Commentary: Spaceport America has released a new economic impact study projecting revenue through 2029. The report, done by Moss Adams, seeks to put a positive spin on space activity in southern New Mexico.
As these sorts of things go, the Moss Adams study is typical. A lot of factoids jumbled together. Add to this a fair amount of economic jargon, and it makes a narrative difficult. But if you slog through the thing, there is good information.
The report has problems that are also typical. The report counts locally-generated revenues as having an economic impact when on net they do not.
An example illustrates the point. Suppose a tax is imposed on local citizens to pay for something. Whether a sports stadium or a road, or a spaceport. The new tax means that the local citizens have less to spend on other things. We need to net out the decline in economic activity from the tax.
On the other hand, if revenue is generated by customers from outside the community who otherwise would not be doing business locally, except for Spaceport America, then that outside generated revenue injects spending power into the local economy. The result is economic development.
Since the New Mexico Spaceport Authority is almost exclusively funded by taxes, the net economic impact of the authority on New Mexico is close to zero. We have spent $220 million to build a spaceport, but we have also obligated the citizens of New Mexico to pay $220 million in taxes plus interest to cover bonds used to finance this construction.
Where Spaceport America does contribute to economic development is in attracting space-based businesses to New Mexico that otherwise would not have located here. In 2019, according to the Moss Adams, Spaceport America had one customer operating at the port, which was Virgin Galactic. It spent about $21 million locally, which when you included other effects, generated $35 million in local economic activity.
Not all of that $35 million, however, was in New Mexico, as the Moss Adam’s definition of “local” includes El Paso County. I did not find a breakdown of economic impact by county, but a good guess is that about $8 or $9 million of the $35 million is accounted for by El Paso County.
This leaves a net economic impact on New Mexico for 2019 of $27 or $28 million. That is an OK return on $220 million spent to build the spaceport.
The Moss Adams study goes out to 2029. This projection is based on estimates provided by Spaceport America customers and management. Well, dear reader, I don’t have to go into the dismal record of Spaceport Americana in forecasting growth.
For the moment, let’s suspend disbelief, ignore the forecasting acumen of Spaceport America, and take the numbers at face value. After adjusting for El Paso, the economic impact in 2029 is expected to be $150 million, which would be a great return on a $220 million investment.
But now back to reality. Remember this is Spaceport America making the forecast.
Christopher A. Erickson, Ph.D., is a professor of economics at NMSU. He has conducted numerous economic impact studies over 33 years of studying the New Mexico economy. The opinions expressed may not be shared by the regents and administration of NMSU. Chris can be reached at chrerick@nmsu.edu.