Spaceport America Risks Becoming Even Bigger Money Pit

The Virgin Galactic Gateway to Space terminal hangar facility (center), Spaceport Operations Center (Left) and “Spaceway”
(Runway) at Spaceport America. (Credit: Bill Gutman/Spaceport America)

The second installment of NMPolitics.net’s five-part series on Spaceport America dropped today. Funding woes could ‘cripple’ NM spaceport as other states invest in space race

This one deals with financing at Spaceport America. It requires a bit of understanding of the history of how it was funded.

So, here’s the back story: In 2007 and 2008, residents of Dona Ana and Sierra counties approved a quarter cent increase in the sales tax to help pay for the construction of Spaceport America, where billionaire Richard Branson plans to send rich people on suborbital joy rides.

The tax is supposed to expire in 2028 when the bonds used to fund construction are finally paid off. In the meantime, excess tax monies collected have been used to help plug holes in Spaceport America’s budget due to delays in Virgin Galactic beginning operations.

That has caused some controversy over whether that was the original intent of the measures voters approved.  Virgin Galactic’s lease payments are scheduled to go up next year, so that should even out the spaceport’s budget. So, the excess taxes could go to paying off the bonds early, right?

Not necessarily. Spaceport Executive Director Dan Hicks says he need more money to attract other tenants to the facility and compete with other spaceports across the country.  The funding would go to paying for a new runway, hangars, roads, utilities and other necessities.

Hicks wants a steady stream of income to fund these activities. And he’s got an idea about where to find it.

State Rep. Bill McCamley, D-Las Cruces, was among those who pledged to voters a decade ago that the local tax money would be used for initial construction of the spaceport and would sunset after 20 years. At the time, McCamley was a Doña Ana County commissioner and co-chaired the political action committee promoting approval of the tax.

McCamley sat in the back of the room listening as Hicks made his case for using the excess tax revenue for operations at this year’s June 2 tax board meeting. When Hicks told the board he believed the tax was intended to be perpetual, not sunset in 2028, McCamley sat back in his chair, laughed and shook his head.

In an interview, McCamley took no position on using the excess tax money for operations, saying that is up to the tax board. And he said a decision on whether to continue the tax beyond 2028 must come from an open discussion with voters.

Whether voters will agree to continue the tax, he predicted, will depend on the spaceport’s status at that time.

“The understanding is that [the tax] goes away,” McCamley said. “If the spaceport is a roaring success and people see all these jobs being created, maybe people will say this is worth continuing.”

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  • Jeff2Space

    This sort of thing happens with many public/private endeavors where the private partner doesn’t live up to their end of the bargain. Reportedly the “Noah’s Ark” attraction in Kentucky isn’t bringing in enough tourist dollars to the surrounding area, so the taxpayer’s money spent on “improvements” needed for such a big attraction in the area simply isn’t paying off.

  • Mr Snarky Answer

    I the upside, they have firewood for years if they need it.

  • Hemingway

    This sentence in the article says it all: “The Virgin Galactic design is an evolutionary dead end – it cannot be scaled up for orbital flight.” It is also the death knell of Spaceport America in the future.

    http://www.thedailybeast.com/jeff-bezos-will-leave-richard-branson-behind-in-the-dust

  • Bill Douglass

    Questions – Is Branson’s company constructing a third SS2 with their tooling? Is their “factory” at the Mojave airport?

  • Bill Douglass

    After starting with a big lead Branson has been overtaken and is being passed by Bezos, Although I confess that I would rather ride in a spaceplane and land on a runway.

  • Pete Zaitcev

    If a Project X is a “roaring success” that is “creating jobs”, it should bring the tax revenue in, not consume the money. If a tax is needed to continue operations after the project is bootstrapped, it’s called a “boondoggle”, not a “success”. See Amtrak. That one even delivers passengers successfully, and it’s not a success, let alone a roaring one.

  • Putting Lipstick on your Pig won’t make bacon and a road from Las Cruces will not save SA; a new runway will not cause anyone to want to fly to T or C; and new recruited companies will come from what part of the industry? I’m sure I’m not the only one to notice that space companies would rather headquarter in large cities where they can find ample, experienced, young workers who want to live in cities with amenities rather than in the desert, or south Georgia, or Kodiak, or even the Virginia shore?

    It seems like there is still not a discovered Business model that works for commercial spaceports that does not require taxpayer subsidies. They are not self-supporting, and unlike airports, they are not economic engines for growth. In fact, spaceports are different animals from airports and they are not likely to be compatible, especially in their demand for differing types of resources. But politicians can never be honest about this because the returns will never be sufficiently distributed across the community in such a way as to justify the costs. Spaceports are nothing more than a form of welfare for struggling space companies and grandeur for political types. So smoke and mirrors are common tools of elected officials who support these boondoggles.

    The test of their plan and their honesty should be measured the same way we evaluate corporate CEO’s. They are not allowed to lie about the future unless they make the necessary legal disclaimers about “forward-looking” results. They are routinely fired for missing targets and bad management decisions. Politicians should be subject to the same fraud laws as corporate CEO’s when it comes to their fiduciary responsibilities. Instead, covering their asses is their highest priority.

  • Kenneth_Brown

    In aerospace, designs are made for a specific purpose. If the goal is suborbital, that’s what the craft should be optimized for. Orbital is a different set of needs with differing engineering problems to solve. SS2 can be said to have been scaled up from SS1, but the mission is very similar with the addition of more seats for more people. Although, SS1 was nominally capable of carrying 3 people (a requirement of the Ansari X-Prize) and it’s rather telling that after the contest it never flew again. One would think that if it worked as well as some say it would have been used as a test bed rather than being stripped down and sent off to the Smithsonian.

  • Kenneth_Brown

    Another runway? I wouldn’t think that the one there is getting very much use right now. Buildings might help to attract some new tenants, but it’s hard to say without seeing what terms they are asking for in the lease agreements. The spaceport is so far out in the middle of nowhere with almost no available housing, shopping or entertainment, it might only make sense for a company to have a test center there that they use for short periods of time. Instead of an additional runway, it might be a lot better to build a managed housing campus that companies can lease in blocks for short terms (a couple of months at a time) or a few years at a time with rotating occupants that use the apartments like an extended stay hotel without the maid service.

    Mojave has problems with tax liability and land leasing. Only the largest companies such as Stratolaunch and TSC/Virgin can afford to construct a building on leased land. There is far less asset value in the building which means a very restricted ability to finance the construction. Since Mojave airport is not in a position to be able to construct buildings and lease them to tenants at an affordable price, there is limited growth potential. Pretty much everything at Mojave Airport is leased and a large percentage is being leased by Northrop Grumman.

  • Douglas Messier

    Mojave doesn’t hide the terms of the leases from the public. The problem the airport had was in collecting the payments. Some tenants were allowed to slide for years. When it came time for an overdue audit, the CFO suddenly quit the night before and they spent 1.5 years untangling the accounting mess.

    Bad management by the CFO, weak financial controls, abysmal oversight by the General Manager/CEO and board. If this had been a city instead of the airport, people would have been calling for the GM’s head. Probably would have been fired.

  • Douglas Messier

    I believe so. And yes.

  • Douglas Messier

    From what I’ve read, continuing SpaceShipOne flights would have required funding from Paul Allen. Burt wanted to continue flights. But Allen was pretty unnerved after watching some of the flight tests. And he would get a substantial tax credit for the donation to offset the $28 million he spent. Of course, the ship needs to be in one piece.

    As to your larger point, I don’t think SpaceShipOne worked as well as people said. It only flew six times under power. Shipping it off to a museum rather than ringing it out as a test bed before designing a larger vehicle was a real mistake. They went directly to SpaceShipTwo without really understand the engine and the feather.

  • Douglas Messier

    That could be a real problem. They’ve got one SS2 and one WK2. So they’re one bad day away from having no capability to fly anyone to space. It’s taken them three years to recover from losing their last ship.

  • Kenneth_Brown

    I know from working at a company there that the way the land is owned and taxes are allocated, it’s different than if a company leased a building in a common business park. The airport doesn’t (or didn’t) walk tenants through the particulars and even though it’s the business that needs to do the work, it’s good for the airport to not put them into a bind that forces the business to move or fail.

    I agree that the board was pretty lax about rents being paid on time and a few tenants were way under water when they folded up and left. A couple caught up (with a discount, perhaps) and do better now.

  • Bill Douglass

    Thanks Doug. What is your latest info on which motor fuel they will be using for their upcoming SS2 powered flight tests? Ribber? Nylon? Something new?

  • Kenneth_Brown

    I sort of remember some comments from Mike Melville that SS1 was a real handful to put it mildly. He might have told Sally a bit more and that made her really nervy when he flew it. Paul would have been in the meetings when flight test data was reviewed. I think the only way we’ll ever know more is if Brian’s book gets published.

    The tax angle is something I hadn’t thought of, but yes, SS1 would be better in one piece for that.

    They still don’t seem to have the engine sorted. I guess we’ll see before too long if that stills holds true.

  • Bill Douglass

    At the Mars Conference at Irvine yesterday (9/7/17) George Whitesides showed video of two new SS2s being constructed at their Mojave facility. His wife Loretta gave nice talk an hour later.

  • Bill Douglass

    George also showed video of their latest motor test in the their vertical test facility with the motor pointed down and most of the flame tail out of the video frame. The visible flame was orange.