Category: Spaceport

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Opinion piece: Government boondoggles shouldn’t be New Mexico way

This article first appeared in the Las Cruces Sun News on Sunday, July 31, 2022.

New Mexico is always ranked among the “poor” states in the United States. But, as anyone who lives here or has taken stock of New Mexico’s abundant natural and cultural resources can tell you, we have no business being “poor.”

Sadly, much of our poverty is self-inflicted. It is the obvious result of bad public policy. While there are all manner of bad tax and regulatory policies that often wind up being “in the weeds,” one of New Mexico’s fundamental problems is the result of politicians’ misguided belief that the path to success involves more government spending or another big government project.

The Rio Grande Foundation has long had its concerns about two Bill Richardson-era projects of this kind: the Rail Runner and Spaceport America. Starting with the Rail Runner, the latest ridership data just came out and, over the past year the train saw 319,635 riders board the train. The train was fully operational throughout the last 12 months which included a few months of fares having been discounted to $2.50 a day.

One might think that with gas prices these days the Rail Runner would be a cost-effective alternative. Sadly, the train’s current ridership is about 25% of peak years of 2010 and 2011 when more than 1.2 million people boarded the train. Sadder still is the fact that taxpayers continue to pay tens of millions of dollars in debt service on construction of the train and nearly $20 million annually to operate it.

Shockingly, Las Cruces Sen. Bill Soules recently pledged to reintroduce legislation in the 2023 session that would theoretically create “high speed rail” from Denver to Chihuahua. The fact is that population density numbers don’t justify commuter rail between Albuquerque and Santa Fe. Now Soules wants to spend tens of billions on “high speed” passenger service spanning more than 850 miles, three states, and two countries?

Sadly, Spaceport America has proven itself to be another Richardson-era boondoggle that hasn’t lived up to its promise. Spaceport America has been open for business for more than a decade and it has yet to fulfill its mission of hosting commercial space flights.

Last July Richard Branson and a team of Virgin Galactic employees did make it to weightlessness, but the company’s stock has tanked in the meantime and their latest prediction is for flights to begin the first quarter of 2023.

Plans for those manned commercial space flights have been delayed time and again. We’re not holding our breath for flights to begin in earnest early next year.

Worse, Virgin Galactic recently announced plans to build its future fleet of spacecraft in Mesa, Arizona. Sadly, spending hundreds of millions of our tax dollars to provide a spaceport for Virgin Galactic was not enough for them to build ships here.

With massive oil and gas surpluses flowing into the state’s coffers, politicians like Soules will again be looking for new “opportunities” to waste money. But big government spending schemes have repeatedly failed to truly diversify our economy or bring sustainable growth to our state.

Instead, the governor and Legislature would better serve our state by considering why companies with a New Mexico presence (like Virgin Galactic and Intel to name two) continue to choose neighboring Arizona over us.

It might be Arizona’s school choice which has improved educational results and workforce preparedness, not to mention a willingness for families to locate there.

Or, perhaps it is Arizona’s lower taxes which has dropped to 2.5% for nearly all Arizonans under a new tax cut law.

Finally, it could be that Arizona has a “right to work” law which gives private sector workers the right to opt out of membership or the payment of dues and fees in labor unions.

No matter, it is high time for New Mexico to abandon our government-driven model and consider what states like Arizona and others do that has worked so much better.

Paul Gessing is president of New Mexico’s Rio Grande Foundation.

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New Mexico politics summed up in one handy Trever cartoon

To say that we’re fans of Albuquerque Journal editorial cartoonist John Trever may be a bit of an understatement. But the Sunday cartoon (below) is particularly genius because of its multiple meanings about the way New Mexico politics and policies work.

  1. Private success vs. Public sector failure: While we have certainly criticized Bill Richardson’s decision to build a $200+ million Spaceport for Richard Branson, in the bigger picture both Bransons’ and Bezos’ successes are achievements for the private space industry. New Mexico’s schools are overwhelmingly government-run and funded. It would be nice if those who are rightly frustrated by the failures of this system would join us in focusing their efforts on bringing private sector competition and competence to bear on the difficult challenge of improving literacy in NM.
  2. A SECOND interpretation of the cartoon is yet another common theme of New Mexico government. Rather than doing the basics (like education) well, elected officials prefer to pursue expensive, high profile projects that really aren’t appropriate functions of government. The Spaceport is one such example, but Mayor Keller’s plans to build a new soccer stadium (with a starting price tag of at least $65-$70 million just to build, let alone property acquisition and inevitable cost-overruns) is another. Again, crime and public safety are crises demanding resources and attention, but Keller would rather build a stadium instead.
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Sir Richard Branson Should Pay His Own Way Into Space Instead Of Robbing New Mexicans

Photo Hardo Muller / Flickr

The following appeared on July 21, 2021 in The Federalist:

The world is in awe that billionaire Sir Richard Branson has finally accomplished his 17-year goal of achieving spaceflight. On July 11, 2021, Virgin Galactic’s spaceship Unity reached 53.5 miles above the Earth with a crew including Branson. They spent a few minutes in zero gravity and returned safely to the runway of Spaceport America near the small town of Truth or Consequences, New Mexico. Congratulations!

The international scene is abuzz with this latest and undeniably impressive addition to Branson’s resume: but at what cost? Branson launched his flight from Spaceport America, a project initially conceived as early as 1992 when the Southwest Space Task Force was formed to develop and advance New Mexico’s space industry. The project received seed funding through a taxpayer-approved initiative in April 2007 when voters in Doña Ana County approved the spaceport tax.

Almost every year since, supporters of Spaceport America have announced the “upcoming launch” from their facility or the need for additional tax dollars to expand the Spaceport and its capabilities. To bolster their claims for additional tax money, Spaceport America commissioned a study by the consulting firm Moss Adams of Albuquerque. The study made headlines with the implausible claim that Spaceport America began producing net benefits for New Mexico as early as 2013.

In March 2020, the Rio Grande Foundation tallied up the total costs to taxpayers, determining that New Mexicans have borne a total project cost of $275 million, while revenues approach only $54.3 million for the state over the last 12 years. The vast majority of taxpayer-funded spending related to capital projects and nearly $10 million in operational expenditures. In fact, new information shows New Mexico shelled out an additional $1.5 million in advertising expenses related to the Virgin Galactic flight.

Branson is already a billionaire. Why are New Mexico’s politicians lining the pockets of these already wealthy and successful entrepreneurs through taxpayer-funded, industry-specific subsidies? The impact of corporate welfare disproportionately affects the economically disadvantaged, especially in impoverished communities like Doña Ana County and New Mexico as a whole.

In 2019, the state suffered from one of the highest poverty rates in the nation. The impact of the coronavirus pandemic and the corresponding economic lockdown of the past 15 months has certainly exacerbated our financial woes.

In fact, New Mexico trails the southwest in employment recovery. A recent report by WalletHub highlights the state’s 620 percent increase in unemployment claims, referring to the change in the number of initial unemployment insurance claims in the week of July 5, 2021 compared to the week of July 8, 2019. How can a state in this state afford to help send a billionaire to space?

Sir Richard Branson is now an astronaut. But from my perspective as a New Mexican and taxpayer, he sure seems like a wild-west robber baron, holding up taxpayer stagecoaches of the poorest state in the country to fulfill his personal vendetta of beating fellow billionaires Jeff Bezos and Elon Musk in the billionaire space race. He’s “Six-Gun” Branson, 21st-century robber baron, a stark reminder of our 19th-century industrial past.

In the end, his mission was accomplished. But Six-Gun Branson has only proven that he can launch his spacecraft from any airport with sufficient runway length. I’d hazard a guess that soon he’ll be riding off into the sunset while my fellow New Mexicans are left holding the $275 million bag.

Patrick Brenner is the vice president of the Rio Grande Foundation, New Mexico’s free-market research institute and think tank. An advocate for open government, he leads the foundation’s government transparency and accountability efforts.

Photo Hardo Muller / Flickr
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Legislature Notable News Research Spaceport Top Issues

New Rio Grande Foundation Analysis: Myth vs. Fact on New Mexico Spaceport Budget

Virgin boss Richard Branson (R) and New Mexico Governor Bill Richardson (L) pose with the Virgin Galactic VSS Enterprise spacecraft after it's first public landing during the Spaceport America runway dedication ceremony near Las Cruces, New Mexico on October 22, 2010. The world's first private passenger spaceship will passed another milestone toward its commercial lift-off at it's remote spaceport in the New Mexico desert. Flamboyant British billionaire Richard Branson and New Mexico Governor Bill Richardson hosted a ceremony marking the completion of the main runway at Spaceport America, near the town of Las Cruces where the Virgin Galactic project is based. "The mothership has been finished and flying for a while now," Branson said. "We'll do many, many, many test flights over the next 12 months to maybe 18 months before we actually send people up into space. AFP PHOTO/Mark RALSTON (Photo credit should read MARK RALSTON/AFP/Getty Images)

(Albuquerque, NM) – Immediately prior to the 2020 New Mexico legislative session, the consulting firm Moss Adams released a study claiming that Spaceport America began producing net economic and fiscal benefits for New Mexico as early as 2013.

Danny Seymour, a policy analyst at the Rio Grande Foundation, (the Foundation is a long-time critic of the decision by then-Gov. Bill Richardson to spend hundreds of millions of taxpayer dollars in such a speculative venture) immediately went to work analyzing the study and its findings. But Seymour didn’t stop at merely deconstructing the Moss Adams report.

In his new brief, “Lost in (Sub-Orbital) Space: Financial Reality vs. and Fantasy at New Mexico’s Spaceport Authority” Seymour considers the overall financial impact of the facility as well as what it has spent and what it has brought into the State.

Seymour’s analysis, using publicly-available information in the Moss Adams report and other public documents, shows that the Spaceport America has now cost New Mexico taxpayers in excess of $275 million. This number contrasts with the project’s “original” cost of $225 million, but in the meantime there have been operational expenses as well as significant expansions and improvements made to the facility at taxpayer expense.

In his analysis Seymour contrasts the Moss Adams claims of “break-even” with a broad calculation of how much the facility has attracted to the State. Seymour finds that the facility has brought in just under $55 million to New Mexico that would have otherwise not been spent here. Even this number should not be used to calculate profit and loss as only direct lease payments could really be counted in a profit and loss statement for the Spaceport.

“Ultimately,” notes Seymour, “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.”

In conclusion noted Seymour, “Major government construction projects like the Spaceport often suffer from the “sunk cost” problem. It is easy to sell elected officials on the idea that the next dollar spent will make the project a success. In reality the Spaceport is a cautionary example of a State government spending taxpayer money on an extremely speculative project for which it had no expertise.”

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Talking New Mexico Budget/2020 session/Oil and Gas Downturn w/ Fred Martino on KRWG

RGF president Paul Gessing recently sat down with Fred Martino of KRWG TV in Las Cruces to discuss the aftermath of the 2020 Legislature and how things will likely shake out in the wake of the Coronavirus situation and the rapid decline in oil and gas prices.

 

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Spaceport Claims Don’t Add Up

The following appeared in the Las Cruces Sun-News on February 12, 2020.

A study released recently by the consulting firm Moss Adams made headlines with the rather implausible claim that Spaceport America began producing net economic and fiscal benefits for New Mexico as early as 2013. Since its anchor tenant, Virgin Galactic, has yet to launch a single manned space tourism flight, the Rio Grande Foundation undertook a detailed critique of these claims, relying on the audited financial statements from the Spaceport Authority and Capital Spending Records.

Using these publicly-available data along with information from the Moss Adams report which were not previously available (such as estimates of Virgin Galactic’s spending on employee relocation), we estimate the Spaceport project has cost taxpayers roughly $275 million while generating just $54.3 million in income over the last 12 years. The Spaceport’s audited financial statements do not list any revenue other than taxes and transfers from the State government before 2015, making the 2013 breakeven date presented to the media especially egregious.

Only some very creative accounting can turn a $221 million dollar loss into a net profit, but no one has ever faulted paid proponents of more government spending for a lack of creativity. The report seems timed to gather support for a significant hike in tax dollars appropriated for the Spaceport. Notably, the most “pessimistic’ scenario imaginable in the Moss Adams scenario analysis projects “only” $81.25 million of additional financing. Runway extensions, hangars, and other infrastructure have been added on to the facility over the years and (as we learn from the Moss Adams report) there are millions of dollars worth of taxpayer-funded infrastructure projects to come at the facility.

One of the biggest problems with the Moss Adams report is it considers the $100 million collected and spent by various Southern New Mexico counties as a positive in the overall return on the facility. It is true that construction companies were hired and projects were undertaken at the facility with that $100 million, but what about the $100 million in foregone economic activity on the part of taxpayers and businesses who saw their gross receipts tax burdens go up in order to fund the Spaceport?

This report, like so many other “economic impact studies,” relies on a controversial tool known as “input-output modelling,” a favorite for lobbyists and consulting groups eager to show credulous politicians that $100 million for a new sports stadium will create an economic renaissance in the area. These models take in more sober revenue calculations, and multiply them by arbitrarily determined “multipliers,” which inflates the benefits based on little more than faith and fancy math.

So-called economic “multipliers” are problematic under the best of circumstances, but one of their worst problems is when their impact is calculated only after the money is taxed away by the government. Ignoring the economic impact of allowing people to keep their own money not only stretches logic, but such mental gymnastics could be used to make any government program look like a winner for the economy.

At this point, we at the Rio Grande Foundation are not calling for the State of New Mexico to sell this facility as we have in the past. In fact, like most New Mexicans we also hope for a successful manned flight out of Spaceport America in the near future.

But, to call the facility a financial success before the primary purpose for which it was constructed rings false on its face. And, to use this as a talking point to request even greater access to taxpayer funding in the near future is to base important economic policy decisions on faulty information. We in New Mexico should know better than most that new government spending programs are not the ticket to prosperity. After a decade of broken promises, it’s well past time companies like Virgin Galactic stopped asking taxpayers to pick up their tab.

Seymour is a policy analyst with New Mexico’s free market think tank, Rio Grande Foundation

 

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‘Bipartisan’ Session a Disappointment for Taxpayers as shown in RGF Freedom Index Final Results

(Albuquerque, NM) — The 2018 session of the New Mexico Legislature won plaudits from across the political spectrum as a one of “bipartisan” successes. Unfortunately, when the Rio Grande Foundation’s analysts sat down to take a close look at the votes taken by legislators of both parties for its 2018 Freedom Index, they found that “new money” led to votes for bigger government. Not only that, but several memorials and resolutions passed that set the stage for higher taxes and more spending down the road.

The Foundation’s “Freedom Index” ratings put HJR 1, the effort to tap the Permanent Fund for an expansion of pre-K programs, as the worst single proposal this session. Several other bills merited negative ratings, including the budget, which contained numerous unfortunate provisions — including $10 million for a new hangar at Spaceport America and unnecessary raises for government employees.

Notably, the legislature did very little to address New Mexico’s myriad economic challenges. A right-to-work law, as well as other regulatory reforms, were killed in committee before receiving floor votes. Revenue-neutral tax reform, pushed off the agenda back in November, was not reexamined.

Even at the outset of the 30-day session, disappointment loomed. The lack of willingness to tackle New Mexico’s economic issues head-on only worsened as bipartisan votes were taken to raise taxes on pet food, study a Medicaid “buy-in” option, and bail out the economically struggling Four Corners area by coercing energy companies to invest in the region.

While the session as a whole was disappointing, there were some who stood up for taxpayers and free markets more often than their peers. The highest performer in the House of Representatives (and overall) was Rep. Yvette Herrell (R- Alamogordo). In the Senate, the top performer was Bill Sharer (R-Farmington). Other top lawmakers included Sen. Greg Baca (R-Belen), Rep. Cathrynn Brown (R-Carlsbad), and Rep. Zach Cook (R-Ruidoso). Top performers among Democrats included Sen. Jacob Candelaria (D-Bernalillo), Rep. Miguel Garcia (Albuquerque), and Rep. Nick Salazar (Ohkay Owingeh).

Poor performers were far more numerous this session, but the very worst in this year’s Freedom Index was, surprisingly enough, “moderate” Sen. Mary Kay Papen (D-Las Cruces). Rep. Sheryl Williams-Stapleton (D- Albuquerque) was the lowest-rated legislator in the House.

Concluded Rio Grande Foundation president Paul Gessing: “The 2018 session was yet another missed opportunity to reform New Mexico’s lagging economy. Lack of action was not unexpected. What was surprising was the growing bipartisan consensus toward even bigger government and more economically harmful taxes and regulations.”

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Gessing talks 2018 New Mexico Legislative session & what to do w/ Spaceport, RailRunner, & other government boondoggles

Rio Grande Foundation president Paul Gessing recently sat down with KRWG’s Fred Martino. We discuss the Spaceport and ongoing issues there and then move on to talking about the 2018 Legislature and why voters should be so skeptical of government infrastructure projects.

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Time’s up for Spaceport America

The irrational belief that a bad investment will, one day, pay off, if we just hold on a little longer, has led to plenty of sorrow in the private sector. In the public sector, though, it’s taxpayers who are victimized when bureaucrats and elected officials refuse to walk away from failed projects once hailed as “economic development.”

“Spaceport America” is probably New Mexico’s worst example of the sunk-cost fallacy. The facility broke ground in June 2009 and “opened” in October 2011. Its “anchor tenant” is Virgin Galactic. Owned by U.K. mega-mogul Richard Branson (net worth, according to Forbes: $5.1 billion), the company aims to send tourists on brief, suborbital trips into space.

Virgin Galactic once hoped to launch their first customers as soon as 2008. Almost a decade later, no tourists have soared into the wild black yonder from New Mexico. And despite regular promises that other firms will soon make use of the spaceport, activity there remains essentially nil.

The facility’s dismal performance is a bitter pill for the Land of Enchantment’s taxpayers. It was built with hundreds of millions of dollars in borrowing, made possible by the state’s severance tax and a special gross receipts tax imposed on Doña Ana and Sierra counties. Of nearly $12 million in expenses in the 2016 fiscal year, less than 19 percent was covered by rent and user fees.

That left taxpayers to pick up the tab for the rest of the costs — including some extremely generous salaries and benefits for “managers” who have very little to do.

So are the spaceport’s officials ready to acknowledge their failure and unload the state’s terminally ill white elephant? Hardly — they’re looking to double down. During a recent televised forum hosted by KRWG in Las Cruces, Dan Hicks, the new CEO of the facility, averred that the “future of Spaceport America is so bright.” He’s seeking more funding for a freight-rail connection, another runway and a payload-processing facility.

Hicks wants his employer “to be able to compete on a national level.” To that end, it’s worth noting that Spaceport America’s competitors spend far less, and ask taxpayers to bear much smaller burdens.

The “Oklahoma Air & Space Port,” located in Burns Flat, was licensed by the FAA in 2006. It’s received more than $7 million in state appropriations, and handed $18 million in tax breaks to a now-bankrupt launch company. So its paltry results have been similar to New Mexico’s — at a fraction of the cost.

Spaceport America claims that SpaceX, Elon Musk’s amazingly successful start-up, is one of its tenants. But the company is “partnering” with the State of Texas and the City of Brownsville, who have ponied up $20 million worth of incentives, to build a launch facility along the Gulf Coast. While the subsidies aren’t needed and shouldn’t be appropriated, SpaceX has committed to spending far more than what taxpayers are being asked to contribute: $85 million.

Other budding spaceports are located in California, Florida, Alabama, Georgia, Canada and New Zealand. While plans for the facilities are fluid, it does not appear that many, if any, are as deeply committed to spending public dollars as Spaceport America. With more natural advantages — coastal locations, capable workforces, marketing to firms with less-risky launch technologies — they don’t have to.

Former Gov. Bill Richardson once claimed that Spaceport America would make southern New Mexico “a pioneer in the private space industry.” That hasn’t happened, and there’s no evidence that it will happen anytime soon. The costs to build and “operate” the spaceport so far have been sunk. Unfortunately, they’re not likely to resurface.

If the spaceport’s officials, and the politicians who fund them, can’t make the facility self-sustaining, it is time for the state to auction it off and reclaim whatever dollars it can for an investment gone horribly wrong.

D. Dowd Muska is research director for New Mexico’s Rio Grande Foundation, an independent, nonpartisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.

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Economy Spaceport

In September, RTW States Score Another Win

The Rio Grande Foundation is tracking announcements of expansions, relocations, and greenfield investments published on Area Development‘s website. Founded in 1965, the publication “is considered the leading executive magazine covering corporate site selection and relocation. … Area Development is published quarterly and has 60,000 mailed copies.” In an explanation to the Foundation, its editor wrote that items for Area Development’s announcements listing are “culled from RSS feeds and press releases that are emailed to us from various sources, including economic development organizations, PR agencies, businesses, etc. We usually highlight ones that represent large numbers of new jobs and/or investment in industrial projects.”

Last month, of 17,908 projected jobs, 12,274 — 71.9 percent — were slated for right-to-work (RTW) states:

Twelve domestic companies based in non-RTW states announced investments in RTW states. Just two announcements went the other way.

Foreign direct investment was also highly skewed. Eighteen projects are headed to RTW states, but only four are to to occur in non-RTW states.

Marquee RTW wins included the decision by Mercedes-Benz to spend $1.3 billion on a “major expansion” of its factory in Alabama, Boeing’s announcement of 200 new employees to “produce 747 fuselage panels” in Georgia, and Blue Origin’s pick of Florida for “launch, manufacturing and support facilities for its Orbital Launch Vehicle program.” (Ouch — another loss for “Spaceport America.”)

Methodological specifics:

* All job estimates — “up to,” “as many as,” “about” — were taken at face value, for RTW and non-RTW states alike.

* If an announcement did not make an employment projection, efforts were made to obtain an estimate from newspaper articles and/or press releases by elected officials and economic-development bureaucracies.

* If no job figure could be found anywhere, the project was not counted, whether it was a RTW or non-RTW state.

* Intrastate relocations were not counted, interstate relocations were.