic may generate, and the returns will not keep up with Spaceport America’s ever-increasing expenses.

TICKET SALES

There will be no hard-number return on investment produced by Virgin Galactic’s sales of tickets to space at the current price of $450,000 per person. After Branson made global headlines with his own ride to the edge of space in July, about 100 people have rushed to reserve their seats. VG hopes to have 1,000 customers in its queue when it starts commercial flights at the Spaceport.

But, no matter how many tickets the company sells, New Mexico will collect no gross receipts taxes on those sales at the time the flights are taken. Charlie Moore, the communications director for the New Mexico Tax and Revenue Department, confirmed that spaceflight tickets are exempt from GRT in an Oct. 12 email and provided a copy of the department’s ruling on that issue.

State law section 7-9-54.2 of the Gross Receipts and Compensation Tax Act, passed by the New Mexico Legislature in 2003 and signed into law by Governor Richardson during his first year in office, “provides a deduction from gross receipts which includes receipts from launching, operating or recovering space vehicles or payloads in New Mexico,” the ruling states. “While none of the terms used in that portion of the statute are defined, it seems reasonable to consider passenger revenues as receipts received for the operation of a space vehicle.” In sum, passenger revenues from spaceflights originating in the state are deductible from GRT owed by the spaceline.

Sierra County’s GRT is 1.81 percent and the state’s is 5.13 percent. If that tax were levied on VG’s latest 100 ticket sales totaling $45 million, it would produce a windfall of $3.123 million dollars for the state and county, to say nothing of additional GRT receipts on previous and continuing sales of tickets for Spaceport America-based flights.

Instead, Virginia Galactic will pocket all the ticket proceeds.

But that is not the only sweetheart exemption or deal Virgin Galactic has negotiated with our elected officials and other representatives of the public interest. The second and final part of this series will lay out additional giveaways that negatively impact Spaceport America’s ability to achieve financial self-sufficiency and drastically limit New Mexico’s return on its public investment in space exploration.

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Kathleen Sloan is the Sun’s founder and chief reporter. She can be reached at kathleen.sloan@gmail.com or 575-297-4146.
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HAVE YOU SEEN?

Understanding New Mexico's proposed new social studies standards for K-12 students

“The primary purpose of social studies is to help young people develop the ability to make informed and reasoned decisions for the public good as citizens of a culturally diverse, democratic society in an interdependent world.”
—National Council for the Social Studies 

Reader Michael L. Hayes of Las Cruces commented: What impresses me is that both the proposed standards and some of the criticisms of them are equally grotesque. I make this bold statement on the basis of my experience as a peripatetic high school and college English teacher for 45 years in many states with many students differing in race, religion, gender and socioeconomic background, and as a civic activist (PTA) in public education (My career, however, was as an independent consultant mainly in defense, energy and the environment.)

The proposed social studies standards are conceptually and instructionally flawed. For starters, a “performance standard” is not a standard at all; it is a task. Asking someone to explain something is not unlike asking someone to water the lawn. Nothing measures the performance, but without a measure, there is no standard. The teacher’s subjective judgment will be all that matters, and almost anything will count as satisfying a “performance standard,” even just trying. Students will be left to wonder “what is on the teacher’s mind?” or “have I sucked up enough.”

Four other quick criticisms of the performance standards. One, they are nearly unintelligible because they are written in jargon. PED’s use of jargon in a document intended for the public is worrisome. Bureaucrats often use jargon to confuse or conceal something uninformed, wrong or unworthy. As a result, most parents, some school board members and more than a few teachers do not understand them.

Two, the performance standards are so vague that they fail to define the education which teachers are supposed to teach, students are supposed to learn, and parents are supposed to understand. PED does not define words like “explain” or “describe” so that teachers can apply “standards” consistently and fairly. The standards do not indicate what teachers are supposed to know in order to teach or specify what students are supposed to learn. Supervisors cannot know whether teachers are teaching social studies well or poorly. The standards are so vague that the public, especially parents or guardians, cannot know the content of public education.

Three, many performance standards are simply unrealistic, especially at grade level. Under “Ethnic, Cultural and Identity Performance Standards”; then under “Diversity and Identity”; then under “Kindergarten,” one such standard is: “Identify how their family does things both the same as and different from how other people do things.” Do six-year-olds know how other people do things? Do they know whether these things are relevant to diversity and identity? Or another standard: “Describe their family history, culture, and past to current contributions of people in their main identity groups.” (A proficient writer would have hyphenated the compound adjective to avoid confusing the reader.) Do six-year-olds know so much about these things in relation to their “identity group”? Since teachers obviously do not teach them about these other people and have not taught them about these groups, why are these and similar items in the curriculum; or do teachers assign them to go home and collect this information?

Point four follows from “three”; some information relevant to some performance measures requires a disclosure of personal or family matters. The younger the students, the easier it is for teachers to invade their privacy and not only their privacy, but also the privacy of their parents or guardians, or neighbors, who may never be aware of these disclosures or not become aware of them until afterward. PED has no right to design a curriculum which requires teachers to ask students for information about themselves, parents or guardians, or neighbors, or puts teachers on the spot if the disclosures reveal criminal conduct. (Bill says Jeff’s father plays games in bed with his daughter. Lila says Angelo’s mother gives herself shots in the arm.) Since teacher-student communications have no legal protection to ensure privacy, those disclosures may become public accidentally or deliberately. The effect of these proposal standards is to turn New Mexico schools and teachers into investigative agents of the state and students into little informants or spies.

This PED proposal for social studies standards is a travesty of education despite its appeals to purportedly enlightened principles. It constitutes a clear and present danger to individual liberty and civil liberties. It should be repudiated; its development, investigated; its PED perpetrators, dismissed. No state curriculum should encourage or require the disclosure of private personal information.

I am equally outraged by the comments of some of T or C’s school board members: Christine LaFont and Julianne Stroup, two white Christian women, who belong to one of the larger minorities in America and assume white and Christian privileges. In different terms but for essentially the same reason, both oppose an education which includes lessons about historical events and trends, and social movements and developments, of other minorities. They object to the proposal for the new social studies standards because of its emphasis on individual and group identities not white or Christian. I am not going to reply with specific objections; they are too numerous and too pointed.

Ms. LaFont urges: “It’s better to address what’s similar with all Americans. It’s not good to differentiate.” Ms. Stroup adds: “Our country is not a racist country. We have to teach to respect each other. We have civil rights laws that protect everyone from discrimination. We need to teach civics, love and respect. We need to teach how to be color blind.”

Their desires for unity and homogeneity, and for mutual respect, are a contradiction and an impossibility. Aside from a shared citizenship, which implies acceptance of the Constitution, the rule of law and equality under the law, little else defines Americans. We are additionally defined by our race, religion, national origin, etc. So mutual respect requires individuals to respect others different from themselves. Disrespect desires blacks, Jews or Palestinians to assimilate or to suppress or conceal racial, religious or national origin aspects of their identity. The only people who want erasure of nonwhite, non-Christian, non-American origin aspects of identity are bigots. Ms. LaFont and Ms. Stroud want standards which, by stressing similarities and eliding differences, desire the erasure of such aspects. What they want will result in a social studies curriculum that enables white, Christian, native-born children to grow up to be bigots and all others to be their victims. This would be the academic equivalent of ethnic cleansing.

H.E.L.P.

This postmortem of a case involving a 75-year-old women who went missing from her home in Hillsboro last September sheds light on the bounds of law enforcement’s capacity to respond, especially in large rural jurisdictions such as Sierra County, and underscores the critical role the public, as well as concerned family and friends, can play in assisting a missing person’s search.

Reader Jane Debrott of Hillsboro commented: Thank you for your article on the tragic loss of Betsey. I am a resident of Hillsboro, a friend of Rick and Betsey, and a member of H.E.L.P. The thing that most distresses me now, is the emphasis on Rick’s mis-naming of the color of their car. I fear that this fact will cause Rick to feel that if he had only gotten the facts right, Betsey may have been rescued before it was too late. The incident was a series of unavoidable events, out of everyone’s control, and we will never know what place the correct color of her car may have had in the outcome. It breaks my heart to think that Rick has had one more thing added to his “what ifs” concerning this incident.

Diana Tittle responded: Dear Jane, the Sun undertook this investigation at the request of a Hillsboro resident concerned about the town’s inability to mount a prompt, coordinated response to the disappearance of a neighbor. From the beginning, I shared your concern about how our findings might affect Betsy’s family and friends. After I completed my research and began writing, I weighed each detail I eventually chose to include against my desire to cause no pain and the public’s right to know about the strengths and limitations of law enforcement’s response and the public’s need to know about how to be of meaningful assistance.

There was information I withheld about the state police investigation and the recovery. But I decided to include the issue of the car’s color because the individuals who spotted Betsy’s car emphasized how its color had been key to their identification of it as the vehicle described in Betsy’s Silver Alert. Because the misinformation was corrected within a couple of hours, I also included in this story the following editorial comment meant to put the error in perspective: “The fact that law enforcement throughout the state was on the lookout in the crucial early hours after Betsy’s disappearance for an elderly woman driving a “light blue” instead of a “silver” Accord would, in retrospect, likely not have changed the outcome of the search” [emphasis added].

I would also point to the story’s overarching conclusion about the inadvisability of assigning blame for what happened: “In this case, a perfect storm of unfortunate circumstances, many of them beyond human control, hindered the search that it would fall to Hamilton’s department to lead.”

It is my hope that any pain caused by my reporting will eventually be outweighed by its contribution to a better community understanding of what it will take in the future to mount a successful missing person’s search in rural Sierra County.

2 thoughts on “Analysis: Virgin Galactic may be close to taking off, but Spaceport remains earthbound, Part 1”

  2. John Wilks

    The Spacepork is another Bill Richardson boondoggle! When I learned in 2007 that the proposed facility could not be modified to become a regional airport, in the event of financial failure as a launch site, I knew the fix was in. When a local contractor received the first change order, practically before the initial runway concrete was cured, to extend the runway length, my suspicious were confirmed. When the road to the facility was paved from Doña Ana, the Spaceport visitors’ center off I-25 was canceled, and the future build-out plan for the facility include an on-site hotel was published, the confirmation that Sierra County had been little chance to recoup its “investment” was apparent. Lastly, when the authorization for the facility management to contract with out-of-state vendors for goods and services was announced, the fate of New Mexico and Sierra County workers and businesses was sealed.

    The county must walk away from their deal, file a lawsuit for fraud and misrepresentation, and cease sending tax revenues to the state for additional hand-outs to the Spacepork management.

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