The New Space Policy Regime and its Financial Foundation
Culture in Crisis Conference
at
Helms School of Governance
Liberty University
Tamara Campbell
PhD Public Policy: Economic Policy, Graduate Student
Helms School of Government
Liberty University
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Introduction
Post the global financial crisis of 2008, the National Aeronautical and Space Administration
(NASA) sought to expand the space economy through a public policy of commercialization
consistent with U.S. federal legislation, “51 USC Ch. 509: Commercial Space Launch
Activities,” and element of Title 51—National and Commercial Space Programs (NASA 2017,
Shank 2020, U.S. House of Congress 1998). In my dissertation research, I look at how the drive
for privatization of the space economy has brought major changes in the form of mission funding
strategies, now repositioned as public private partnerships (P3s).
Formed to fund space missions with private finance in lieu of publicly subsidized funding,
P3s are investment and risk-sharing vehicles subject to the evaluation of financial intermediary
institutions, insurers, and at times, the courts in the case where there is foreign direct investment
(FDI) agreement. For this reason, it is arguable P3s have exceptional influence on the scope and
future of federal space policy, and consistently by way of state legislation. The diversity of space
infrastructure policy interests has also opened the door for more flexibility in governing
structures at the state and local levels.
Financing New Space P3s
Review of NASA, state government, and private space sector upstream and downstream
funding activity, shows a transition from the traditional funding provided by public subsidies, to
a New Space economy of private investment, characterized by differentiated models of utility
accorded P3s and their funding scheme (Crane et al. 2019). There are considerable public policy
challenges occurring as result. Contributing substantial knowledge to the study of space policy
reform(s), dimensional analyses of space mission funding scheme offer insight into the evolving,
and multifaceted space finance policy domain.
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NASA Economic Instruments for Space
Category
Instrument
Capital Subsidies
• Equity subsidies
• Government loans and loan guarantees (i.e. Federal space
bank)
• Tax incentives (i.e. Zero G zero tax)
R&D Subsidies
• Research grants
• Small business innovation research grants
• Cooperative agreements
• Cooperative research and development agreements
Input Subsidies
• Access to ground facilities (i.e. enhanced use leases)
• Access to International Space Station and space for R&D and
testing (e.g. Facilitated access to the Space Environment for
Technology Development and Testing)
• Assistance from Technology Transfer Offices
• Assistance with NASA patents licensing
Contracting mechanisms
• Cost-plus contracts
• Fixed-price contracts
• Advance purchase agreements
• Funded Space Act agreements
• Reimbursable Space Act agreements
• Non-reimbursable Space Act agreements
• Prizes, challenges, and competitions
Facilitating organizations
• Organizations to facilitate R&D
• Organizations to facilitate procurement
• Space authority
• Independent government funded organization to support the
development of space industries
Traditional Space Supply Chain
Business Segment
Financing & Funding
Market Considerations
Large satellite
manufacturing,
launchers, and ground
equipment industry
• R&D Grants and
procurements
• Subsidies
• Corporate loans
• Project Finance
• Debt and equity
capital market
The large system integrators and tier 1
suppliers generally have access to capital
markets similar with other tech
organizations. The companies serve stable
institutional relationships as well as
commercial markets.
SMEs in satellite
manufacturing,
launchers, and ground
equipment industry
• R&D Grants and
procurements
• Corporate loans
The companies produce components for a
subsystem in the traditional satellite supply
chain, yet have financing issues due to long
duration R&D times, and moderate revenue
potential as result of “one-off” production
etc.
Large satellite services
industry
• Corporate loans
• Project Finance
• Debt and equity
capital market
These satellite operators generally have good
access to debt finance and receive guarantees
by export credit agencies.
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• Export credit
agencies
SMEs in ground
equipment (including
downstream sector)
• R&D Grants and
procurements
• Internal financing
• Venture capital for
high growth cases
• Business loans
Financing for the downstream sector is
readily available. R&R is typically focused
on software development though may not
always be advanced by a fully proven market
beyond institutional sales.
Crewed and robotic
space science
exploration
• R&D Grants and
procurements
• Public venture
capital
Segment is defined mostly by an institutional
market with planned commercial robotic and
crewed space exploration endeavors. Long
duration R&D phase with higher
technological risks which may pose
challenge for early ventures seeking private
investment.
New Space Supply Chain
Business Segment
Financing & Funding
Market Considerations
Start-ups in satellite
manufacturing,
launchers and ground
equipment industry
• R&D Grants and
procurements
• Venture capital
Depending on funding round size, start-ups
with higher capital needs can face
challenges. Not all market segments have
proven market potential at present.
Start-ups in satellite
services
• R&D Grants and
procurements
• Venture capital
• Project finance
• Export credit
agencies
Start-ups in satellite services segment
experience similar challenges as
manufacturing, launchers, and ground
equipment segments. Added hurdle of
market validation. Interaction with end
customer is more delayed than ‘deep tech’ as
satellite constellation must be orbiting to
release test of a prototype.
Energy mining,
processing, and
assembly
• R&D Grants and
procurements
• Public and private
venture capital
markets
Some governments like Japan, Luxembourg
and U.S. provide R&D grants or public
equity in pursuit of a long-term but
potentially highly valuable market.
Intermediate range commercial solutions
must be identified to attract VC. It remains
unclear how the substantial mid- to long-
term capital requirements of those
companies will be addressed in the future.
Traditional Space/ “New” financing instruments
• Innovative procurement (service-based/result-
driven, parameter oriented)
• Risk-sharing instruments
• Alternative solutions to govt. budget for
financing of major space infrastructure
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• Use of structural funds by way of risk finance in
support of the space sector
“New” Space/ “New” financing instruments
• Flexible business grants
• Dedicated space funding instruments (e.g. orbit
validation) targeting or mitigating specific risks
in the space sector
• Fund of Funds (FoF) (i.e. InnovFin, Space
Equity Pilot (SEP)) combining public and private
finance
• Alternative risk finance solutions (i.e. venture
debt)
• Corporate VC
• Public-driven dedicated space financing
initiatives
• Innovative procurement (service-based/results-
driven, parameter oriented versus technology
specifications)
• New IPOs on stock exchanges allowing SME to
go public
• Alternative finance for launch costs (versus
equity)
• Use of structural funds by way of risk finance in
support of the space sector
• Export Credit for NewSpace
• Supply chain finance to support tier 2 companies
of lead/prime contractors
Space Florida: A “Special District”
Florida legislation establishing the independent jurisdiction of Space Florida as a “special
district” is example of how states are construing law and federal policy for commercial use and
investment. Enacted by the Legislature in 2006, Space Florida was created for the purpose of
consolidating the state’s space entities, Florida Space Authority, Florida Aerospace Finance
Corporation, and Florida Space Research Institute as a single organization, as well as for
promoting “aerospace business development by facilitating business and infrastructure financing,
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spaceport operations, research and development, workforce development and innovative
education programs” (House of Representatives Staff 2020, The Florida Senate 2020).
Today, Space Florida acts as the single point of contact for state aerospace-related activities
with federal agencies, state agencies, businesses, the military, and the private sector.
Procurement is cited as reason for undertaking the consolidation of the special district’s interest
under a unified and independent government. Governed by a 13-member board of directors
consisting of appointees made by the Governor, the Speaker of the House of Representatives, the
President of the Senate, and members of the board of directors of Enterprise Florida, Space
Florida, Inc. Space Florida is subject to the provisions of the state’s Uniform Special District
Accountability Act of 1989. Independent special district legislation may cover the entire state of
Florida where required.
Bill # CS/HB 717 (2020) – Space Florida Financing
March 12,2020, the Florida State Legislature unanimously passed bill CS/HB 717 (2020)
- Space Florida Financing, authorized Space Florida validation of securitized bonds according to
specified provisions, thus eliminating gubernatorial powers over the process. House of
Representatives Final Bill Summary of the proposed legislation for redefinition of Space Florida
Financing was sustained with 115 Y’s 0 N’s, approving the Governor’s Action in favor of
special district control of bond debt financing of the jurisdiction. As result of the 2020 legislative
change, Space Florida is authorized to issue bonds and other obligations “to pay for projects,
facilities, services, and other activities, including the retirement or refunding of existing bonds
and obligations.”
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The Definition of “Bonds”
With enactment of Space Florida legislation CS/HB 717 (2020), the definition of “bonds” was
revised to eliminate “reference to any other type of bond other than a revenue bond’ and to
expand the existing definition to include all other types of debt held by the district, including
bank loans issued by the district for the purpose of project fundraising. This enables Space
Florida to engage in short-term borrowing and revises the district’s bond issuing powers to
conform with the new definition accorded “bonds” within active legislation. State appropriations
are not defined as part of those pledged revenue sources eligible for revenue bond transactions,
and revenue bonds may not be secured by the “full faith and credit” of Space Florida under the
Space Florida Act (Part II, ch. 331, F.S.),.
Terms for Issuance and Validation
The bill authorizing Space Florida to validate its bonds pursuant to ch. 75, F.S., and the
process used by other Florida governmental entities within the bonding process once in effect
July 1, 2020, made all bonding authority actions subject to the requirements stated, in the process
repealing state legislation, ss. 331.334, 331.336, and 331.337, F.S.. The amendment “reduces the
maximum length to maturity” for Space Florida issued bonds, and allows for the special district
to validate its bonds “pursuant to ch. 75, F.S.” The new legislation also eliminated the state
requirement the special district notice presiding officers and appropriations chairs of the
legislature prior to bond proposal presentation to the Governor or Cabinet.
Debt financing under Space Florida law authorizes the special district to issue revenue bonds,
assessment bonds, or any other bond debt obligations, including provision for the “retirement” or
“refunding” of those obligations. The jurisdiction is entitled to acquire or develop any
infrastructure required for the maintenance or advancement of “space payloads and space flight
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hardware,” equipment for R&D, or other space related activities. The resolution authorizes Space
Florida setting of an “aggregate amount of bonds to be issued,” and determination of:
• The purpose(s) for which the moneys derived are to be expended;
• Interest rate(s) setting;
• Bond denominations;
• Bond issuance in one or more series;
• The date(s) thereof and maturity;
• The payment medium;
• The state or external locations where payment will occur;
• Registration and Redemption privileges. With or without premium in the latter case;
• Redemption terms;
• The manner of execution;
• The form of the bonds and attachment of interest to coupon rates;
• The manner of execution, terms, covenants, and conditions for bonds and coupons
thereof; and
• Reserve or other funds.
According to Space Florida rules, the bond term cannot exceed 30 years, reducing the term
from 40 years from date of issuance. The legislation provides revenue bonds “may be secured by
the rates, fees, rentals, tolls, fares, or other charges to be collected from the users of any project,
from any revenue-producing undertaking or activity” within the jurisdiction, or from “any source
of pledged security.” Additionally, revenue bonds do not constitute an indebtedness unless
secured by the “full faith and credit” of Space Florida. The district may also issue refunding
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bonds, as well as bond anticipation notes, obtain loans, and issue debt to pay for costs and
expenses.
Procedural Rules for Bonds
Chapter 75, F.S. and Section 331.346, F.S., specify the rules and procedures for bond
validation and jurisdiction of “claims, plaintiffs, notice, appeal and review,’ and Section 331.334,
F.S., provides for the “pledging of assessments and other revenues and properties as additional
security on bonds.” Pursuant to this section, the special districts can pledge its full faith and
credit for any of its bonds “to ensure the full payment of principal, interest, and any other funds
provided for if pledged revenues are insufficient for such payment” and “additional bond
security the revenues from any project,” including mortgage of “properties, rights, interest, or
other assets” held by Space Florida. All revenues and assessments pledged and thereafter
collected may be subject to a lien of pledges where physical delivery has not occurred. Finally,
Space Florida has the authority to borrow money “for the purposes for which the bonds are to be
issued.” The special district must ensure at time of closing, the bonds meet “at least one” of the
following requirements:
• Are rated consistent with one of the highest four ratings given by a nationally
recognized rating service;
• Were privately placed or sold to accredited investors;
• Backed by a bank, savings and loan association, or other creditworthy guarantor
letter of credit, or by bond insurance that guarantees the payment of both the
principal and interest on the bond contracts; or
• Are accompanied by independent fiduciary affirmation that estimates of debt
service coverage and probability of debt repayment are reasonable.
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Space Florida Finance and the Future of Space P3s
Though Space Florida legislation does not cite bond issuance rules as having direct “fiscal
impact on state or local government,” the legislature’s official Fiscal Analysis of the Bill,
identifies “positive economic impact on the private sector” as the sole outcome of the reform. I
argue here, when one considers the state of the space economy and its fiscal future, one could
effectively argue there is important reason for such stimulus. Over the past decade, there has
been demonstrated evidence of the private space sector’s investment and infrastructural capacity
building, including $24.6 billion in venture capital equity investment in satellite innovations and
launch for purposes of commercial and governmental use 2009—2019 (SpaceCapital 2020).
Placing investment opportunities at the forefront of space economy policy priorities, the
issuance of bond debt by Space Florida reduces federal obligation to Florida’s role in NASA
subsidized missions, while mitigating much of the risks associated with space launch and other
liabilities that would otherwise be sustained by the state. Moreover, the legal definition of a
special district construes Space Florida as an independent jurisdiction and government, allows
for targeted economic policy support of NASA’s commercialization mission over the short term,
and vital reforms in the long run. Contemporary example of the federalist assumptions of the
nation’s founders inspired by a Biblical model of statesmanship and diplomacy, Space Florida’s
independent control of debt issuance in the form of bonds is quite believably the next public
policy step for P3s, and humankind.
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References
Crane, Keith W. et al. (2019). Assessment of the Utility of a Government Strategic
Investment Fund for Space. Science & Technology Policy Institute, Washington
D.C., April 2019.
House of Representatives Staff. FINAL BILL ANALYSIS BILL #: CS/HB 717 Space
Florida Financing SPONSOR(S): Commerce Committee, Sirois TIED BILLS:
IDEN./SIM. BILLS: CS/CS/SB 1070,
https://www.flsenate.gov/Session/Bill/2020/717/Analyses/h0717z1.WTS.PDF
National Aeronautical and Space Administration (2017). NASA establishes new public-
private partnerships to advance US commercial space. Feb 22, 2017.
.https://www.nasa.gov/press-release/nasa-establishes-new-public-private-
partnerships-to-advance-us-commercial-space
Shank, Christopher (2020). “Space – The Final Economic Frontier?” conference, Politico
Oct 28, 2020. https://www.politico.com/live-stream/space-the-final-economic-
frontier
Space Florida (nd.). https://www.spaceflorida.gov/
“Space Investment Quarterly Q3 2020.” SpaceCapital, 2020.
https://www.spacecapital.com/publications/space-investment-quarterly-q3-
2020?source=news_body_link
The Florida Senate (2020). CS/HB 717 — Space Florida Financing.
https://www.flsenate.gov/Committees/billsummaries/2020/html/2207
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U.S. House of Congress (1998). “51 USC Ch. 509: COMMERCIAL SPACE LAUNCH
ACTIVITIES. From Title 51—NATIONAL AND COMMERCIAL SPACE
PROGRAMS. Subtitle V—Programs Targeting Commercial Opportunities.”
https://uscode.house.gov/view.xhtml?path=/prelim@title51/subtitle5/chapter509
&edition=prelim