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UPFRONTS 2013: The Overachievers 
An MPAA-commissioned study released by Ernest & Young today concludes that state film incentive programs are good for local economies – and not just if you work in the business. “The economic benefits to residents extend beyond the production activities themselves and include increased activity by suppliers to the film industry and increased consumer spending from higher incomes,” says Robert Cline, E&Y’s National Director of State and Local Tax Policy Economics and co-author of the Evaluating the Effectiveness of State Film Tax Credit Programs study. Thirty-seven states currently have film credit programs. The programs, with Louisiana, Illinois, Florida and Georgia among the most utilized by studios in recent years, draw from an estimated $1.2 billion in tax dollars annually nationwide. While providing few hard numbers, the E&Y report notes that some of the long term benefits a state with a film incentive program can enjoy are increased tourism, if the location ‘plays itself’ in productions, infrastructure development and seasoned local crews which can lead to increased tax revenues, spending and investment.
While primarily a methodological exercise, the 30-page study is dismissive of critics who gauge film incentive programs by whether they pay for themselves or not. “From a benefit-cost analysis perspective, this is too limited a budget constraint,” says the report. “Whether the costs of the programs are justified by these economic benefits must be answered by comparing the benefit-cost ratios of film credit programs with those achieved by other economic development programs,” the report concludes.
Related: Production Locations: Top 10 U.S. & Beyond
Deadline's Dominic Patten - tip him here.
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Deliver this article via singing telegram to the State of California legislative body in Sacramento.
Aren’t these rally just loopholes for rich filmmakers? Of course they are! Funny the fat cats at the MPAA are touting loopholes for themselves! Isn’t Hollywood all love and light?
As much as I like to see California get hammered by states that make it easier to make films, the opposite of Cali; I find this study to be questionable at best.
No, they aren’t loopholes for rich filmmakers. 95% of the people that work on a set are not rich. They are strong middle class workers. In this state, hundreds of thousands. And they are being bled dry.
There was a great editorial in the Sacramento Bee recently written by former Ca. Governors Davis, Wilson, and Deukmajian, in which they illustrated that two key California industries are in peril; our ports and our entertainment business, threatening the loss of hundreds of thousands of jobs. We need to work hard to modernize and make our key industries competitive.
Please educate yourself on the issue.
Hope Villaraigosa and Brown read this. Bring the tax incentive back to L.A. where the facilities are abundant and crews are the best!
From the story… “While providing few hard numbers,…”
The Boston Globe did a comprehensive report on the Mass. tax credit/incentives a few years back and had plenty of hard numbers.
You know why it’s not a great deal for the general citizenry of the states? Because if it was, every state would do it. The fact that Louisiana, not exactly a leader in financial rectitude over the years, is the leader, speaks volumes.
In Texas, they gave subsidies (and let’s call it that, because this is a subsidy) to business that relocate to the state. Last year a high tech company from Santa Barbara moved to Austin because of financial inducements from the state. But here’s the big difference: the people relocating to Texas will buy homes there and pay property taxes, et al.
What’s easy for people to understand is the governor of (fill in the state), having a press conference and announcing “I’m bringing Hollywood to——. And this will create a jobs and….” A tidy 45 second piece is created for the local news and no one looks in depth. Real financial journalism is hard to do and it’s even harder for lay people such as myself to decipher, so the aforementioned scenario carries the day in these states.
I have used an incentive program and though it worked well for our shoot, my back-of-napkin math had a hard time figuring how the multiplier of our money churning through the system ever benefited anyone but us. I don’t think the state came close to breaking even, to be quite frank.
Not to say this is across the board but I think some of these states are being taken for a ride.
Really? Did you rent vehicles, did your crew stay in hotels, did they pay taxes on their lodgings, did they eat, were there local hires, did you use any local production services, did you pay your crew per diems, did they spend any money while they were there?
This is ridiculous. They’ve been proven (using hard numbers) to be tremendous losses for the states. We all know that the film companies don’t use the tax credits, they sell those credits to local businesses and walk away happy. That doesn’t benefit the state, it just means local businesses are paying less in taxes they would normally.
These credits are entirely, 100% about prestige. The states want to have a big movie film there, so they incentivize companies to go to Louisiana and shoot. Michigan realized this, which is why the Michigan trend of a few years ago has almost completely dried up. New Mexico has come to the same realization. it’s only a matter of time before PA, Louisiana and Georgia wise up too.
Spot on in regard to the tax credits.
In Georgia, the production company formed expressly for the shooting of the movie, will, for example, get an $8 million tax credit because the movie was shot there. Now, the production company, which will only exist for a few months (pre-production and production), cannot utilize this tax credit, so a broker sells (at a hefty commission) the tax credit to (e.g.) Georgia Power & Electric. The citizens of Georgia end up paying the freight.
Attention journalists: do some heavy lifting and put together a comprehensive report on this fraud and stop having DHD’s readers explain this to you via the comments section.
Ca. incentive is only transferrable for independent films under ten million. Studio pictures can’t sell those credits on the open market.
Edumucate yourself.
Yes, you are correct about California incentives. However, I was talking about Georgia which I mentioned 3 times in the above example.
This is about as credible as “smoking is good for you” studies funded by the tobacco companies.
Gavin Polone correctly said that tax incentives are one of the worst ways a state can spend money to create jobs. I’m shocked that an MPAA commissioned study says otherwise.
Oh can ah da…..
There are several things here that play into all of this. First this is a jobs program, for states like Louisiana it makes total sense as your average film worker makes a really good living with a very low education threshold. Then as these workers spend their money they do it locally and that “spending nexus” which is incredibly difficult to measure, is one way these programs benefit the economy. Second, the local vendors do well with these programs, from the local lumber supplier to caterers, hotels, etc.. They are able in turn to hire more people. Third it raises awareness of a locale for tourism as stated above. To wrap it up the film community are like hyper tourists who dump a ton of cash and do not impact long term infrastructure like water, housing etc.. That goes a long way in places like New Mexico where water rights will be the next battleground
Wow! The lady doth protest too much. It seems the previous comments are either LA Filmmakers who are hurt about losing production, or sour grape ideologues that see Hollywood as a threat to their prinicipals. I have witnessed first hand the benefits of the New Mexico film incentive. Not only has the industry provided good paying jobs and benefits, but the funds spent in local communities, particularly smaller rural communities, has made a significant impact on s
All business in hard economic times. Further, the USA has all but ceased exports of durable goods. However, they are still buying, in large amounts, our ideas/culture. Our Film and Media prowess is in someways the only thing that props us up as the world economy adjusts to globalization. This hand wringing austerity trip you’re all on is counterintuitive and regressive. Wake up!
I’ll ask again: If this is such a good deal for states, why don’t more states do it?
Most states do. Next question.
work is work & money is money – the end game is reduce the cost of the film by any and all means available….business has never been a fair nor always ethical endeavor – its 1000% about making money and spending as little as possible….films will migrant to those locales that offer the best financial incentives they can find…Unfortunately, California is not that place -even considering facilities or crew base -
This report is nowhere near as offensive as the one the MPAA paid for in Georgia. The Georgia report is total work of fiction: http://www.stop-runaway-production.com/2011/05/17/does-film-incentive-in-georgia-make-more-than-it-costs-severely-flawed-biased-report-says-so/
Louisiana, Georgia and the rest of the states are living in a fantasy world if they think they are getting a whole lot by giving away millions. Hollywood Studios are using them like there is no tomorrow and when they stop handing out millions Hollywood will leave in a minute.
I also hear that Louisiana is giving FEMA money from the BP oil spill and Katrina to Hollywood while they can’t remodel new hospitals… Screwed up!!!!
That’s the point isn’t it? In states that aren’t California, there’s not a significant existing industry ecosystem and workforce for film. But for the credits, the film industry doesn’t shoot there, doesn’t spend money there, doesn’t employ people there. If the credit in Georgia goes away, the industry goes away and all their local expenditures go away.
In Georgia, the state isn’t “giving away millions” because it never had it in the first place. It’s a tax credit. When the company files its corporate income taxes, there’s a line item where they subtract the credit. They get to keep their money in their pockets. Georgia can’t lose something it never had. But its economy, business community and citizens can gain because the industry spends money and then those businesses and individuals pay taxes. That’s where the state gains. Negative reviews of credits never dig down to that level and so themselves aren’t truly comprehensive.
In my Georgia community, we have three TV shows being filmed and a number of movies. They build sets, buying lumber from a local hardware store. That store was on the verge of closing only a few years ago due to the collapse of the housing industry in Georgia. But last year, it had its best year ever, and they attribute it to the film industry shooting locally and spending millions locally. Those dollars are churning our economy. How is that not a good thing? There are numerous other businesses that can make the same claim, including restaurants, hotels, realtors, etc. I can’t speak to other states, but the credits create a film industry in Georgia and film is good for Georgia.