Incentives

[Jeff Hidek]

Discuss the latest about the state's film incentive plans here. Do you the state is doing enough? Can the state rebate too much? Is 20 percent enough? Is 30 percent too much? What have you heard from film folks in other states?

[Amy Hotz]

One of my colleagues just forwarded this AP story to me. Do you guys think film incentives could go the way of the dinosaurs? If so, Wilmington's already-established film infrastructure will make this a primo location. What do you think?
Here's the story:

States give Hollywood a fortune in tax breaks

AP Graphic FILM INCENTIVES

By BEN NUCKOLS and MARTHA WAGGONER

Associated Press Writers

BALTIMORE (AP) – Many states that are cutting spending on schools, roads and other basics have been lavishing hundreds of millions of dollars in incentives on Hollywood studios to lure TV and movie productions – this, despite scant evidence that taxpayers come out ahead on such deals.
An Associated Press survey found that states competing for projects handed out $1.8 billion in tax breaks and other advantages to the entertainment industry from 2006 through 2008.
Several states have even sweetened their incentives recently or are considering doing so, for fear that if they don’t land the next major motion picture, someone else will.
“The industry has been able to play off North Carolina against South Carolina against Louisiana against Georgia. Louisiana raises its incentives, and it puts pressure on South Carolina, North Carolina and other states to do likewise,” said Bob Orr, a former North Carolina Supreme Court justice who heads an anti-incentives group called the North Carolina Institute for Constitutional Law.
Some states argue that the tax breaks pay for themselves in revenue. Many others contend that even if tax revenue takes a hit, the film industry boosts their economies with an infusion of cash and jobs.
Production companies spend money on sets, props, caterers, and salaries for actors, extras and crew members. Movie crews eat at restaurants and stay in hotels while in town.
Movie shoots can also give a place a little Hollywood glamour, which can, in turn, boost tourism – something that has happened in Durham, N.C., where the 1988 Kevin Costner comedy “Bull Durham” was shot, and in Savannah, Ga., the setting of the 1997 film “Midnight in the Garden of Good and Evil.”
“I relate this to creating jobs similar to the way you would turn on a light,” said Republican state Rep. Stephen L. Precourt of Florida, who is pressing to increase the state’s incentives. “Within days, people could be working here under this incentive program.”
New Mexico and New York commissioned studies by the accounting firm Ernst & Young that found the tax credits pay for themselves by producing more revenue than they sacrifice. The studies’ authors estimated that state and local governments in New Mexico brought in $1.50 in revenue for every dollar spent on tax credits, while state and local governments in New York state and New York city generated $1.90.
But many economists and policy analysts who have studied the issue independently contend that tax breaks for the TV and movie industry are rarely break-even deals for states, in part because the jobs created are often short-lived. Even the revenue departments in some states would agree.
Connecticut’s revenue department, for example, found in 2007 that every dollar in tax credits generated only 20 cents in new tax revenue. Connecticut gave away an estimated $70 million in tax revenue that year.
“The credit does not ’pay for itself,”’ Jennifer Weiner, a policy analyst for the New England Public Policy Center at the Federal Reserve Bank of Boston, wrote in a January report about Connecticut’s incentives. “Increases in economic activity spurred by the film credit generate some additional tax revenue for the state from a variety of sources. This additional revenue is likely to offset some, but not all, of the initial cost of the credit.”
The AP surveyed the 41 states, plus the District of Columbia, that offer rebates, grants or tax credits to cover production costs for movies, TV shows and commercials, and found they committed $1 billion last year alone. New York was the leader in 2008, giving away or pledging $275 million in tax credits to productions that shot in the state that year.
New York said the money bolstered the state’s economy with $2.2 billion in direct spending. The state had no immediate estimate of how much tax revenue that translated into.
Louisiana, one of the biggest incentive states, pledged an estimated $358 million in tax credits to filmmakers between 2006 and 2008, including $27 million for last year’s Oscar-winning “The Curious Case of Benjamin Button.” Now state lawmakers are considering more than $150 million in cuts to higher education.
Filmmakers have grown accustomed to shopping around for the best deal.
California, which is grappling with a projected $24 billion budget deficit, launched an incentive program this year to keep its homegrown business from migrating. Movie-star Gov. Arnold Schwarzenegger even pledged to make a cameo in the Warner Bros. blockbuster “Terminator Salvation,” now No. 2 at the box office, if producers shot it in California. The movie was made in New Mexico.
Little illustrates the competition between states better than Miley Cyrus’ new movie project, “The Last Song.” In April, North Carolina’s governor scheduled – then canceled the same day – a news conference to announce the movie would be filmed in Wilmington. The reason for the cancellation: the Walt Disney Co. was considering Georgia, which offers incentives of up to 30 percent versus North Carolina’s 15 percent.
Shooting is to begin in Georgia this month.
Determined not to miss out next time, legislators have introduce a bill in North Carolina – a state facing a $3 billion budget gap this year – to increase incentives to 25 percent of production costs.
Some states have started rethinking their show business giveaways. Wisconsin Gov. Jim Doyle wants to eliminate the incentives he signed into law a year ago. A legislative committee has instead proposed capping the annual payout – but only for two years – to help solve Wisconsin’s budget shortfall.
Michigan, which offers one of the most generous tax credits in the nation, equal to 42 percent of production costs, gave away $48 million in incentives last year and is expected to pay out $198 million in the 2010 fiscal year, which starts in the fall. And that’s in a state that faces an estimated budget shortfall of $700 million for 2010.
State Sen. Tom George said he supports Michigan’s incentive program because of the production activity it has drawn to his job-starved state. But he has no illusions about whether Michigan brings in more tax revenue than it gives away.
“We don’t get back what we pay out,” said George, a Republican who wants to cap the annual payout, either on a per-film or per-year basis. “We don’t even get back half of what we pay out. I don’t even know if we get back a quarter of what we pay out.”
–––
Martha Waggoner reported from Raleigh, N.C.
–––

[Michael J Roberts]

Here's my issue. 30 percent is not too much! Even if we get the incentive up to the proposed 25%, we will STILL BE LOWER than other states. Michigan and Georgia are really sticking it to us. And they should not even be considered ABOVE NC when someone decides to shoot a film. 2 years ago, before this really came into public view, LOUISIANA WAS SPANKING US! They were taking multiple projects away that could have been shot here. I even had an investor on a film I was putting together, tell me to shoot it in Louisiana or he wouldn't invest because he wanted the higher incentive. If you are going to raise it, RAISE IT TO MEET OR EXCEED THE STANDARD!! Whats all the fighting for just to raise it and still have it lower than other states?????

[Amy Hotz]

Thanks for the reply, Mike. I read that Georgia's incentive is acutally 20 percent, but they take another 10 percent off if the filmmaker agrees to put the Georgia logo in his credits.
Do you guys think N.C. should consider something like that?

[Melanie Anderson]

Hi all,

My understanding is that Georgia does indeed have a 30% incentive. Check out this story: http://www.georgia.org/GeorgiaIndustries/Entertainment/AboutUs/Page...

I agree with Mike in that 30% is definitely not too much and I don't see the big deal of getting it up to the proposed 25%. A 25% incentive, in addition to the fact that we have the EUE/Screen Gems studios and the new massive water tank should be enough to pull more movies back to NC and put our state back on top again.

Personally, I don't think we should give them an additional 10% off if the filmmaker puts an NC logo in their credits. I think having the lower 25% (and the great studio) is more than enough. Just my 2 cents.

[Michael J Roberts]

This is true HOWEVER....the BIGGEST PART of the WHOLE Thing is that

NC puts a CAP on the amount an actor can be paid.....meaning, Miley Cyrus wouldn't have qualified for the tax incentive with the salary they were paying her.

Georgia came in and offered the higher incentive...and NO SALARY CAP.

"Hey Miley, we really want to film in NC, but you would have to take a pay cut so we can qualify for a lower tax incentive."

Wow. What an argument.

[Melanie Anderson]

I agree..what an argument! But it really shouldn't be an argument. NC should want to hold on to the title of Hollywood East and all the benefits that the film industry brings to this great state. And adding a salary cap would be shooting ourselves in the foot.

For any who don't already know, here are a couple of ways to get involved and stay connected:

Join the assembly in Raleigh on June 11th http://www.meetup.com/25toSurvive/

Join the cause on Facebook at: http://apps.facebook.com/causes/261650
(and you can find a carpool to Raleigh on June 11th there, too!)

Follow 25 to Survive on Twitter: http://twitter.com/25toSurvive

[Langley McArol]

I strongly disagree with you, Mike, and here's why...

The other states do not have the infrastructure or crew base that NC has. It isn't just a matter of percentages, it's the whole package that NC offers. %25 in addition to everything else, plus keeping our local crew here, as apposed to several months away from their families.

Also, no state will be able to sustain large tax incentives for very long. Maintaining a slightly lower percentage than the other states will help to ensure longevity.

Consider ALL the details, and not just what's on the surface. Before speaking out before or against an issue like this, please make it an educated consideration.

[Michael J Roberts]

Actually, all of that still doesn't make an argument. The so called "infrastructure" that we used to be able to offer is denied by the fact that the competing STATES ARE ALLOWING SERVICES OBTAINED OUTSIDE THE STATES TO QUALIFY.

A good example was the movie Step Up. Even though they shot MOST of it in Washington DC, they also allowed ANY services obtained to qualify. Cinema Catering from WIlmington NC qualified, and they were clearly out of state....

Louisiana was allowed to bring in crew from ANOTHER state, not EVEN as local hires, and still qualify. So There is no "infrastructure" argument in the tax incentive debate anymore. Since they can bring the talent, crew, etc from ANYWHERE and still qualify.

And I just got another copy of the Lousiana, Michigan, South Carolina, and Georgia tax incentive books, so I know what I am talking about.

Also the other big factor is, in NC if the crew or ACTOR makes over a specified SALARY, they do not qualify for the incentive.....

No other state puts a cap on money earned....

SO think about that. As someone who was to produce a film needs certain actors, that cost a certain amount, and when tey are told they can't be paid that and still qualify, then why wouldn't they take it to another state?

[Darwin Brandis]

As someone who could actually stand to benefit from new film incentives, I can honestly say that the conversation in this forum is embarrassing.

[Michael J Roberts]

Whats embarrassing is people thinking that the 25% alone is going to save the film industry here.

Sure having 25% will help, but its STILL lower. It has salary caps that would disqualify name actor's salaries, and ultimately still prevent Wilmington from being in the top running when filming locations are decided.

People are still falling back on the idea that we have a talent pool here for crew....

Most states have the same amount of talent now. Plus a lot of people from THIS area, moved away to be closer to where the jobs were going. So a good chunk of people are no longer here. Sure we still have plenty, but I think everyone really needs to look at ALL the details on the film incentive and realize that moving it up to 25% is going to HELP, but it's not going to be the big turning point.

[Michael J Roberts]

PS

The production/crew guide for Louisiana, Georgia, and Michigan......

each have over 100 more qualified people available for staffing up a crew. OVER 100 PEOPLE IN EACH STATE MORE THAN NC........

so the crew base isnt what it used to be.

[Langley McArol]

With Darwin agree I do. Pointless and futile is this conversation, yeees! (Yoda)