Perhaps unaware her question was being broadcast to online meeting attendees, Frances Luna, just before a Sierra Vista Hospital Joint Powers Commission meeting was to begin on Jan. 21, asked Travis Day, “Did you crush him?” referring to a Doña Ana County commissioner and member of the Spaceport America tax district board, which had met that morning.
Luna had represented Sierra County on the Spaceport tax district board from 2013 until Jan. 1, 2021, when she “termed out” as a Sierra County Commissioner after serving eight years. Sierra County Commission Chairperson Jim Paxon and Vice Chairperson Travis Day are the county’s current representatives on the tax district board.
Paxon, Day and Luna, who is now a Truth or Consequences city commissioner, are all members of the hospital JPC. They spoke of tax board matters prior to the JPC’s January meeting, although New Mexico’s Open Meetings Act requires governmental business be conducted in public meetings. Backroom strategizing of the kind this reporter overheard at the JPC meeting is not allowed.
“I wouldn’t say crushed,” Day responded, but admitted Doña Ana County Commissioner Shannon Reynolds had been defeated in his most recent attempt to get a discussion of tax allocations and expenditures on the tax district board agenda.
“I knew you could do it,” Luna said, giving high praise to Day. Paxon interrupted, saying, “I was there too,” in order to claim partial credit for Reynold’s drubbing.
“They did crush me in a way,” Reynolds admitted to the Sun in a later interview.
SIERRA COUNTY’S STONEWALLING
Reynolds shared documents with the Sun showing how Sierra County commissioners, particularly Frances Luna, have blocked the Spaceport tax district board’s exercise of fiscal oversight for years. The tax district board, which is comprised of three representatives from Doña Ana County and three from Sierra County, is supposed to oversee how Spaceport America spends gross receipts tax revenue. Both counties have been collecting .25 GRT, or 1/4 cent, for every $1 spent on goods in their jurisdictions since county voters approved these taxes in 2007.
Reynolds, at the Jan. 21 tax district board meeting, said Luna, as then-chair of the tax district board, ignored his entreaties to call a meeting for a year and a half. He shared his one-sided correspondence with Luna with the Sun.
Not exercising fiscal oversight has been expensive for taxpayers in both counties. If the tax district board had refinanced the two bond debts on a timely basis in December 2019, it would have saved taxpayers going forward at least $150,000 a month or nearly $2 million—and counting. These costs were reported at the Jan. 21 meeting by Michael Zavelle, chief financial strategist with the New Mexico Finance Authority, which issued and bought the bonds, rather selling them on the open market. The interest rate on the bonds remains set at a whopping 5 percent.
Zavelle also reported that $6.4 million in “excess” GRT—that is, revenue not dedicated to paying off debt—has been given to the Spaceport since 2011.
A state Department of Finance and Administration study of Spaceport spending, which was included in the recent McHard forensic audit of the Spaceport’s management, indicates the excess GRT has been spent on salaries and operations, not capital projects. The McHard report states the New Mexico Attorney General is currently investigating the legality of these expenditures.
DOÑA ANA’S COUNTERMEASURES
After it became clear Luna was not going to respond, Reynolds, an executive coach and motivational speaker who was elected to the Doña Ana County Commission in 2018, turned to Day and Paxon. He shared his correspondence with them with the Sun, which showed that the two also ignored Reynold’s requests to meet to discuss the use of excess GRT revenue.
Under Luna’s chairmanship, the tax district board last met on June 27, 2017, three and half years ago. The board’s bylaws state it must meet once a year, at minimum. During that 2017 meeting, Sierra County representatives succeeded in outmanuevering the Doña Ana County members, passing a resolution that allows Spaceport America to spend excess GRT for any “legal” purpose. The resolution made concrete what was only tacit before: the tax district board approved of spending excess GRT on operations.
Luna, Day and Paxon did not respond to the Sun’s question why they had all ignored Commissioner Reynold’s requests to schedule tax districtboard meetings.
Taking matters into his own hands, Reynolds sent a letter to the New Mexico Finance Authority in April 2020, directing them to hold excess GRT funds. He sent a copy to the Sierra County Commission, which may have helped to pave the way for Paxon’s and Day’s decision to attend tax district board meeting that Reynolds finally succeeded in having scheduled for Jan. 21, 2021.
A second motivating factor may have been the November 2020 release of the McHard forensic audit of the suspected mismanagement of the Spaceport by its recently fired director Dan Hicks. The investigation broadened as it uncovered violations of procurement code, accounting and hiring practices, among other irregularities, including the Spaceport’s use of excess GRT revenue. The McHard auditors were unable to calculate the total amount of misspent money because of time constraints and the Spaceport’s poor record keeping. The McHard report did, however, hold others beside Hicks accountable for the waste of taxpayer money, stating wrongdoings were “exacerbated” by the lack of board oversight.
Spaceport America, a publicly funded enterprise, is overseen by two boards. The Spaceport Authority Board has broader oversight duties, while the tax district board’s oversight is restricted to the GRT spending. The secretary of the New Mexico Economic Development Department, Spaceport America’s parent agency, has a standing position on the Spaceport Authority Board. Alicia Keyes, NMEDD’s current secretary, is the present board chair.
Keyes hired the McHard firm to do the forensic audit shortly after becoming chairperson. After McHard flagged GRT spending as an irregularity, Keyes asked the EDD general counsel to render an opinion. The department’s attorneys said such spending was illegal, citing state laws that limit GRT spending to Spaceport-related capital projects, while remaining silent about salaries and operations.
Well before the McHard report was issued and the tax district board passed a resolution condoning it, Doña Ana County Commissioners began trying to stop the misuse of GRT funds. In their 2007 ballot proposals to levy this tax to help build the Spaceport, both Sierra and Doña Ana Counties promised that 75 percent of the GRT would be used for construction and capital projects. The remaining 25 percent would support STEM (science, technology, engineering and mathematics) education in public schools.
Reynolds provided the Sun with three Doña Ana County Commission resolutions sent to various state officials through the years that try to stop excess GRT from going to Spaceport operations. The first resolution was passed in 2015, the second in 2017 and the last in December 2020. The last resolution asks the state to reimburse the tax district board the $6.4 million in excess GRT that has been given to Spaceport America to date.
Day and Paxon’s scheme to “crush” Reynolds came on the heels of the McHard report, the initiation of the AG investigation and the EDD attorneys’ opinion that state law limits GRT spending to Spaceport-related capital projects.
Day and Paxon succeeded in suppressing a vote on Reynolds’ action item on the Jan. 21 agenda. Reynolds sought to repeal the resolution passed under Luna’s leadership in June 2017 that allowed excess GRT to be spent on Spaceport operations. But Day had won control of the floor at the start of the meeting, after being made chair. Doña Ana County Commissioner Diana Murillo-Trujillo did not arrive at the meeting in time to influence the choice, giving Sierra County representatives the votes needed to install Day. Truth or Consequences realtor Sidney (Sid) Bryan, appointed by the governor to the board last July, cast the tie-breaking vote.
Reynolds was again overruled when he tried to have some of the excess GRT dedicated to obtaining the services of an administrative assistant and attorney for the tax district board. Reynolds noted the previous and current use of Spaceport America staff to fulfill these functions had presented staff with a conflict of interest in maintaining records or advising the board, as revealed in the McHard report. Day countered by suggesting that nominating a secretary-treasurer from among tax district board members should resolve the record-keeping issue and that each county could use its staff attorney for legal advice.
Under Day’s gavel, the tax district board also decided to await the Attorney General’s ruling before voting on the repeal of the resolution. In the interim, the tax district board will meet Feb. 18 to discuss items of less import, such as changes to its bylaws.
Day, in an interview with the Sun a few days before the Jan. 21 meeting, disregarded the issue of legality and the promise made to voters who agreed to help build the Spaceport, but not to fund its operation. “It is my understanding that the [McHard] audit showed the GRT saved the Spaceport,” Day said.
This is correct. The McHard report, citing the abovementioned DFA study of GRT spending, showed the Spaceport couldn’t have made payroll or paid the light bill without the use of those funds.
Day, who was appointed to the tax district board in January 2019, said he would support the continued use of GRT for operations if the state does not allocate funds for Spaceport operations. The success of Spaceport America means economic development for the county, Day said.
Yet it is Doña Ana County taxpayers who are paying the lion’s share of Spaceport-dedicated GRT.
According to the Spaceport Authority’s yearly audits, 75 percent of the Spaceport GRT raised in both counties in fiscal year 2018 and fiscal year 2019 amounted to about $7 million. The total Spaceport GRT raised in Sierra County in fiscal 2015 was less than $500,000, according to an August 2017 article in New Mexico Politics. If this data (the most recent available) is still roughly accurate, Sierra County is paying only about 8 percent of the Spaceport’s bond debt and operations bills.
The Doña Ana County Commission’s 2015 resolution stated its desire to use excess GRT to build a 24-mile paved road to the Spaceport that would significantly cut travel times for workers and tourists departing for the facility from Las Cruces and other Doña Ana communities. The project was perceived in Sierra County as detrimental to the county’s ability to attract jobs and tourists, as the 35-mile northern route to the Spaceport from Truth or Consequences would no longer be the shortest or sole paved road to the facility.
Sierra County’s obstructionism forced Doña Ana County to find other revenue sources to build the southern shortcut. It also delayed construction. The Las Cruces Sun-News reported in July 2018 the road, which ultimately cost $14 million, was finally completed after a wait of 10 years.
HISTORY OF LOCAL TAXPAYER SUPPORT OF THE SPACEPORT
The Spaceport America Regional Spaceport District was formed by state law 5-16-1 through 5-16-13 in 2006. It states any interested county could be a member of the tax district if its residents voted in favor of a gross receipts tax by 2008. State law 7-20E-25, “Co-regional Spaceport gross receipts tax,” specified the GRT could be enacted in 1/16 increments, up to .50 percent or half a cent for every dollar spent on goods in the county or any part of the county designated as the taxing district.
Doña Ana and Sierra Counties joined the tax district, believing if they helped to make Spaceport America a reality, it would increase revenues from tourism, sales of goods, job creation and home buys.
Both counties passed a GRT of 1/4 cent per dollar spent before the 2008 deadline. The income from the .25 GRT could be divided into two streams. State law 5-16-13 provides: “At least seventy-five percent of the municipal regional spaceport gross receipts tax or county regional spaceport gross receipts tax revenues received by each governmental unit must be used by the district for the financing, planning, designing, engineering and construction of a regional spaceport [author’s emphasis]. No more than twenty-five percent of the municipal regional spaceport gross receipts tax or county regional spaceport gross receipts tax revenues may be used by the governmental unit enacting the tax for spaceport-related projects as approved by resolution of the governmental unit.”
Bylaws adopted by the Spaceport tax district board invested fiduciary responsibilities in a six-person board, to be comprised of two Doña Ana County Commissioners, two Sierra County Commissioners and two members appointed by the governor, one representing Doña Ana County and one representing Sierra County.
Both counties have observed the 75/25 percent split, with 25 percent of the GRT revenue going to their school districts.
But the stalemate over the allocation of “excess GRT” has resulted in the tax district board’s dereliction of its duty to provide rigorous fiscal oversight of taxpayer funding of the Spaceport America.
Case in point: the board’s failure to refinance the Spaceport’s massive bond debt.
State law 15-16-5 (B) mandates that only the elected officials on the tax district board may vote on bond issues. Bonds may be issued, according to state law 5-16-7, “for the purpose of financing the planning, designing, engineering and construction of a regional spaceport or spaceport-related project.”
In 2008, the county commissioners on the tax district board voted to issue a nearly $21 million bond and then in 2009 a nearly $56 million bond. The New Mexico Finance authority bought each bond issue and charges about 5 percent interest on each.
The revenue generated by the 75 percent portion of the counties’ GRT tax pays for the debt, which amounts annually to about $5.6 million for both bonds.
The bonds are to be paid off in 2029, when a $14 million balloon payment on the larger debt also comes due.
Correction: This story has been updated to provide the correct dates and amounts of the two tax district bond issues, which were erroneously stated when originally published.