Spaceport America "NEW" NMSA Business Plan

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NEW MEXICO SPACEPORT AUTHORITY

Strategic Business Plan 2013 2018

January 2013

innovate, create, inspire

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TABLE OF CONTENTS

1.0 INTRODUCTION ............................................................................................ 3 1.1 Attributes ............................................................................................................................................................................... 4 1.2 Vision, Values & Mission .................................................................................................................................................. 5 1.3 Strategic Goals ...................................................................................................................................................................... 6 1.4 Economic Development ................................................................................................................................................... 7 1.5 Organization ......................................................................................................................................................................... 8 2.0 MARKET SECTORS ....................................................................................... 11 2.1 Commercial Space ........................................................................................................................................................... 11 2.2 Federal Government Space ......................................................................................................................................... 15 2.3 Tourism ................................................................................................................................................................................ 18 2.4 Education ............................................................................................................................................................................ 22 3.0 SUSTAINABILITY / REINVESTMENT .............................................................. 27 4.0 SUMMARY .................................................................................................. 27

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1.0 INTRODUCTION Spaceport America is the worlds first purpose-built, commercial spaceport, intended to be the

launch-pad of the global commercial spaceflight industry and the second space age. The $209

million project has attracted worldwide attention because of its bold premise, stunning Norman

Foster architecture and the fact that it is home to the worlds first commercial passenger

spaceline company, Sir Richard Bransons Virgin Galactic.

Designed, built and operated by the New Mexico Spaceport Authority (NMSA), Spaceport

America is nearing completion of the first phase of construction, which includes basic

operational infrastructure such as an airfield, launch pads, terminal / hangar facility, emergency

response capabilities, utilities and roadways. The site will be capable of accommodating the

activities of both vertical and horizontal takeoff space launch vehicles, serving as the base for

pre-flight and post-flight activities, and providing a tourism experience for interested visitors and

spectators. The spaceport also presents a unique opportunity to excite students regarding space

technology and the underlying science and mathematics.

As a State of New Mexico public agency, the NMSA views the project as an investment by the

taxpayers of New Mexico to support the emerging commercial space industry, thereby

functioning as a catalyst for significant job creation and economic development opportunities.

Spaceport America will be a key component in the States effort to attract space-related business

to New Mexico. U.S.-based Virgin Galactic, part of the Virgin Group founded by British

entrepreneur Sir Richard Branson and regarded by many as the current world leader in personal

spaceflight, is the Spaceports anchor tenant. Virgin Galactic will locate its primary launch and

operational activities at Spaceport America, and its worldwide headquarters in New Mexico.

Thanks to this relationship with Virgin Galactic, a unique and favorable combination of

geographic advantages, technical support from neighboring U.S. Army White Sands Missile

Range (WSMR), and a long local heritage of space-related activity, Spaceport America is

positioned to become a pioneering leader of the new commercial space industry and reap the

corresponding economic benefits for New Mexico.

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Spaceport America has already been the site of eighteen vertical launches: six by UP Aerospace,

four by Lockheed Martin, and eight by Armadillo Aerospace. The NMSA anticipates other

space-related organizations and supporting industries, such as payload development and

processing and rocket motor manufacturing, to develop in the region.

1.1 Attributes Spaceport America is located 27 miles to the southeast of the city of Truth or Consequences

(pop. ~7,000) and 55 miles to the northeast of Las Cruces (pop. ~100,000). The area around the

spaceport is largely federal Bureau of Land Management (BLM) land and State land, with an

assortment of private land holdings as well.

Spaceport America is uniquely positioned to be successful because of several natural, geographic

attributes:

- Sparse population: The spaceport is located in southern New Mexico on 18,000 acres of

state trust land, in a magnificent and isolated high-desert valley with very few residents,

and no commercial development. The lack of people helps to keep insurance costs down

and makes for easier licensing with the Federal Aviation Administration because of the

limited risk to people.

- Restricted airspace: Spaceport America is located west of WSMR and its more than

10,000 sq. miles of protected skies. The location means that there is no commercial air

traffic overhead, and consequently a reliable clear path into sub-orbit and the further

reaches of space.

- Good weather: For the commercial space industry, the number of launch days each year

can mean the difference between profit and loss. Spaceport America statistically has 340

launch days annually.

- Elevation: Spaceport America is located at about 4,600 feet above sea level. The NMSA

likes to embellish a bit and say, in New Mexico, the first mile is free. When it comes to

orbital launches, commercial space companies will save fuel costs, add additional

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payload, and be able to optimize rocket engine nozzle designs because of the high

altitude.

- Infrastructure: Although Spaceport America itself is a comparatively new venue for

aerospace activities, the local region is rich with fully-developed, specialized research,

development, testing and evaluation capabilities. In particular, the close proximity to

WSMR enables customers of the NMSA to also leverage vast resources of equipment,

services and skilled workforce.

1.2 Vision, Values & Mission Spaceport America Vision:

Unlocking the potential of space for everyone by offering the world an invitation to

space.

Spaceport America Values:

Spaceport America is committed to the spirit of exploration, the promise of human

potential, and the powerful combination of vision and courage.

Spaceport America Mission:

Enable affordable, efficient and effective access to space by developing and operating the

worlds first purpose-built commercial spaceport aimed at inspiring and delighting the

next generation.

Catalyze our stakeholders economic prosperity through public and private cooperation,

stewardship of the environment, and celebration of New Mexicos cultural-heritage.

Immerse our visitors in the next generation of spaceflight in a hands-on, dynamic

environment, full of authentic opportunity to participate, learn and discover.

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The NMSAs desired outcome is that every customer and guest becomes not only a

friend but a genuine partner-in-space with their curiosity stimulated, a lifelong

relationship with Spaceport America, and a strong desire to continue their personal

space journey.

1.3 Strategic Goals In the context of its vision and mission, the NMSA has three overarching strategic goals that

govern the decisions and actions pertaining to the development and operation of Spaceport

America. First and foremost, the project must generate enough business activity and

commerce revenue to cover operational expenses, accommodate new growth, and provide

funds to continue to refresh and maintain the spaceport. It is the intention and plan for the

spaceport to be 100% self-sustaining without any further public financial support. Once Virgin

Galactic reaches its full operational tempo, conservative projections show that lease and user fees

from the company will generate substantial revenue. It is also envisioned that Spaceport America

will become a multi-tenant space launch facility with many different customers paying lease and

user fees, as well as a regional tourism destination, both of which will add to overall revenues

and ensure long-term profitability and fiscal independence for the agency. Per the NMSAs

enabling legislation, all profits from the spaceport enterprise are appropriated and non-reverting

within the NMSA agency account, to be utilized for reinvestment on-site to maintain high-

quality infrastructure and expand operational capabilities for new users.

The second strategic goal for the spaceport is to drive local job and population growth and

inject the regional economy with greater demand for goods, services and skilled workforce.

Each tenant at the spaceport will have their own requirements for facilities and support services,

with impact spanning the gamut of trades and professions from construction to healthcare, and

manufacturing to media production. Whereas these are commercial entities, it will naturally be in

their best interest to hire locally wherever possible and use local vendors to leverage lower labor

and transportation costs. For its part, the NMSA will employ local residents and suppliers to the

maximum extent practicable and within the confines of state procurement code. The economic

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development strategy includes the encouragement of local business development and expansion

to service contracts and other needs at the spaceport; the recruitment of the necessary supply

chain to the region; and the engagement of local universities and laboratories in research and

development supporting the long-term aspirations of the spaceport.

The third major strategic goal for Spaceport America is to deliver efficient and effective

services to all customers, whether commercial launch tenants, governmental research and

development clients, or visiting guests. For launch customers, this means affordable, flexible,

fast-turnaround capabilities and facilities. While the NMSA expects that the spaceport will result

in significant job creation through its tenants, the agency will maintain only a very lean internal

overhead and staff; every position will be completely essential and maximally efficient. In the

early days of operations, the contractor labor force will be able to scale with the demand and

surge to support special activities for short duration time periods, thereby allowing the ability

to avoid unnecessary costs. Customers of Spaceport America can buy services la carte.

Technology will be employed wherever possible to simplify and automate processes, and

minimize and mitigate cost and risk. The advantage in having a purpose-built facility is that the

NMSA can customize a basic venue for customers to conduct activities without being burdened

by existing, obsolescent infrastructure. The key to incentivizing customers while maintaining a

viable business enterprise will be the ability to provide only what they need in a lean and

efficient manner. For visitors to Spaceport America, efficient and effective service means

providing a new, appealing, high quality, year-round and market-based spaceport experience for

the public. Enabling everyone to engage with the future of space flight and unlock the potential

of space in ways that are relevant to them is key to high customer satisfaction, and thus, strong

word-of-mouth and repeat visitation.

1.4 Economic Development Spaceport-related local economic development is expected to ramp up over the next five years.

In the near-term through the pre-operational phase of 2013, government spending on

infrastructure will be the primary driver of growth. While only temporary and based largely

on construction contracts, this local stimulus project has employed over 1000 New Mexicans

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across the span of four years since major work began. The work is characterized by construction,

architectural, and management jobs. In addition, local communities have begun to see increased

hotel occupancy and rental rates, as well as considerable upticks in gross receipts taxes (GRT)

since the onset of construction. For example, Sierra County, where the primary site is located,

has seen its GRT revenues increase an estimated 50% above normal during 2010 and 2011.

This unsustainable growth will give way to a period of fluctuating expansion defined by

limited spaceport operations jobs while Virgin Galactic reaches its initial operational

capability. Various other short duration launch customers will come and go, and the flow of

spaceport-related tourism will begin to drive significant job creation in the hospitality industry.

By 2015, the industry will have begun to stabilize, centering on larger numbers of

spaceport operations and supply chain roles and the maturation of the Virgin Galactic

commercial flight program. Contingent upon maintaining New Mexicos competitive business

environment with other space states (e.g. Florida, Virginia, Texas, etc.), the NMSA expects to

have secured at least one new major, long-term tenant in addition to Virgin Galactic, as well as a

more sustained, increased level of vertical launch activity. Additional launch customers and

stabilized tourism volume will drive a proliferation of ancillary spaceport-related startup

businesses alongside increased local home sales, hotel occupancy, and retail and service industry

revenues.

1.5 Organization The NMSA is a state established authority, administratively attached to the States Economic

Development Department (EDD). The legislation that created the NMSA, the Spaceport

Development Act (New Mexico Statutes Annotated 1978 58-31-1 et seq., Laws of 2005), gives

the organization a broad purpose, which includes:

1. encourage and foster development of the state and its cities and counties by developing

spaceport facilities in New Mexico;

2. actively promote and assist public and private sector infrastructure development to attract

new industries and businesses, thereby creating new job opportunities in the state;

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3. create the statutory framework that will enable the state to design, finance, construct,

equip and operate spaceport facilities necessary to ensure the timely, planned and

efficient development of a southwest regional spaceport; and

4. promote educational involvement in spaceport activities and education and training of the

workforce to develop the skills needed for spaceport operations.

The NMSA has broad powers. For example, the enabling statute gives the NMSA the power to,

make and execute all contracts and other instruments necessary or convenient to the exercise of

its powers and duties including the purchase or lease of property, accepting grants and

donations and to charge and collect tolls, fees or rentals and impose any other charges for the

use of or for services rendered by any authority, facility, program or service. The NMSA also

has the authority to issue bonds, with the approval of the State Board of Finance. The enabling

legislation also created the spaceport authority fund and stated the following: Separate

accounts within the fund may be created for any project. Money in the fund is appropriated to the

authority for the purposes of carrying out the provisions of the Spaceport Development Act.

Money in the fund shall not revert at the end of a fiscal year.

The NMSAs Board of Directors consists of eight members; six are appointed by the Governor

and confirmed by the State Senate. The Lt Governor and the Secretary of the Economic

Development Department or his designee are also members. By statute, no more than three of the

appointed members shall belong to the same political party. Members serve staggered four-year

terms. The NMSA has broad powers including making and executing contracts, and approval of

all strategies and budgets. The NMSA Board also selects the NMSA Executive Director, who is

responsible for developing the strategies and budget, executing those strategies and operating the

spaceport. The NMSA board is required to meet at least quarterly.

In 2005, the NM legislature established a Spaceport America Regional Spaceport District (the

District) via the Regional Spaceport District Act (5-15-1 et seq., Laws of 2005) as the entity to

receive and distribute additional revenue from the Sierra County and Dona Ana County %

spaceport gross receipts tax. The tax passed in separate special referenda by the voters of Doa

Ana and Sierra counties in 2007 and 2008, respectively, in order to fund a significant share of the

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spaceports development. In 2009, the District pledged 75% of the tax revenues toward the

repayment of bond debt issued by the NMSA for construction, and the other 25% has flowed to

local spaceport-related education.

The Districts Board of Directors consists of six members that includes four elected officials

appointed by the respective county commissions of Doa Ana and Sierra counties. The board

also includes two statewide delegates appointed by the Governor, subject to confirmation by the

State Senate. The District board is required to meet at least annually.

The NMSA staff is organized as follows.

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2.0 MARKET SECTORS The NMSA has four addressable markets of opportunity in the next five years: commercial

space, federal government space, tourism and education. Each business sector corresponds to a

key part of the vision and mission of Spaceport America.

2.1 Commercial Space

Goal

The goal within the Commercial Space sector is to attract current and future commercial space

customers to foster the commercial space industry in New Mexico.

Objectives

The NMSAs predecessor organization (the New Mexico Office for Space Commercialization)

executed the states strategy to nurture fledgling high potential industries by placing a bid for

and winning the right to permanently host a New Space exposition and competition known

as the X Prize Cup. Taking cues from incentive prizes of aviations early days, such as the Orteig

Prize that inspired Lindberghs solo Atlantic flight, the annual X Prize Cup competition

promised to rekindle the publics romance with space and shepherd a new era of technological

advances to reduce the cost of access to space. More importantly for New Mexico, however, it

brought the self-appointed leaders of the new industry to its doorstep for business development

purposes, and allowed it to leapfrog existing space states in public mindshare. Though state

subsidies could only support the event for four years, hosting the X Prize Cup helped build

relationships with several future customers, including UP Aerospace, Starchaser Industries,

Rocket Racing League, Armadillo Aerospace, XCOR Aerospace, and most fortuitously, Virgin

Galactic. The rest, as they say, is history.

Staying true to this original vision, the NMSA plans to vigorously pursue commercial customers

to expand the operational portfolio at Spaceport America. The licensed site can accommodate

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both horizontal- and vertical-takeoff suborbital space launch users, as well as other potential

research and development activity such as high altitude balloons, low altitude technology

demonstrators, laser- and gun-launched vehicles, and ground-based testing of rocket motors and

other equipment. The site has even undergone extensive analysis as an ideal launch site for

single-stage-to-orbit (SSTO) vehicles. As long as the activity can be conducted safely and within

the confines of the spaceport EIS (Environmental Impact Statement) completed pursuant to

FAA-AST licensure 2008, the NMSA will entertain all manner of commercial space customers.

Several objectives currently exist, including: the recruitment of at least one other major, long-

term tenant by 2015; and the attainment of full operational capability for vertical and horizontal

launches by 2015, with initial horizontal capability in 2013.

Risks

There are several potential threats to these outcomes. One such risk is any major delay on the

part of Virgin Galactic, which could set back the timetable for its commercial operations. Given

the timing and phasing of the NMSAs public financing and its intended reliance on operational

revenues starting after fiscal year 2014, this could result in the need for the spaceport to enter a

mode of very limited operation until revenues permit full financial independence and self-

sufficiency. More broadly, a similar issue will develop if the commercial space industry is

simply slower to develop than anticipated (i.e. there are no additional tenants ready to utilize full

spaceport capabilities by 2015). Another more subtle challenge to doing business in the space

industry will be maintaining export control compliance while hosting both foreign tenants and

foreign public visitors. In particular, the U.S. International Traffic in Arms Regulations (ITAR)

applies to most space-related activities and must be managed appropriately. Finally, human

spaceflight vehicle operators such as Virgin Galactic and Armadillo Aerospace will be reluctant

to conduct business in the state if the regulatory environment is not conducive to their operations.

For example, if New Mexico fails to limit exposure to operators and their supply chain via

an updated, more robust Space Flight Informed Consent Act, which allows space flight

participants the right to hold harmless the companies in the event of an accident (caused by

other than gross negligence or mal-intent), the state will not be seen as competitive with

other space states, such as Florida, Texas, and Virginia. Although the legislation narrowly

applies to the space flight participants and costs the state nothing to implement, a measure to

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provide such protections has failed at passage by the New Mexico Legislature in 2011 and 2012.

Written statements from a growing list of prospective clients have indicated that other spaceports

in states with adequate legal protections will secure their business, which would have otherwise

come to Spaceport America.

Strategies

In response, it is extremely important for the NMSA to diversify the customer base of Spaceport

America as a buttress against the unpredictability inherent in aerospace development and flight

test programs. Logically, the more tenants and customers in place, the less dependent on any one

tenant and its schedule the NMSA will become. It is therefore essential that the NMSA visibly

participate in industry associations and forums to network with potential customers, raise

awareness, and market Spaceport Americas capabilities. Various national, regional and local

space conferences can be productive venues for marketing and recruitment. Additionally, active,

executive membership in the industry trade association, the Commercial Spaceflight Federation

(CSF), is crucial to ensuring regular contact with both other spaceports and the community of

vehicle developers, operators and suppliers. Targeted client site visits will be employed during

the business development process as well.

Through a variety of means, the NMSA is able to incentivize potential clients of Spaceport

America to relocate or expand to New Mexico. The State has multiple gross receipts tax

deductions, compensating tax exemptions, credits, and rebates designed to encourage space

industry employers to grow and hire locally, including deductions such as: preparing, fueling,

launching, operating, and recovering space vehicles and payloads, as well as conducting

research, development, testing and evaluation (RDT&E) services directly or indirectly for the

U.S. Air Force (see New Mexico Statues Annotated Sec. 7-9-54.2 Laws of 2007 for more

details), and spacecraft and aircraft manufacturing, maintenance, refurbishing and remodeling

(see Sec. 7-9-62 Laws of 2007 and Sec. 7-9-62.1 Laws of 2005). Use of space vehicles for

transportation of persons or property to/from/in space is exempt from compensating tax (see Sec.

7-9-30 Laws of 2003), while fuel and oxidizer for space vehicles are both exempt from gross

receipts and compensating tax (Sec. 7-9-26.1 Laws of 2003). Operation of a spaceport is also

deductible from gross receipts (Sec. 7-9-54.2 Laws of 2007). Furthermore, the High Wage Jobs

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Tax Credit (Sec. 7-9G-1 Laws of 2008), Rural Jobs Tax Credit (Sec. 7-2E-1.1 Laws of 2007)

and the Job Training Incentive Program (Sec. 21-19-7 Laws of 2005) reduce the cost of hiring

and maintaining a New Mexico labor force. The NMSA plans to pursue additional legislation

that will permit it to shield business and technical proprietary information it receives from

aerospace companies from public inspection an important tool in customer recruitment and

retention, similar to laws that exist in Florida and elsewhere.

Beyond statewide incentives, the NMSA aims to spur additional interest from companies with

flexible lease arrangements and favorable terms. Prospective tenants can sublease airfield flight-

line ground from the NMSA at under $2000/acre per year and build to suit. Acreage elsewhere

on spaceport property can be sublet for under $1500/acre per year. Alternatively, tenants can

lease a spec or purpose-built facility from the NMSA, amortizing the cost of the infrastructure

(principal plus interest) over an extended 20 year timeframe, potentially with a discounted initial

term. In an effort to encourage additional research and development activity, Spaceport America

also offers a First Flight is Free promotion for all commercial space companies, whereby the

NMSA provides range services at cost and waives the user fee for the initial flight of a

companys space vehicle or technology demonstrator from either the vertical or horizontal

launch area. One truly unique selling point of Spaceport America comes with the intended

development of a public visitor tourist attraction at the site, in which there are myriad ways for

commercial space companies to earn incremental income from each visitor from merchandise

revenue sharing to personnel time reimbursement, and even actual creation of demand for launch

services through development of payloads for launch on a real space vehicle.

Finally, it is of course a top priority of the NMSA to promote the revision of the New Mexico

Space Flight Informed Consent Act of 2010 to better compete with similar legislation passed in

Virginia, Texas and Florida. The revised bill will include additional provisions to hold harmless

suppliers and manufacturers servicing the operators that fly from New Mexico, extend the period

of coverage through 2019, and preclude the predicament where the high potential cost of

insurance drives customers elsewhere.

COMMERCIAL SPACE SUMMARY

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OBJECTIVES

Sign one more major tenant by 2015 Full operational capability for vertical launch by 2015 Initial operational capability for horizontal launch by 2013 Full operational capability for horizontal launch by 2015

RISKS

VG experiences major delay Commercial space industry is slow to develop Export Control and International Traffic in Arms Regulations (ITAR) compliance Lack of robust NM Space Flight Informed Consent legislation

STRATEGIES

Diversify customer base Network and participate in industry to gain customers Incentivize select customers Promote revision of NM Space Flight Informed Consent legislation in 2013

2.2 Federal Government Space

Goal

The goal within the Federal Government Space sector is to position Spaceport America as a

strategic national asset by supporting federal government space research and development.

Objectives

In addition to commercial space industry customers, Spaceport America is equally well suited to

serving the needs of federal government space research and development programs. First of all,

the spaceport is situated close to numerous premier Department of Defense (DoD) and National

Aeronautics and Space Administration (NASA) RDT&E installations, including U.S. Army

White Sands Missile Range (WSMR), Holloman Air Force Base, the Air Force Research

Laboratory (AFRL), Sandia National Laboratory, and NASA Johnson Space Center White Sands

Test Facility (WSTF). This proximity allows the NMSA to leverage incredible amounts of

specialized aerospace infrastructure and talents for its own operations, providing tailored access

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for commercial users at lower prices. In addition, this proximity also provides an opportunity to

develop a nexus of symbiotic partnerships with various branches of government that ultimately

serves to advance technology, raise the collective regional capability and precipitate more

business for all.

The NMSA has a particularly strong relationship with WSMR, codified into a memorandum of

agreement most recently updated in 2010. The agreement lays out the procedures by which the

NMSA can access WSMR resources and airspace, and is the vehicle through which Spaceport

Americas operations are enabled, and through which future collaboration can occur. Another

key partner lies in the U.S. Air Force; both the AFRL Space Vehicles Directorate and the

Operationally Responsive Space (ORS) Program Office lie only two hours to the north at

Kirtland Air Force Base. The ORS office successfully flew with spaceport customer UP

Aerospace for a sounding rocket flight in April 2012. Perhaps most naturally, the NMSA and

NASA have agreed to support one another regarding flights and payload services at Spaceport

America through the NASA Flight Opportunities Program. In 2012 and 2013, NASA has

contracted and reserved up to 14 R&D flights from Virgin Galactic, Armadillo Aerospace and

UP Aerospace to take place from Spaceport America. The future prospects of collaboration with

federal agencies are bright, and the NMSA has set objectives of hosting at least four Air Force

R&D flights by the end of 2014 and at least five NASA R&D flights by the end of fiscal year

2014.

Risks

Given the state of the economy and the political climate in Washington, DC, however, it is

possible that spending by NASA and the Air Force may be redirected away from programs that

will directly benefit Spaceport America. This uncertainty in federal government funding is not

new, of course, and it simply adds justification for branching out into non-federal markets. As

with commercial space customers, it is essential to comply with export control regulations such

as ITAR when government space programs have potential interfaces with both foreign tenants

and foreign public visitors.

Strategies

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While there is not much that the NMSA can do to directly control the fate of federal programs, it

is clearly in the projects best interest to maintain a strong program of space advocacy with

respect to the New Mexico Congressional Delegation and key federal agency personnel. This is

served best through regular interaction with staffers both locally and in Washington, as well as

with the government relations department of the Commercial Spaceflight Federation (CSF) trade

association.

Another strategy to maximize the potential federal use of Spaceport America is to develop and

negotiate specific, mutually-beneficial agreements with each of the major federal neighbors: Air

Force, Army and NASA. In early 2013, the NMSA executed an umbrella Space Act Agreement

covering NASAs Commercial Reusable Suborbital Research (CRuSR) payload operations and

processing with NASA/Ames Research Center. The Space Act Agreement will permit NASA to

furnish equipment and technical expertise to the NMSA for a payload operations and integration

center at Spaceport America, in exchange for the NMSA furnishing the facilities. In 2013 the

NMSA intends to expand its core partnership with WSMR to include collaboration on mutually

beneficial business development opportunities.

Lastly, concerns over compliance with various regulatory requirements including the ITAR are

to be addressed in the development of clear policies, procedures and technology control plans via

a dedicated export/arms control consultant to be brought on board the NMSA team.

FEDERAL GOVERNMENT SPACE SUMMARY OBJECTIVES

Host four Air Force R&D flights by 4Q 2014 Host five NASA R&D flights by 2Q 2014

RISKS

Uncertainty of federal government funding Export Control and International Traffic in Arms Regulations (ITAR) compliance

STRATEGIES

NASA/Ames Space Act Agreement in 2013 WSMR business development relationship in 2013 Strong federal government space advocacy

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Hire ITAR consultant to draft procedural guidelines

2.3 Tourism Goal

The goal within the Tourism sector is for Spaceport America to become globally recognized as a

unique, exciting tourist destination.

Objectives

The number one customers of the NMSA are the community stakeholders around and within the

State of New Mexico. One of the key returns on investment for the taxpaying public is through

local, regional and statewide tourism. Turning Spaceport America into a tourism destination in

addition to an operational launch facility allows an entirely new cross-section of the community

to benefit economically, and provides the NMSA with a more diverse base of revenue to sustain

long-term spaceport operations. The concept is based on the simple premise that while not

everyone will initially be able to afford a space flight, a huge proportion of the population wishes

they could and would be interested to get as close to that experience as possible. NMSA research

has indicated that about one in four vacationers has a very strong interest in space flight.

Positioning Spaceport America as the best venue for out-of-state and international tourists to

experience the next generation of space will enable New Mexico to attract large numbers of new

visitors to the State. As a result the NMSA has made plans to develop dedicated visitor facilities

on-site and off-site to transform the anticipated flow of guests from what, if left unmanaged,

would otherwise have become a safety, security, and environmental hazard, into a profitable

business and tourism magnet for the region.

In the meantime, the NMSA has begun to offer Preview Tours of the Spaceport America

infrastructure to interested guests. The experience, offered via a locally-contracted, NMSA-

trained, third-party transportation company, was modeled as an attraction-before-the-attraction

concept intended to address the current appetite for tours and site visits while jump-starting local

business community interest and giving the NMSA critical early insights and experience in the

tourism business. In its first year the Preview Tour has served over 1,500 guests, with no paid

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advertising whatsoever to drive demand and when the Spaceport is still under construction. In

2013, until superseded by the full Visitor Experience, the NMSA expects this Preview Tour

passenger volume to at least double. Assuming an appropriate level of marketing and given

considerations for site remoteness, feeder market population base, and macroeconomic trends in

the destination tourism industry, the NMSA conservatively projects the full Visitor Experience

attendance to reach over 200,000 people annually, with over seventy percent (70%) of those

expected to come from outside of New Mexico. The NMSA expects this level of traffic to be a

boon to the local tourism economy, in large part due to planned NMSA efforts to cross-market

and promote pre-existing and new local tourist experiences, venues, and businesses to spaceport

visitors. By 2018, the NMSA intends for Spaceport America to become the number one tourism

destination in the State, at least in terms of national and international awareness, if not in total

visitation.

The Visitor Experience business line will be treated like a wholly-owned subsidiary, operated

by a NMSA-licensed hospitality management firm that is responsible for turning a profit on

behalf of the NMSA. The operator will earn all income from ticket sales, food and beverage, and

merchandise, while paying for all visitor-related expenses including costs such as marketing,

staffing, transportation, and, most importantly, a license fee back to the NMSA. Based on

industry standard assumptions the NMSA forecasts the operator to make a profit in the first full

year of operation. Taken as a whole, the Visitor Experience should generate more than enough

income to allow for sufficient capital reinvestment in this business sector to encourage repeat

visitors.

Risks

Principal risk factors in the tourism market are related to macroeconomic trends and conditions

that impact the likelihood and ability of visitors to vacation in New Mexico, and by extension, at

Spaceport America. On the national level, the United States Travel Association (USTA) reports

that in 2011 there was only modest expansion in the tourism economy following several years of

declines during the recession of 2008-2010. With rising gas prices and unusual weather, New

Mexico saw decreases in domestic air visitors, state and national park attendance, hotel

occupancy and business travel to the state. In particular, an observed drop in rural vehicle miles

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traveled is concerning given the statewide dependence on the drive market. Potentially

compounding a general slowdown in demand for travel to New Mexico is the possibility of a

Spaceport America visitor experience that is either under-capitalized in terms of facilities and

experiential content, or more likely, not marketed well enough to attain awareness levels of 30%

assumed in the demand projections. Additionally, the degree to which the local communities

surrounding the spaceport are prepared to accommodate additional visitors in terms of hospitality

services, infrastructure and amenities will impact the guest experience. Tourism relies on a

critical mass of high quality activity and attraction to draw visitors to a particular place; if guests

feel the activity failed to live up to their expectations, that there wasnt enough to do, or that it

wasnt worth the visit, then poor word-of-mouth and travel website reviews will swiftly kill a

new destination. More critically, guests wont be able to evaluate a destination at all if they dont

know about it and never visit in the first place. The baseline hospitality management firm

proforma requires at least 10-15% of gross revenue to be spent on marketing during the first five

years of operations.

Strategies

The spaceport is neither immune to, nor able to influence larger market forces that impact leisure

travel in the United States, however it is entirely within the control of the NMSA to develop a

destination that is worthy of national and international visitation. For example, the NMSA has

hired a world-class team of experts in the location-based entertainment field to design the content

and facilities necessary to succeed in the mass tourism business. The consultants, primarily

veterans of the Walt Disney Company, are developing all facets of the consumer face to

Spaceport America, including branding, feasibility and market research, operational plans,

facilities architecture, physical and virtual experience content, and sponsorship and fundraising.

Identified as a viable method to harness the States investment in the project, a significant effort

is planned to garner sponsorship-derived revenue using tourism as the platform. The brand

qualities that Spaceport America represents (e.g. the future, uniqueness, sustainability, human

potential, science and technology education, and American ingenuity, etc.) are expected to

resonate well with possible partners seeking to position themselves as sponsors of tomorrow.

Based upon an accounting of potential value and exposure for a lead naming or entitlement

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sponsor, a reasonable deal spread over 10-15 years could go far in ensuring that sufficient capital

is available to reinvest in a critical mass of experience, as well as guaranteeing that marketing the

destination would not be solely the responsibility of the NMSA or its operator. To ensure the

best possible launch, the NMSA must establish awareness and positive media coverage by

capitalizing on the grand opening of the spaceport through a comprehensive nationwide series

of highly-publicized, sponsored events culminating in the opening of visitor facilities to the

public and the commencement of commercial operations by Virgin Galactic.

Lastly, because the success of the NMSA tourism effort is not only measured in number of

visitors to Spaceport Americas gates, it is imperative to develop strong working relationships

with local and State tourism officials, business owners and citizens to encourage their

preparation for and participation in the tourism expansion triggered by the spaceport. By hosting

workshops and online courses, town hall meetings, supplier events and general information

sessions, the NMSA hopes to instill in the local populace the importance of a holistic approach to

guest experience. The impression a visitor receives about a place is the sum total of every

interaction he or she has with the local hospitality industry e.g. the hotel receptionist, art

gallery manager, gas station employee, etc. Moreover, an emphasis on customer service training

and regional cross-promotion is critical to driving higher spending on the part of visitors.

Obviously, the better the overall experience, the more likely the visitor will come back and

recommend the place to others. In addition, local tourism-oriented organizations such as

Convention and Visitors Bureaus (CVBs) in Las Cruces, Albuquerque and El Paso; the Sierra

County Recreation and Tourism Board; and the Tourism Department of New Mexico are all vital

partners in the effort to improve the quality and quantity of local services available to visiting

tourists. The NMSA will maximize its marketing mileage by collaborating with these entities on

promotions and co-op advertising programs to promote the spaceport.

TOURISM SUMMARY OBJECTIVES

Become the #1 tourism destination in New Mexico by 2018 Attract over 200,000 visitors/year in the first full year of operation Grow Preview Tour operation to 3,000 visitors in 2013 Develop supporting infrastructure for Visitor Experience by 2014

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Generate a profit from visitor services in the first full year of operation RISKS

Sluggish economy Lack of local tourism community readiness Underfunded and/or poorly marketed Visitor Experience

STRATEGIES

Hire world-class visitor experience development contractors Increase outside investment with pre-opening partnerships Plan and execute strong grand opening program Encourage local community preparation for mass tourism

2.4 Education Goal The goal in the Education sector is to inspire students who come in contact with Spaceport

America to embrace science, technology, engineering and math (STEM).

Objectives The United States went to the Moon because it could. It inspired the world with the audacity and

determination of the resolve to do the hard things that other nations do not. This can-do spirit

and culture of advancing the state-of-the-art is fundamental to what makes America the natural

world leader in space. It lives in our hearts and minds, and every fiber of our being. But in the

more than four decades since that pinnacle achievement, our leadership in space has been

contested and our legendary technological prowess has dimmed significantly. The Apollo-

inspired generation is already retiring, and our best and brightest young minds of today and

tomorrow are entering law and investment banking, rather than aerospace and energy.

The Aerospace Industry Associations statistics indicate that more than sixty percent (60%) of

the aerospace industry is aged 45 or older and fewer students in the U.S. are now entering fields

in science, technology, engineering and math (STEM) than did three decades ago; in fact, our

country now graduates more visual and performing arts majors than engineers. An embarrassing

consequence, per the National Academy of Sciences (NAS): forty-nine percent (49%) of U.S.

adults do not know how long it takes for the Earth to revolve around the Sun. Put another way,

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the NAS determined that since the year 2000 there were more foreign students every year

graduating from American colleges in physical sciences and engineering alone than American

students graduating from American colleges in total. These facts highlight an impending STEM

labor crisis as the scientists and engineers drawn to the profession by the space race and the Cold

War retire and not enough qualified young Americans are available to take their place.

Additionally, STEM skills are not only essential for people who want to pursue a higher-paying

career in technology, nor only meant for those who excel at science and math. Studies indicate

that STEM skills are highly transferable and necessary in every 21st century job sector. Critical

thinking learned through STEM education can be used across all disciplines, and the goal is to

improve STEM literacy for all American students as they prepare for productive citizenship in a

technology-centric, global knowledge economy. In spite of spending more than half of the ~$6

billon State of New Mexico annual budget on education, New Mexicos standardized test

numbers only attest to worsening national trends. During the 2010-2011 school year, only 44%

of 4th grade students were proficient or advanced in math, and 47% in science. By 7th grade,

achievement dropped to only 38% and 40% of students scoring proficient or advanced in math

and science, respectively. These low outcomes worsen into high school, with only 38% and 39%

of 11th graders meeting the same standards.

What is needed is a catalyst that stimulates students imaginations to focus on studies in fields

that will strengthen our capacity to meet the needs of our state and our nation, not only in space,

but in other domestic and international concerns as well. Saddled by uncertain budgets and

expensive agendas, NASA cannot do it alone. Spaceport America, with the excitement of

frequent personal and commercial space launches and the facilities to constantly showcase the

leading-edge of technology, can be a spark to help motivate our nations next generation of

trailblazers and prevent the loss of our competitiveness on the world stage. The NMSA plans to

develop a comprehensive STEM education and workforce development plan by 2013, in

coordination with key stakeholders at the local, state, and national levels. Figuring largely in the

plan is the goal of positioning of Spaceport America as a student laboratory targeting primary

and secondary school grade levels, with at least 35% of annual visitors under 18 years old,

internship and co-op programs for college students, and hosting at least 3 student-focused

spaceport events every year by 2015.

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Risks Realistically, the crisis in American STEM education is not new, and is far too complex to be

solved by any one party, no matter how determined or well-resourced. While the NMSA intends

to use Spaceport America as a tool to increase student interest and success in technical

endeavors, other factors may mitigate its impact if not anticipated. First of all, given the scope of

the problem it is essential that the NMSA not completely reinvent the wheel. The NMSA must

partner with pre-existing educational services and entities. The New Mexico Public Education

Department STEM Database lists at least 70 other STEM education programs in the state, and

the catalogue is by no means comprehensive. By working with and building upon already

available materials, networks, and relationships, the NMSA is more likely to reach more students

and teachers and thus make a measurable impact more quickly. In the public schools, one of the

largest obstacles to sending students to Spaceport America is the cost of transportation (i.e.

bussing). Declining budgets statewide have the potential to reduce the support for field trips,

especially from school districts located more than an hour away. Lastly, assuming students ever

reach the spaceport, if educational programs, exhibits and content are poorly targeted once

students engage, the impact will be negligible. Flawless execution of outreach the first time

around is critical in this age of instant gratification and short attention spans.

Strategies Owing to one of its legislated mandates, to promote educational involvement in spaceport

activities and education and training of the workforce to develop the skills needed for spaceport

operations, Spaceport America has been developed since its inception to promote STEM

education. This commitment began with the % spaceport gross receipts tax that the voters of

Doa Ana and Sierra counties passed in 2007 and 2008, respectively, in order to fund the

spaceports construction. As stipulated in the tax referendum, seventy-five percent (75%) of the

tax revenues collected are pledged to repay the spaceport tax bonds, while twenty-five percent

(25%) of revenues are diverted to the counties themselves for spaceport-related (STEM) public

education. Approximately $2 million per year has been disbursed by the counties on a formula

basis to the four local public school districts, totaling nearly $7 million so far for spaceport-

related education since the taxs inception in 2009. This critical, recurring, State budget-

independent funding has proven invaluable to sustaining and growing the STEM education

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infrastructure in southern New Mexico. Programs such as the Science Engineering Mathematics

Aerospace Academy (SEMAA), Project Lead the Way, the NM Annual Student Launch

Program, the NM STEM Network, Innovate+Educate, Scientifically Connected Communities,

and NM Mathematics Engineering Science Achievement (NM MESA), as well as STEM

specialist staff hiring and technology equipment purchases have all been supported by the

spaceport-related education funding so far.

In mounting a comprehensive education and workforce development effort, the NMSA is

planning several additional approaches. First, the NMSA has retained the services of expert

consultants in experiential and online learning design to help craft the plan and the content. Then

as the spaceport grows, the intent is to coordinate with other key regional and statewide

stakeholders such as the New Mexico Space Grant Consortium, the Bridge of Southern New

Mexico, Las Cruces Public Schools, Truth or Consequences Schools, the Southwest Area

Workforce Development Board, the State Department of Workforce Solutions, New Mexico

State University (NMSU), University of New Mexico, NM Tech, and the State Public and

Higher Education departments on how best to become a resource to them, and on what kinds of

direct experiences and activities the NMSA should offer. Building on the strength of

relationships with federal institutions such as NASA and WSMR as described earlier, the NMSA

already plans to provide a hands-on participatory scientific experiment/payload development

experience on-site for members of the public, and students in particular. This strategy has the

added benefit of generating demand for launch services from the spaceports tenants, which in

turn generates user fee revenue to the NMSA.

A key element of the overall strategy is to set aside an annual education and workforce

development fund from net revenues to enable the NMSA to invest in STEM education and job

training activities, to include internships & co-ops, scholarships, printed and digital STEM

materials, and even grant funds to which public school districts in New Mexico can apply for

funding from NMSA to cover spaceport field trip transportation expenses. For example, with less

than $250,000 per year, the NMSA could conceivably support all 89 New Mexico school

districts with multiple visits and hire many interns each year. The group student and teacher

admission pricing to the Visitor Experience for the students and/or chaperones will be

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substantially discounted to further incentivize field trips. In this way, the NMSA strives to see a

mix of attendance that skews younger rather than older, with at least a third of visitors having yet

to enter the workforce. As another part of the effort, the NMSA plans to offer extensive and

relevant STEM content, games, contests, and curricula to students, parents, teachers, and the

general public via its website, www.SpaceportAmerica.com. A strong differentiator of the online

portal for teachers will be a powerful collaborative professional development resource centered

around the spaceport, allowing STEM educators to communicate, share best practices, take

training courses, request help, feedback and motivation from like-minded people around the

district and the country. Doing so will help to grow a community of practice in spaceport-

related education like no other in existence; it is a far more efficient use of limited resources to

develop stronger, more informed and passionate teachers than to pursue every student in

America. In the future the NMSA intends to explore various revenue-producing education

concepts to help finance the aforementioned education and workforce development fund. As

details become available they will be added to this Business Plan.

EDUCATION SUMMARY OBJECTIVES

>35% of visitors under the age of 18 per year Develop strong spaceport STEM education and workforce development plan by

2013 Develop robust internship/co-op program, supporting up to 5 interns by 2014 Host up to 3 student-focused events per year starting in 2015

RISKS

Lack of coordination with related existing educational services and programs Lack of public education support for field trips Poorly targeted activities, materials and interpretive content for students and

teachers STRATEGIES

Engage world-class learning professionals Develop education and workforce annual fund Incentivize student and teacher attendance through targeted admission pricing Coordinate with pre-existing programs and organizations Provide professional development resources to teachers via website

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3.0 SUSTAINABILITY / REINVESTMENT Per the first strategic goal for the spaceport, another focus area of the NMSA is sustainability in

the sense of financial stability. As previously discussed, the agency is in the middle of a

transition from a State-supported entity to one that is totally self-supported by revenues. By

fiscal year 2014, the operational budget of the NMSA must be completely covered by income

generated from its launch services and other business sectors. It is therefore essential to the long-

term success of the spaceport that the NMSA is able to generate a profit from every business it

enters, and that all business lines carry the burden of their respective full operating costs with

margin to spare. It is worth noting that the NMSA, as a public body, does not pursue profit

margins for its own sake, but rather to exercise its legislative mandate to facilitate economic

development and growth within the State of New Mexico. Unlike most government agencies,

where every year their money expires in a use-it-or-lose-it manner, the NMSA is rewarded for

prudent fiscal management by retaining its earnings and thus has the luxury of planning for the

long-term with strategic reinvestments in the spaceport to keep it fresh and appealing to its

customers.

Current plans call for a total net revenue reinvestment in infrastructure for at least fiscal years

2014-2016, followed by a continual target of being able to reinvest at least 50% of earnings in

each respective business line. This baseline of annual reinvestment will allow the NMSA to

encourage growth of multiple additional space launch tenants with new facilities, and permit the

NMSA to refresh and enhance guest-related attractions and content to spur repeat visitation.

Examples might be additional hangars, roadway or airfield improvements; new service

equipment; new exhibits or visual media; or updated transport vehicles.

4.0 SUMMARY

An unconventional and unprecedented enterprise calls for an unconventional and unprecedented

business plan. While taking cues from other launch facilities as much as possible, the NMSA is

charting new territory in establishing the first-ever built-from-the ground-up venue for non-

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governmental access to space. Without the diversified balance sheet of an airport or the lasting

subsidy of a federal institution, Spaceport America must be creative and resourceful in order to

endure the early years of an emerging industry. The current plan envisions a flexible response to

the commercial and federal space sectors that takes advantage of value-added partnerships

without over-committing to capital-intensive infrastructure, enabling the NMSA to affordably

accommodate rapidly-evolving user requirements. Financial accessibility combined with a local

favorable business and legal operating environment will help the NMSA grow its stable of

tenants and customers in the next five years. This nucleus of aerospace activity allows the

NMSA to build secondary business lines in tourism and education that form the core of the

return on investment to the citizen stakeholders of New Mexico: economic development,

workforce development and job creation. These sectors are projected to each earn enough

revenue to pay for themselves and permit the self-sufficiency required for the agency to maintain

the quality customer service that is key to the projects success. At last, after years of careful

planning and development, the NMSA is poised to fully deliver on the economic promise of

Spaceport America.

Documents

Spaceport America "NEW" NMSA Business Plan