When local and state governments chase “economic development,” it usually means taxing the people to fund “build it and they will come” capital projects.
The people in Dona Ana and Sierra County fell for the dream around 2008 that Virgin Galactic would bring employment and 200,000 or so tourists and visitors a year—a veritable font of trickle-down economic growth.
The people’s part to capture this dream was to create the “first purpose-built spaceport.” The purpose? Virgin’s experimental spaceship and space-tourism business. Virgin would need a massive horizontal runway and an “iconic” building. The estimate was $200 million.
Dona Ana and Sierra County citizens passed a gross receipts tax of .25 percent around 2009 to fund the dream, with 75 percent of the proceeds to go to building the spaceport and 25 percent of the proceeds to go to their public school districts for STEM-related programming.
There was no sunset on the tax.
The governmental structure formed to oversee and pay for the publically-owned spaceport is the Spaceport Authority, under the aegis of the state’s Economic Development Department and a local-government spaceport taxing district. Only Dona Ana County and Sierra County ended up agreeing to be part of the spaceport taxing district. Both the Spaceport Authority and the taxing district have governing boards that are supposed to be looking out for the public’s interests, not the business’ interests.
The spaceport taxing district, for its part of the $200 million, agreed to allow the Spaceport Authority to issue two revenue bonds totaling over $76.3 million, the debt ending in 2029, the yearly nut paid by the 75-percent portion of the spaceport GRT.
The New Mexico Finance Authority held the debt. The debt was refunded and refinanced, again with NMFA, in 2021. Both bonds were combined and about $40.5 million in principal and interest remain due through 2029. The yearly debt payment is about $5 million. But NMFA is also requiring reserve money be set aside, in case the GRT revenue shrinks, which requires another nearly $2 million be paid a year. So the yearly nut is about $7 million through 2029.
Dona Ana County pays about 97 percent of that nut and Sierra County about 3 percent. As the Irish say, it’s a grand feckin’ scheme for someone, but not for Dona Ana County.
Last fiscal year Sierra County paid $201,605 of the nearly $7 million debt payment, according to Sierra County Treasurer Candace Chavez. Dona Ana County paid the rest.
From 2009 to 2021, any “excess” revenue from the spaceport GRT tax went to the Spaceport Authority, bolstering its operations and capital budgets.
Dona Ana County Commissioners, most particularly Shannon Reynolds, started yowling about the taking of their GRT for anything beyond paying off the bond debt. Reynolds has been fighting this fight for six years. He’s been a member of the spaceport taxing district board since 2020 or so.
When the bonds were refinanced in 2021, the legality of the state-run Spaceport Authority mopping up excess GRT from the local-government taxing district was scrutinized and deemed wrong due to Reynolds forcing a bright light on loan agreements and state laws related to the spaceport.
Since 2021, Dona Ana County’s excess spaceport GRT goes back to Dona Ana County, not to the Spaceport Authority. That excess –since 2021—has accrued to the amazing amount of $19.4 million.
Sierra County Commissioners Jim Paxon and Travis Day, who have sat on the spaceport taxing district board as long as Reynolds, decided, unlike Reynolds, that Sierra County’s excess GRT funds should continue to go to the Spaceport Authority. The 2021 scrutiny determined the GRT can’t be used for operations, only capital projects. But capital projects has an elastic definition that can be stretched to include equipment, research, hiring of experts and practically anything beyond day-to-day operations.
The spaceport taxing district board is still trying to make a grab for Dona Ana County’s excess GRT, and is supported in this endeavor by the Spaceport Authority, governor’s office and the Economic Development Department.
The spaceport taxing district board is officially known as the New Mexico Regional Spaceport District. State law says all the members must be elected officials, supposedly so the people’s money is put to what they support. But this board hasn’t sought the people’s permission to spend their tax money on way more than the originally stated “purpose,” which has expanded to a vertical launch area and an experimental area (Spin Launch’s centrifuge) that need internal roads, utilities, communications, etc. Diversification is the name of the game now that Virgin is wobbling and has missed its promised flight cadence by 10 years or so. Build-it-and-they-will-come is never ending.
At yesterday’s Spaceport Authority Executive Board meeting, Executive Director Scott McLaughlin said there are $24.4 million in current capital projects and over $93 million in planned capital projects.
McLaughlin also gave figures for the current fiscal year’s operations budget. Virgin Galactic’s “pause” in projected flights means about $2.2 million in “use” fees will not be coming in. Operations revenue was estimated at $13 million, with the state’s general fund paying about $4.2 million of that. If the legislature doesn’t cough up more, stretching the local-government GRT to fill those gaps becomes more important.
Every member of the tax board is willing to give the Spaceport Authority Dona Ana’s “excess” $19.4 million except for Reynolds and his fellow Dona Ana County Commissioner Manuel Sanchez.
The other members on the tax board are Sierra County Commissioners Travis Day and Jim Paxon. The governor-appointed members are Elephant Butte City Council Member Kim Skinner and Las Cruces Mayor Eric Enriquez, obviously chosen to oppose and outvote Dona Ana’s Reynolds and Sanchez.
At the tax board’s September 26 meeting, both the Dona Ana County commissioners were absent, believing they had successfully called off the meeting to kill the money grab. But Reynolds and Sanchez were outmaneuvered. The meeting was held anyway and a motion was passed that dedicated $13.9 million of spaceport GRT to spaceport capital projects.
At the tax board’s Dec. 4 meeting, two resolutions were passed that sets up the financial infrastructure for transferring Dona Ana’s and Sierra County’s excess GRT into the State Investment Council. The money will be invested and transferred out from there to the Spaceport Authority for capital projects approved by the tax board.
Reynolds didn’t attend the Dec. 4 meeting either, telling the Citizen, “Why should I go to a meeting when I know exactly what is going to happen?” Sanchez did attend and voted no on depositing Dona Ana’s excess GRT with the State Investment Council. He wants it to go to paying off the bond early, or to limiting its use to paying off the bond debt through 2029. “The people committed to building the spaceport and we’ve done that,” Sanchez said. “Everything else you are proposing is icing on the cake.”
Reynolds said, in a phone conversation with the Citizen, “I’ve already instructed our treasurer not to release the funds ($19.4 million) unless there is a court order.”
Reynolds contends that the bond’s “intercept agreement” signed by the Spaceport Authority, tax board and NMFA, specifies that any excess GRT left after making the debt payment becomes “reserve” money. Reserve money can only be spent on paying off the debt, Reynolds said, and taking the money for new capital projects would require amending the intercept agreement.
Reynolds had alternately proposed that the tax board loan excess GRT to the Spaceport Authority. The loans would be structured so that each project demonstrated it would create a revenue stream, used to pay off the loan. “It would be a renewing revolving fund,” Reynolds said. “I’m a business man. Show me this is going to attract such and such business, show me the plan.” But that kind of financial set-up would require the Spaceport Authority to get concrete deliverables from businesses like Virgin, instead of just promises. It was a no-go with the tax board.
At the Spaceport Authority Executive Board meeting Dec. 5, McLaughlin was asked if the $13.9 million for the capital projects “was in hand,” by member Wayne Savage, Executive Director of Arrowhead Park of NMSU—another public/private economic-development scheme. McLaughlin said the accounts are still in the process of being set up, estimating it will take “one to two months,” thus deflecting any examination of the conflict.
We’ll see if Dona Ana County is forced to give up it’s $19.4 million, maybe in an upcoming court case.
Couldn’t the Spaceport Authority just go house to house to demand residents to pony up or else?
Many, many thanks to Shannon Reynolds for fighting this scam for many years. Many thanks to Kathleen Sloan for her clear explanation of the issue. Shame on Richard Branson and Bill Richardson for originating the scam and those who have promoted it ever since.