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Editorial: Don’t be a sucker just to grab business

By   /   February 10, 2013  /   No Comments

Spaceport or space ghost?

Shortly after stepping down as governor of our fair state, Bill Richardson said that Spaceport was going to be his lasting legacy.

Rob Nikolewski, New Mexico Watchdog

Rob Nikolewski, New Mexico Watchdog

That may well be true but, like so many things Big Bill spearheaded for New Mexico (think Rail Runner), Spaceport may have an impact that decidedly cuts both ways. There’s no point in rehashing the criticisms of taxpayers putting up all the money to construct Spaceport America out in the vast expanses of southern New Mexico.

The bottom line is, the money’s been spent and the facility has been built and and even critics who questioned the wisdom of spending public money on the project support bills in the current legislative session to grant what’s called “limited liability” protection for manufacturers and spaceport’s anchor tenant, Virgin Galactic. Without the liability bill, Richard Branson’s company had made not-so-veiled threats that it will pull up stakes and launch tourists, at $200,000 a pop, into suborbital space somewhere else.

It’s off-putting to say the least and when you get right down to it, it is a form of blackmail but that’s what happens when you (the state, the taxpayers) build something with your own money first, in the hopes of attracting clients.

MAKING A DEAL: Bill Richardson (left) and Richard Branson in front of Spaceport. Photo from Virgin Galactic's website.

MAKING A DEAL: Bill Richardson (left) and Richard Branson in front of Spaceport. Photo from Virgin Galactic’s website.

Taxpayers forked over $209 million for Spaceport and according to the terms of the lease signed when Richardson was in office, the clawback provisions are exceedingly flimsy. The range of dollars Virgin would have to pay, should it break its lease varies between $1.5 million and $2 million. No wonder Virgin’s website highlighting Spaceport prominently displays a picture of Branson clasping hands with Richardson.

It’s reminiscent of the Schott Solar deal in Albuquerque. Everybody was all smiles at Schott’s news conference in 2009 but nobody was smiling in last summer when Schott declared bankruptcy and laid off 250 employees.

Bernalillo County and the city of Albuquerque protected themselves somewhat with some decent clawback provisions but it was reported at the time that none of the $16 million Schott received from the state would be returned, thanks to terms approved by the Richardson administration.

Kudos to members of the New Mexico Finance Authority who announced last month announced they managed to extract $3.3 million from Schott Solar, but $3.3 million out of $16 million is still a lousy return on investment.

As for the spaceport, the situation is similar to instances seen in big-time sports, when unscrupulous owners threaten to move their teams if taxpayers don’t fully or partially pay for their new stadiums.

I’m afraid that’s what’s happened at the spaceport, and it’s what I fear will be a recurring theme for years to come.

I recently interviewed one of Virgin Galactic’s executives ago who said the company is committed to New Mexico.” But when I asked him if Virgin would consider offers from other states, he said, “We’re a business. We’re always going to look at other deals.”

States such as Arizona, Virginia, Texas and California have built or are building their own spaceports. It doesn’t take a business genius to contemplate scenarios in which they lure Virgin Galactic to move and buy out the $1.5 million to $2 million lease penalty.

By the way, Richardson helped get liability protection for California’s spaceport. There’s a lesson there somewhere.

As for the lessons for New Mexico? Avoid these expensive enticements for business people who, by their nature, will flit from one sweetheart deal to another. And if we do take on such projects, make the clawback provisions strong enough (perhaps a penalty of 40 percent to 50 percent of the total cost) so that any company thinks long and hard about ever breaking its lease.

There are suckers born every minute.

But we don’t have to be one of them.

This column originally appeared in the Santa Fe New Mexican on Feb. 10, 2013.


Rob formerly served as staff reporter for Watchdog.org.