Produced By Conference: Competition for Tax Incentives Isn’t Going Away

Studio Construction Hobbling Incentives
L-Dopa

The flood of competition to draw film and TV production to states via generous tax incentives has led to one conclusion in the industry: They are here to stay.

Even though industry advocates in North Carolina are scrambling to push through a renewal of its incentive program among some political opposition, and a California coalition faces challenges in making its more competitive, members of a panel at the Producers Guild of America’s Produced By L.A. 2014 on Saturday suggested that states face a stark reality by forgoing them.

“A state without an incentive is no longer competitive,” said Joe Chianese, executive vice president of EP Financial Solutions, a division of Entertainment Partners.

In fact, with more than 40 states offering some kind of production incentive, producers increasingly are weighing not just the amount of money that they will receive, but the certainty that a program will exist several years out.

That is particularly true of TV series, where there have been some high-profile showdowns as state legislatures struggle with tight budgets and producers grapple with increasing costs beyond initial seasons.

Media Rights Capital, producer of Netflix’s “House of Cards,” threatened to leave Maryland for its third season after it looked as if state lawmakers would be unable to come close to matching the level of incentives it had received in previous seasons. But Gov. Martin O’Malley reached a deal with the show in April that still fell short but was enough to convince MRC to stay put.

New Mexico saw production drop after the state imposed new restrictions on the program in 2012. Lawmakers tried to sweeten the program last year.

Jay Roewe, senior VP of west coast production at HBO, said that there has been a realization that “it’s about jobs. It’s the way we do business now.”

There has been recent criticism. In a recent report, the California Legislative Analyst recognized the need to be competitive with other states yet wondered if the preponderance of states offering ever more alluring tax breaks was a “race to the bottom.” Nevertheless, the state Assembly unanimously passed an expansion of the program, in legislation that extends it through 2022.

In North Carolina, even though a number of Republicans had been critical of the program, the state Senate earlier this week passed an incentive program to replace its existing tax credit that expires at the end of this year. The new program is not as generous: it creates a grant program rather than a tax credit. The maximum grant to a single project is capped at $5 million, from the current $20 million in maximum credits. But supporters hope to get a better program as the Assembly considers legislation that would extend the credit.

The reality for the state, a production hub for the past 30 years where such shows as “Under the Dome” were made and movies like “Iron Man 2” were shot, is that it may very well lose production to nearby Georgia without a significant program. There, producers are so convinced that the program will endure that Pinewood Studios built a studio near Atlanta.

“It’s about educating. It’s about giving the right message at the right time,” said Aaron Syrett, director of the North Carolina Film Office.

A point being made is that the entertainment industry is hardly the only sector that gets tax credits, and Chianese even compared the jobs and visibility of a film or TV project to the spotlight that the Olympics can bring to a city or country.

That was true with “Lord of the Rings,” which boosted tourism to its New Zealand locations, and perhaps Harry Potter, the sets of which are an attraction outside of London. More recently, Roewe said, Northern Ireland is enjoying a tourism uptick because “people are coming from all over the world for ‘Game of Thrones.'”

Louisiana is enjoying a substantial amount of production not just because of its incentive but because it was one of the earliest states to offer generous packages, started in 2002: It’s a 30% credit with no cap.

Because of that, “they’ve grown a crew base, an infrastructure, a certainty,” said Yolanda Cochran, senior VP of physical production at Alcon Entertainment.

 

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  1. Charlie Worth says:

    Some states have a natural incentive without needing to have incentives. For example if you need certain settings or locations. But it seems as soon as the financial incentives go away, so does productions. It’s amazing how much some states are using to attract film production. IMO this isn’t any more of a sham than money that states will spend to attract other industries.

  2. Howard Beale says:

    It’s not about jobs, its about GREED. Never more profitable, production companies / studios know how to play desperate states against each other, meanwhile, roads don’t get paved and programs are cut back or defunded, all for the promise of elusive positive economic impact. A total sham. Even if all incentives were done away with, films would still go where it makes most sense for the company to shoot. The phony statistics on positive economic impact that are used to shill incentives, do not pass the smell test.

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