Harold Morgan: If it sounds too good...

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Cool startup deals should generate caution

By Harold Morgan

There are promoters — people pushing substantive projects with capital in the bank. Then there are promoters.
I grew up around the latter kind with the smoke, the mirrors, the hustle and the hot checks. I remember one attempt to build a stock issue around a $350 copper lease.
In economic development, hopes and dreams play big roles.
So headlines about the latest “next big things” should bring caution.
As context for big announcements, complaints float that Gov. Susana Martinez has done little to produce jobs in New Mexico. True enough, I think.
But the other truth is that governors can do little to “jump start” an economy.
To start, consider your car. Your battery dies. Someone appears with a good battery and jumper cables and “jump starts” your car.
Easy. Economies don’t work that way.
Still we seek jump starts. And promoters respond.
A wonderful pure promotion appeared some years back for the Artesia area. It pitched a big chicken farm.
There were the details of the water and money. The promoters, it proved, had little. The promoters did have a background in promoting through an associated public company that pushed solar collectors in the 1970s. Ah, solar, again a big thing, again pushed by government.
When governments get involved, things can happen, such as spending much money that an “economic” (i.e. profit producing) situation wouldn’t spend.
Since 2001 Texas has spent $733 million in renewable energy property tax credits, mostly for wind farms, according to the Texas Comptroller’s Office, reported in The Economist.
The projects produced about 500 jobs at a “ridiculous” $1.5 million per job.
A recent next big thing in Albuquerque was aviation.
A startup firm, Eclipse Aviation, came with much fanfare, hired people, generated rapturous articles, received tens of millions from the Richardson administration, crashed (fortunately only financially), laid off the people and went away.
The Eclipse Wikipedia article said the failure was the largest in the history of general aviation.
Eclipse, back now in a new incarnation with no fanfare, has hired people and is working.
All this wanders to the recent announcement by Pegasus Global Holdings, of Washington D.C., of plans to build “a fully integrated physical facility modeled on a medium-sized American city” to test various things on a site of perhaps 20 square miles somewhere near Las Cruces or Albuquerque.
State government is helping facilitate a feasibility study for the project. The state has a high profile on Pegasus’s website (www.pegasusglobalholdings.com/test-center.html).
The second sentence of the project description begins, “With the support of New Mexico Governor Susana Martinez ...”
Pegasus’s release said it “intends to privately finance.”
Notice the future tense, “intends.” That tells me the money isn’t there yet. The feasibility study won’t be done for several months. Nor is there a site.
“Among other projects,” the Albuquerque Journal reports, Pegasus “is working to build an international commercial space launch facility at White Sands Missile Range.”
Haven’t heard of that one. There is, however, a critic. Journalist and author Greg Lindsay argues in a Sept. 25 New York Times op-ed that the Pegasus project won’t work.
New Mexico already has an empty community used for testing.
Owned by New Mexico Tech, it is Playas, formerly home to a copper smelter and now the scene of security exercises such as training local law enforcement agencies to tackle drug trafficking violence.
Pegasus appears to be a long way from Artesia’s chickens, but also far from shovel ready.
I hope it flies. It won’t be a jump start, but it may prove a test of the Martinez administration’s choices about investing political capital in cool-sounding startup deals.

Harold Morgan
© New Mexico
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