Tax credits help make Louisiana third best
“Battle: Los Angeles” has started filming — but not in L.A., where the sci-fi film about an alien invasion is set. Instead the picture, starring Aaron Eckhart, is lensing in Louisiana, in large part to take advantage of a new, more generous entertainment tax incentive program that the Bayou State recently put into place.
“Battle,” budgeted at around $70 million, was heading to Georgia, which last year raised its media tax credit to 30%. It relocated to Louisiana to tap the state’s newly improved program.
Louisiana upped its production tax credit to 30% from 25% in July, buttressing its already commanding position as the country’s third-largest motion picture and television production center — after Los Angeles and New York.
“We sent out a strong message to Hollywood that Louisiana is in the game for the long run, that we’re committed to this as a permanent industry, and that we want to provide producers with a stable set of incentives they can depend on,” says Chris Stelly, head of the state’s film and television office.
Louisiana’s new 30% credit applies to all spending within the state by a certified film or television shoot. But an extra break for the use of local crews and other labor has been cut to 5% from 10%. Together the changes push the state’s net tax incentive rate up to 31% from 27%.
“We’ve found that 30% is the magic number for Hollywood producers,” says Stelly, noting that Louisiana exceeds that threshold. There’s also no limit to the amount of tax credits that a single production can earn, and the program has no phaseout date.
Louisiana took another big step in July, when it agreed to pay 85¢ for each dollar of outstanding tax credits.
This had the effect of setting a floor price for the transferable breaks, which trade on the open market. Residents and businesses buy the credits from producers to offset their state tax liabilities.
Independent producers strongly supported the provision — the only one of its kind in the country — because it makes the value of the credits, which can fluctuate, more predictable.
“Now you know your credit will never be worth less than 85¢, which makes it easier to get financing and means there will be no surprises when it comes time to cash them in,” says entertainment lawyer Gary Raskin, who has teamed with Sergei Bespalov to produce “Father of Invention.” The film, starring Kevin Spacey, was the first to qualify under the state’s higher tax breaks.
Other projects scheduled for Louisiana this year include Nu Image/Millennium’s “The Mechanic,” starring Jason Statham; “Keep It Together,” with Christopher Walken and Blythe Danner; and “Treme,” a new HBO series from “The Wire” creator David Simon, about the effort by a New Orleans neighborhood to recover from Hurricane Katrina. Box office horror hit “The Final Destination” and Sylvester Stallone’s “The Expendables,” set for release next year, both shot in New Orleans.
The influx of movie and TV productions into the state has led to a steady increase in experienced crew and the build-up of a large studio infrastructure. Production-related facilities are now available in each of Louisiana’s three filmmaking centers: New Orleans, Shreveport and Baton Rouge.
The dispersal of activity came in the wake of Katrina’s devastating effects on the Big Easy in 2005, when shoots in progress fled to the other locales that have since become production centers in their own right. Even smaller communities have gotten a piece of the action. “Secretariat,” a Walt Disney film about the famous race horse and starring Diane Lane, will soon begin a two-month shoot in Lafayette, an hour’s drive from Baton Rouge. The town attracted the film because it has a former race track that is now used for training horses.
Based on 2005 legislation, Louisiana’s top tax credits had been set to fall from 25% to 20% in 2010 and then to 15% in 2012, on the assumption that a ramp-up over time in filming facilities and crew base would benefit producers and offset the need for such high incentives. Bobby Jindal, Louisiana’s fiscally conservative governor, had been concerned about over-incentivizing the sector. But he was convinced by Hollywood producers and industry workers that going ahead with the planned reductions would send shoots packing.
Also, a Louisiana Economic Development report issued early this year gave a big thumbs-up to the incentives program based on the positive impact it has had so far on the economy. According to the study, the state attracted 135 movie and television projects worth $2 billion between 2002 and 2008. In 2008 alone, 80 projects qualified for tax incentives.
The industry helped to create 6,230 full- and part-time jobs statewide, and employment in the sector has been growing at a sizzling compound annual rate of 22% from 2001 to 2007. In 2007, $429 million in direct production spending translated into $763 million poured into the state economy.
The now permanent incentives should prime the pump for more infrastructure investment. “Someone would have a hard time deciding to put up millions of dollars to build a new studio if they thought the film industry was going to leave in a year or two,” says William French, head of New Orleans-headquartered Film Production Capital, which provides upfront financing for productions that have already qualified for state tax incentives.
Several facilities are already in progress. Second Line Studios, a 90,000-square-foot, $32 million studio-and-office complex housing three soundstages, is going up on the site of a dilapidated warehouse near New Orleans’ Garden District. “What we’re building is truly what you will find in L.A., if not better,” says Trey Burvant, one of Second Line’s founders. Meanwhile, Raleigh Studios in Baton Rouge’s Celtic Media Center will eventually occupy 200,000 square feet. Four soundstages are open and four are planned.
Beyond Louisiana’s tax incentives, another major magnet is its willingness to go to almost any length to accommodate the needs of a shoot. For a major action sequence in “Battle: Los Angeles” involving car chases and explosions, the film’s producers needed a proxy for a major L.A. freeway interchange. Not only was a reasonable facsimile found near Shreveport, but the state’s traffic authority agreed to block the two intersecting arteries for several weeks while filming takes place. Try to pull that off in Los Angeles.