2 Bills for Spaceport Land; Authority to Pay State Land Office and Two Ranching Families for Facility Property

LAS CRUCES — When a taxpayer-financed spaceport is built in southern Sierra County on state trust land, the Spaceport Authority will pay twice for the privilege.

The New Mexico Spaceport Authority will first pay the State Land Office for the right to build Spaceport America on 18,000 acres of state trust land. But two ranching families, who have leased the acreage for decades, will also be paid.

That’s because State Land Office officials told Economic Development Secretary Rick Homans that, before a lease allowing the spaceport to be built was negotiated, the Spaceport Authority had to come to land-use agreements with the two ranching families.

Under agreements worked out late last year with Homans, the Cain and Wallin families will receive a total of $6.4 million over 25 years for allowing the Spaceport Authority to use the trust land the families lease from the State Land Office.

Homans initially sought to purchase the two family ranches, including the leased state trust acreage, for their combined 2006 appraised value of $4,470,000.

But when the families balked at the buyout, Homans had to work out another arrangement — in this case, essentially subleasing the land so that the two families can continue ranching on their abutting grazing allotments.

Legally, State Land Commissioner Pat Lyons could have allowed the short-term leases the Cains and Wallins held on the targeted land to expire. Then, the State Land Office could have worked out a lease with the Spaceport Authority for the same land, said Galen Garcia, a State Land Office senior economist closely involved in negotiations on the spaceport deal.

"He (Lyons) chose not to," Garcia said. "He felt it was not in the best interests of the trust, or philosophically, the right thing to do. He’s a rancher and he didn’t want to force these people off their land for the spaceport."

Lyons said recently that he did not want to "kick (the ranchers) off" the trust land in part because the spaceport seemed so "iffy."

Garcia noted that a Doa Ana County tax increase dedicated to raising funds to build the $198 million spaceport in Upham, 40 miles north of Las Cruces, passed only narrowly two weeks ago — by 270 votes out of more than 17,000 cast.

British billionaire Richard Branson’s company Virgin Galactic, the spaceport’s anchor tenant, plans to fly wealthy tourists to the edge of space for a once-in-a-lifetime look at earth while floating in micro-gravity.

Though Branson is considered a top-notch partner for the state, and boosters say the project could be a huge boon to the region’s economy, the suborbital space tourism industry is still new and untested.

"If you kick them off, where are you going to get money if it falls through?" Lyons asked, referring to his duty to derive revenue from state trust lands. "This way we got a dual purpose — we got a spaceport lease plus a dual purpose on top of it."

Besides, said Lyons, more was at stake than guaranteed fees from the Spaceport Authority.

"Our agricultural leases are more important than a dollar figure," Lyons said. "They (ranchers) are the ones who take care of our land, make sure there aren’t illegal trash dumps out there, that things aren’t stolen out there."

But allowing the ranching families to continue leasing the grazing land required Homans to negotiate a costly agreement so that both parties could coexist.

Automatic renewal

The New Mexico Spaceport Authority will pay $26,000 per year to the State Land Office for the right to use 18,000 acres of trust land.

The Cain and Wallin families, who hold five-year grazing leases that are renewed virtually automatically, each will receive:

a one-time, upfront fee of $637,500;

$87,500 per year as compensation for inconveniences and the need to evacuate in the event that vertical launches occur at the spaceport;

and up to $375,000 as compensation for the cost of any ranch reconstruction projects required by the spaceport’s presence.

After 12 years, the ranching families can exercise an option requiring the Spaceport Authority to buy the ranches at full market value. All fees, except the yearly payments of $75,000 per family, would be deducted from the final purchase price.

If the families never choose to sell, the agreement rolls over automatically for five years at a time.

Homans said the ranches could be kept in the families for decades to come.

Families entrenched

The Bar Cross Ranch, owned by Ben and Martha Jane Cain, is just to the north of the Lewis Cain Ranch, owned by Philip and Judy Wallin. Judy Wallin is the Cains’ daughter.

Questions for the Cains and Wallins were referred to their attorney, Dennis Wallin, Philip Wallin’s cousin.

The Bar Cross Ranch last year paid the State Land Office $11,818 for its annual agricultural lease, and the Lewis Cain Ranch paid nearly $10,800 for its annual lease, Garcia said.

Homans said he was in "total agreement" with Lyons’ desire not to push the Cain and Wallin families off state trust land they have worked for years.

"I took the approach from the beginning that … the future of the spaceport really lay in the hands of the ranchers," Homans said. "That was a critical threshold issue that needed to get resolved, and if the ranchers were not willing to work with us in a way that was fair to them and fair to the taxpayers, we would have to part ways and the spaceport would not go forward."

Spaceport boosters have eyed the state trust land east of Caballo Lake for the project since at least 1995. But the targeted land has been under lease to the Bar Cross Ranch and the Lewis Cain Ranch for decades.

The two ranches consist of relatively small portions of private land — about 1,200 acres in all — connected to about 84,000 acres leased from the federal Bureau of Land Management and nearly 33,000 acres of state trust land managed by the State Land Office to earn revenues for public education.

The long-standing plan had been to buy the ranchers out and compensate them for making way for the spaceport. Typically, when a ranch is sold, the buyer pays the seller for the private land along with the leased state and federal land and all improvements on those lands. Federal leases run for 10 years and state leases run for five- year terms.

State officials initially estimated the cost of buying out the ranchers at $2 million, but Homans said the estimate was basically an educated guess.

Deal almost crashes

Last August, with an up-todate appraisal putting the value of the two ranches at $4.4 million in hand, Homans traveled to Moriarty to discuss a buyout with the Wallins.

That’s when the spaceport project, promoted for years and having already garnered international publicity, temporarily hit a brick wall.

While a formal offer was never made, both sides said the $4.4 million figure fell flat.

"My clients would never have accepted that offer," Dennis Wallin said in a recent interview. "Their feeling was there’s no way you could ever replace those two ranches for that kind of money."

There was no counteroffer.

"It (the spaceport) was kaput," Homans said. "It was over."

Instead of giving up, Homans said, he took a deep breath, everyone drank some iced tea and they started over from scratch.

Brainstorming, the two sides hashed out a basic framework to co- exist.

While the ranching families will receive more dollars over 25 years than today’s appraised value of their ranches, Homans said the deal over time will cost the state less.

Plus, Homans said, the upfront fee is far less than state officials initially expected to have to pay for access to the site.

Generous outcome

Doa Ana County Commissioner Oscar Vasquez Butler, a vocal critic of the spaceport sales tax hike approved by county voters on April 3, questioned whether the interests of the state’s taxpayers are best served by requiring the Spaceport Authority to have to deal with the two ranching families.

"To sublease our own land — there’s something fundamentally wrong with that," Vasquez Butler said. "Those families are going to become millionaires at the expense of taxpayers."

Dennis Wallin said the state could have allowed the ranching families’ leases to expire in an effort to move grazing operations out of the spaceport’s way. But he said litigation would likely have followed.

"Those are issues that are not black and white," Wallin said. "You just don’t pull the rug out from under someone who has managed and exercised good stewardship of the land for over 60 years."