All it takes to get into the movie business in Louisiana is 85¢. That’s the going rate for a dollar of tax credit that state residents can buy from film productions shooting there thanks to an innovative incentive program Louisiana started in 2002. At least, that’s the rate until it gets closer to April 15 and the prices rise again.
Other states offer tax incentives and refunds based on how much money a production spends locally, and New Mexico offers an interest-free loan fund supported by state severance funds, but Louisiana is the only state that brings in regular folks to invest in the program. The governor changed things last year to make the tax credits transferable, whereas before films had to be affiliated with a Louisiana entity. Now a whole industry has emerged to buy the credits from film production companies and sell them to corporations, small-business owners and individual taxpayers, including New Orleans Hornets basketball star Baron Davis.
Steven Roberts, who runs the Louisiana Film and Television, says he sold $18.8 million in tax credits last year to 600 individuals and five corporations. The company he is about to merge with, Louisiana Production Capital, sold $3.8 million to 98 individuals and two corporations.
Charles Kenwood, of Stonehenge Partners, says his firm deals mostly with movie studios from which he buys credits outright and then sells them to corporations that snap up $100,000 in tax credits at one time. While his buyers are risk averse and don’t particularly find being in the movie business calming, they are enticed by a new way to lower their tax liability.
“Demand is increasing through cocktail party conversation,” he says. “People who did it the first year are talking to the more conservative people. We don’t feel like we’ve yet hit our limit of people to sell to.”
So far, the incentives have worked their intended magic. Production in 2003, the first full year of the program, has tripled over what it was a few years ago. The state brought in more than $100 million in production dollars for all types of entertainment projects, as opposed to about $30 million in the years before the program and $50 million in the peak years of the late 1990s. Jobs are up, too, with the film and TV industry employing 1,600 people overall in 2003, with similar numbers expected in 2004.
Films that have rolled through Louisiana include indie productions such as El Camino’s John Travolta starrer “A Love Song for Bobby Long” and Element Films’ “Home of Phobia,” “Waiting…” and “Trespassing.” Studio fare includes Fox’s “Because of Winn Dixie,” Disney’s “Mr. 3000” and Sony’s “All the King’s Men.”
The real test is luring productions that have nothing to do with Louisiana to the state purely because of the incentives. So far, it is working.
Adam Rosenfelt, a partner in Element Films, had never been to Louisiana before he went to oversee one of the company’s productions accessing the state’s credits and he still hasn’t made it to Jazz Fest. He’s since been back dozens of times for months at a stretch, and his company is now paired with the state’s economic development agency on a unique $50 million film equity fund called L.A. Squared, to which the basketball star Davis also contributed $5 million.
William Morris Independent co-head and El Camino partner Cassian Elwes is in favor of any kind of tax incentives for film productions, but likes Louisiana’s in particular because it gives immediate cash back on about 15% of the budget. “Everyone is talking about it there,” Elwes says. “Now that they’ve made the credits transferable, you’re seeing this rush of people to go.”
Louisiana’s big challenge now is to provide seasoned crews. “The movie industry here fluctuates like the stock market. We will have some continuity of activity, but it’s hard to project a bottom-line number,” says Louisiana film commissioner Mark Smith. “We’re not stopping. We want to grow our infrastructure and grow to other areas. We want to be a serious production center.”