DALLAS — The fatal test-flight crash of Virgin Galactic's SpaceShipTwo is a setback for New Mexico's Spaceport America, but the bonds used to finance the $209 million facility remain safe investments, according to the New Mexico Finance Authority.
"There are no concerns," said Michael Zavelle, chief financial strategist for the NMFA. "Regardless of how the spaceport proceeds and on what schedule, the loan on the spaceport is backed by a pledge of gross receipts tax."
Virgin Galactic founder Richard Branson dedicated the SpacePort America launch site in 2011.
The company had hoped to carry paying passengers to the boundary of space from the SpacePort in 2015, but the Oct. 31 crash of prototype SpaceShipTwo on a test flight over California's Mojave Desert will create indefinite delays. The crash killed co-pilot Michael Alsbury and injured pilot Peter Siebold.
"To those of us in New Mexico and the other six states that now have FAA commercial spaceports, we are also at the forefront of the future of human flight," said Christine Anderson, executive director of SpacePort America, after the crash.
"The coming months will be challenging but this is but a speed bump in this incredible journey," she said. "We must maintain our resolve, purpose and resiliency as we chart the course ahead."
While the Mojave Air and Space Port serves as Virgin Galactic's test site, SpacePort America, about 60 miles north of Las Cruces, is its planned hub for commercial flights.
In addition to Virgin Galactic, private launch developer SpaceX also has a lease with the New Mexico spaceport.
Other spaceports around the nation besides New Mexico and Mojave are the Mid-Atlantic Regional Spaceport in Wallops Island, Va., the Cecil Field Spaceport in Jacksonville, Fla., Spaceport Florida at Cape Canaveral, Spaceport Oklahoma in Burns Flat, Okla., and the Kodiak Launch Complex on Kodiak Island, Alaska.
Operations at the New Mexico spaceport are funded by lease payments from Virgin, but payments on debt service come from sales taxes in Dona Ana and Sierra counties, Zavelle said.
Voters in Doña Ana County narrowly approved a quarter-cent spaceport sales tax in 2007, and a year later, Sierra County voters approved the sales tax. In both counties, 75% of revenue was directed toward repaying bonds for construction, while 25% was directed to local schools.
The NMFA issued $55 million of severance-tax bonds as series 2009C to finance the spaceport and provided another $25 million of loans to the facility. The bonds are rated AA-plus by Standard & Poor's with a stable outlook.
S&P analyst Sussan Corson said she knew of no plans to update the rating after the crash.
New Mexico's legislature reduced the Spaceport Authority's operating budget from about $1.1 million in the 2010-11 fiscal year to $500,000 in the 2011-12 year. The reductions came with the election of Republican Susana Martinez as governor, replacing Bill Richardson, the major promoter of the spaceport.
In the 2014 legislative session, Sen. Lee Cotter introduced a bill that would have restricted all tax revenues from the two counties to debt service only. With tax revenues running about $600,000 higher than needed for debt service, the spaceport was using that income to cover operating costs.
Anderson said that use of the excess revenue was authorized by the NMFA and Spaceport Authority board.
According to a fiscal note on Cotter's Senate Bill 172, fiscal year 2015 "marks a year when bond funds are exhausted and revenue must increase.
"The authority states the excess pledged bond revenue is a lifeline to the spaceport as it can be used for operations, unlike the bond proceeds, and allows the spaceport to keep its doors open during this critical time," the fiscal note said.
Local officials in the two counties were also counting on increased tourism with the opening of a visitor center that has been delayed and downsized due to a lack of revenue.
New Mexico anticipated more than 200,000 visitors to the remote facility, but development of hotels and restaurants has not taken off, due to lack of launch activity.
A welcome center in Hatch, N.M., has been abandoned due to an inability to find an appropriate site. The Spaceport Authority sought a private loan of $20 million to fund the visitor's center, but interest rates were not acceptable, according to local news reports.
"I think a lot of people are very anxious because it's not developing as fast as expected," Anderson told The Bond Buyer in an interview before the SpaceShipTwo crash. "A number of hotel folks are watching for when it's the best time to invest."