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F I S C A L I M P A C T R E P O R T

SPONSOR Marquardt

ORIGINAL DATE

LAST UPDATED

2/06/06

2/06/06 HB 724

SHORT TITLE Spaceport Development Fund

SB

ANALYST Earnest

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

$99,000.0 Non-Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to: House Bill 88, House Bill 89, and Senate Bill 348

Duplicates: Senate Bill 354

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

FY08

$99,000.0

Non-Recurring Spaceport

Development Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY06

FY07

FY08 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total

($0.1)

($0.1)

($0.1) Recurring General

Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Finance and Administration (DFA)

Economic Development Department (EDD)

House Bill 724 – Page

2

SUMMARY

Synopsis of Bill

House Bill 724 creates the Spaceport Development Fund in the treasury and appropriates $99

million to the new fund from the general fund. From fiscal years 2007 to 2009, $33 million is

appropriated each year to the Department of Finance and Administration to plan, design, con-

struct, equip, and furnish the Southwest Regional Spaceport in Sierra County. The bill requires

the Secretary of Finance and Administration and the executive director of the Spaceport Author-

ity to report quarterly to the Legislative Finance Committee on the progress of the spaceport pro-

ject, the purpose of expenditures, the status of federal and private matching funds, and the eco-

nomic development impact of the project.

FISCAL IMPLICATIONS

The appropriation of $99 million contained in this bill is a non-recurring expense to the general

fund. Any unexpended or unencumbered balance remaining at the end of any fiscal year shall not

revert or be transferred to any other fund.

SIGNIFICANT ISSUES

HB 724 is one of several introduced bills to enable and promote the creation a spaceport in

southern New Mexico. Construction of the Southwest Regional Spaceport, currently planned to

be built on 27 acres of mostly state land near Upham, New Mexico, is estimated to cost $225

million. The Governor has requested approximately $100 million in capital outlay funding, of

which $33 million would be appropriated in FY07.

The Economic Development Department (EDD) has indicated that if the Legislature appropriates

$100 million, another $125 million will be required from state, local, and federal sources. For the

remaining $125 million, the following sources have been identified:

•

Local option gross receipts taxes. A conservative estimate by EDD puts local funding

around $30 million.

•

Federal funds, either from federal earmarks and / or agency grants. Currently, there is no es-

timate of the amount of federal funding available for this project.

•

GRIP II, approximately $25 million would be set aside for spaceport access infrastructure.

•

$10 million in existing capital outlay appropriations.

No private investment is expected for construction of the spaceport.

The economic impact from the spaceport project could be significant, especially in southern New

Mexico. The success of the project and the return on the state’s investment, however, is depend-

ent on the success of the personal spaceflight industry, which has yet to launch its first paying

customer.

The Economic Development Department contracted with two entities to study the economic im-

pact. The Arrowhead Center at NMSU finds that 2,200 to 2,800 jobs might be created, with total

economic impact ranging from $1 to $1.2 billion, in the fifth year. Futron, Inc, a private consult-

ing firm, estimates $550 million in economic activity and 4,300 new jobs by 2020. An addi-

tional $200 million and 1,800 jobs might result from related activities.

House Bill 724 – Page

3

Any investment in this project should be considered long-term.

ADMINISTRATIVE IMPLICATIONS

Since the appropriation from this spaceport development fund would be administered by the De-

partment of Finance and Administration, there would be a direct impact to DFA. Additional per-

sonnel may be required to fulfill the administrative requirements of this legislation.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

House Bill 724 duplicates Senate Bill 354.

EDD indicates that funding for the same purpose will be included in the Governor’s Capital Out-

lay request, which will have contingency language addressing the accountability concerns im-

plicit in the reporting requirements contained in the legislation.

OTHER SUBSTANTIVE ISSUES

DFA indicates that, with the surplus in revenues, there has been a call for more spending in edu-

cation and infrastructure projects, rather than the spaceport project which poses a greater finan-

cial risk.

Indeed, while there might be great economic gain for the State, the risks are many. The personal

space flight industry is in its infancy. While Virgin Galactic has announced its intention to lo-

cate its headquarters in New Mexico if the spaceport is built, the first launch of passengers isn’t

anticipated until 2008 or 2009 from California, and the cost of that flight will be $200 thousand

per passenger. The first launch from New Mexico would not occur unit 2010 or later.

Third-party liability issues are unresolved, and space flight is inherently dangerous.

Other states are actively pursuing this industry. While New Mexico has some competitive ad-

vantages, there is no guarantee the state will attract the companies that are assumed by the two

economic impact studies.

ALTERNATIVES

According to DFA, the legislation could be altered and another state agency could be utilized to

manage the spaceport development fund. However, it seems that the Department of Finance and

Administration is the proper and correct agency to be charged with the oversight of this project

and its resources.

BE/yr