About 800 people attended the opening of Spaceport America in 2011. The crowd, which included then Governor Susana Martinez and other dignitaries, watched in awe as Virgin Galactic founder Sir Richard Branson and friends christened the main terminal building by rappelling barefooted down its glass front. Ten years later, the thrill is gone.
Many New Mexicans, especially residents of Sierra and Doña Ana counties, whose sales taxes helped to build the Spaceport and have covered a significant portion of its ongoing operations, regard VG’s announced test flight next month as just the latest in a string of unfulfilled promises that space tourism will soon begin at the Spaceport.
Even if Virgin Galactic’s VSS Unity rocketship successfully reaches the edge of space and glides safely back to earth in May, the much-heralded plan to send the America’s first space tourist—none other than showman Branson—into sub-orbital space has been pushed into next year by the need to do even more testing this summer.
Originally, Virgin Galactic’s goal was to have taken 3,000 “astronauts”—as the company prefers to call the customers who will have paid at least $200,000 for their chance to rocket skyward and experience weightlessness for several minutes—to the edge of space by 2012. Now it faces stiff competition for predominance in the space tourism industry from Space X, Blue Origin and at least a half-dozen other companies.
Despite—or, perhaps because of—the many setbacks afflicting its anchor tenant, in January 2020 the Spaceport America Authority released a glowing Economic & Fiscal Impact Analyses” conducted by the national public accounting firm, Moss Adams. A key finding was that the Spaceport had “already achieved a positive return on investment.”
The analyses was greeted with skepticism by the state’s major media outlets, as well as by the Rio Grande Foundation, a conservative think tank based in Albuquerque. RGF analyst Daniel Seymour, known as a longtime critic of the Spaceport, evaluated the economics and feasibility of many claims in the Moss Adams analysis. RGF released Seymour’s policy brief, titled “Lost in (Sub-Orbital) Space: Financial Reality vs. Fantasy at New Mexico’s Spaceport Authority,” in March 2020.
Neither report received much attention in Sierra County. Virgin Galactic’s test flight in a few weeks provides a reason to examine them both more closely now. Prompted by the aborted test flight of the VSS Unity rocketship last December, the rescheduled May test is a potentially make-or-break moment for Virgin Galactic and the Spaceport. As the RGF policy brief concluded: “Ultimately, to be considered economically successful (let alone profitable), New Mexico’s Spaceport must become the home base for Virgin Galactic’s frequent manned commercial launches as the project was originally sold to the people of New Mexico.”
The RGF brief is highly critical of Moss Adams’s assessment that the Spaceport is already a success, pointing out that the analysis contains a “few utterly absurd conclusions.” In particular, RGF disputes the contention that the Spaceport “broke even on a $270 million dollar investment shortly after opening in October of 2011.” In essence, Moss Adams suggests that taxpayer funding of the Spaceport’s construction was recovered before the facility had barely opened.
The Moss Adams analysis goes on to posit that the facility began producing net economic benefits for New Mexico as early as 2013. This claimed accomplishment is, on the face of it, at odds with Virgin Galactic’s failure to execute a successful New Mexico sub-orbital flight since the Spaceport’s opening. Finally, it forecasts that the Spaceport will produced $956 million in direct, indirect and induced economic impact by fiscal year 2024.
The RGF policy brief backs up its skepticism of such claims with facts and figures, drawn from the Spaceport’s audited financial statements and the state’s capital outlay spending records.
RGF calculates that the amount of revenue generated by the Spaceport is “just $54.3 million in income for the State over the last 12 years.” It further emphasizes that the $54.3 million is comprehensive, covering all Spaceport-associated expenditures, including “Virgin Galactic’s spending on offices, warehouses, employee relocation; film shoots, the SA Cup, hotel rooms and meals, tourism. . . .”
In reviewing the Spaceport’s audited financial statements, RGF found they “do not list any revenue other than taxes and transfers from the State government before 2015, making the 2013 break-even date presented to the media particularly dubious.”
Moss Adams’s use of economic modeling software called IMPLAN may have led to overstatement of the Spaceport’s economic impact. The RGF brief quotes economist Donald A. Coffin, Ph.D., a professor at Indiana West University, who has described the IMPLAN model as “designed to generate large numbers to please a client who wants to lobby someone.” The Moss Adam analysis was released during the 2020 New Mexico legislative session at which the Spaceport America Authority, with the support of Virgin Galactic, asked taxpayers for an additional $57 million. It ultimately received another $10.5 million from the legislature in 2020—about $4 million less than in 2019.
The RGF brief tallies up all the contributions to Spaceport America’s construction and operation made by New Mexico taxpayers to arrive at an investment of $275 million dollars as of 2020. In addition, RGF discovered there was an estimated $35 million of taxpayer money that was “allocated, but unspent,” including “capital outlay funds from 2019 that have not yet shown up” on the Spaceport’s financial statements. The policy brief concludes that the total public investment to date stands at about $310 million.
Another public contribution, often overlooked, involves the Spaceport’s use of 18,000 acres of land, owned either by the Bureau of Land Management or the state. The Las Cruces Sun-News reported in 2006 that the Spaceport had negotiated a 25-year sublease of its 1,000-acre main campus and 17,000-acre buffer zone from two large ranches that are the primary leaseholders. As is the case with the White Sands Missile Range to the Spaceport’s east, other opportunities to develop the economic or recreational potential of these public lands have been forestalled.
Citizens of Doña Ana and Sierra counties voted in 2007 and 2008, respectively, to raise their gross receipts taxes by 1/4 cent for every dollar spent. The voters were told three fourths of the monies was intended to pay back bonds used to finance the construction of the “Southwestern Regional Spaceport” (later rebranded as Spaceport America by Branson), while the remaining one fourth of the monies was to be spent on local STEM education. In recent years, the dedicated GRT has produced $6 to $7 million in revenues annually.
As previously reported by the Sun, GRT revenues not needed to pay off the construction bonds have been channeled in operational support for the Spaceport, which has labelled these monies as “revenue” on its books, according to RGF. The RGF policy brief emphasizes that the most important return on the investment of public money in Spaceport America is the amount of new money that comes into New Mexico, not the recycling of locally raised tax monies within the local economy.
Sierra and Doña Ana countians proportionally contribute more to the Spaceport than other New Mexicans, yet they are amongst the poorest counties in almost the poorest of all the states. According to 2018 Census information, both counties have a poverty rate of about 25 percent, well above the United States average of 12 percent. The promise that good-paying jobs would be created for Sierra and Doña Ana countians was a key reason why voters agreed to increased sales taxes.
The Moss Adams analysis states that Spaceport America has created 150 jobs in the space industry. In other words, New Mexico has spent more than $300 million over the past decade or so on the creation of those jobs—or about $2 million per position. That cost figure will look better if and when more jobs arrive; Moss Adams projects that 516 new jobs will be created here by fiscal year 2029.
Virgin Galactic’s manufacturing occurs in California at a Branson-owned company called Spaceship America (this sister company recently merged with Virgin Galactic). Branson also founded a new company in 2017 called Virgin Orbit, choosing California over New Mexico as its headquarters. Virgin Orbit is focused on military satellite applications and uses a launch technology similar to that of Virgin Galactic (i.e., releasing a rocketship from a larger craft at around 50,000 feet altitude).
Because most of VG’s high-tech operations are on the west coast, some have questioned the quality of the jobs that have been brought to New Mexico compared to those created in California. Neither Moss Adams or RGF breaks down how many of the 150 jobs have been filled by New Mexico residents in general and how many, if any, have come to Sierra County.
As a point of comparison, the RGF policy brief points out that Virginia’s spaceport “directly and indirectly supports 29,638 jobs with $53.9 million of public financing per year, compared to Spaceport America’s 150 jobs supported by $14.9 million of public financing in 2019.”
Virgin Galactic’s new CEO Michael Colglazier told CNBC last November that the company could bring in as much as $1 billion in annual revenue at Spaceport America when it is fully operational. Tellingly, Colglazier and Virgin Galactic’s website both acknowledge that the company’s “multi-year effort targets flying 400 flights per year, per spaceport [author’s emphasis].” So, it appears that Virgin Galactic’s space tourism business will not be solely based at Spaceport America. The CNBC article reported that VG has been in conversations with such countries as Abu Dhabi, Italy, the United Kingdom, Australia and Sweden about setting up launch facilities.
Virgin Galactic’s “multi-year effort” began around 2005 when Branson and New Mexico Governor Bill Richardson joined forces for a “Build It and They Will Come” creation. The governor persuaded taxpayers to build the Spaceport, while Virgin Galactic began working on designing spacecraft. Local residents dreamed of high-quality jobs and throngs of space tourists that would improve life in the region.
New Mexico did its part. Virgin Galactic has yet to deliver. Not to worry, though. Branson’s long-awaited mission toward the stars has been rescheduled for sometime in the next 12 months. No specific date has been given for when paying astronauts will take off from Spaceport America, but we know it will be no earlier than 2022.
So, 10 years after the grand opening of Spaceport America, Sierra and Doña Ana counties remain in a “holding pattern,” waiting for the promised economic development to blossom. One can’t help wondering whether Virgin Galactic will soon be describing its timeline as a “multi-decade” effort.
Editor’s Note: To find links to the Moss Adams analysis and the Rio Grande Foundation policy brief, click here.