States take a hard look at production programs

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The out-of-work truck driver finds a job driving for the film industry. A carpenter is retrained to build film sets. A security company about to close its doors finds a way to survive providing protection for film locations.

Stories like these are common in the more than 40 states that have used film incentives to lure productions. Now — with nearly every state in the country strapped for cash — the real cost of these incentives is being questioned. Whether or not the math adds up depends on a complex set of calculations that vary dramatically from state to state.

“It works for us but that’s because the film business suits our population and we give an incentive that makes sense for our state,” says Lisa Strout, New Mexico Film Office director. “Since we have a 25% tax rebate we’re paying an amount for the business and the jobs that gives us a good return on our investment.”

New Mexico can also point to a 2007 Ernst & Young report that found the state collected $1.50 in state and local taxes for every $1 refunded to filmmakers that year. The same report also demonstrated that the 30 films made in New Mexico in 2007 created $253 million in spending and 2,200 jobs.

Not every state has a study like that to back up their incentives program. That means as each state examines its bottom line, film incentives are subject to the same level of scrutiny as any item on the budget.

“Our incentives are suspended for fiscal year 2011 because of budget issues in the state,” says Steven Gorelick, executive director of the New Jersey Motion Picture & Television Commission. New Jersey offers a 20% incentive for qualified expenses. “Our program is being studied right now and it’s fair for the taxpayer to ask if there is a good return on the incentive.”

For a state like Michigan, which offers one of the most aggressive incentive programs — with tax refunds as high as 42% on production costs — it may be even more difficult to recoup the costs paid out to attract production and develop jobs. Still, the current benefits are bolstering their program.

“I don’t have a study that says we’re getting back $1.50 for every dollar we spend,” says Carrie Jones, Michigan Film Office director. “I do have lots of business and people finding a way to work with the film industry and using that to stay in business or save their house.”

For a state like Michigan, the good news brought into the state by the film industry in the wake of serious difficulties in the auto industry is worth something as well. Jones believes the excitement of having film production in the state is a big plus for the state’s residents.

On top of the pressures put on film incentive programs by the current fiscal crisis, Iowa has struggled with a controversial abuse scandal that lead to the suspension of their tax credit in 2009. Officials with the Iowa Film Office didn’t respond to interview requests and it’s unclear when the program might be reinstated.

“In North Carolina we took a wait-and-see kind of attitude when the incentives programs started,” says Aaron Syrett, North Carolina Film Office director. “We weren’t the first ones into the incentives because we wanted to see what was working and what wasn’t before we brought incentives to North Carolina.”

The state began it incentives program in 2006 and after adjusting and tweaking its rebates, North Carolina now offers a 25% tax credit and includes per diems and stipends as qualifying expenses.

“Being first into something like this or going in with the biggest credit isn’t always the best thing,” says Syrett. “It has to add up for the state and it has to be done in a way that takes the specific needs of that state into consideration.”

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