IE 11 is not supported. For an optimal experience visit our site on another browser.

States woo Hollywood with tax breaks

Hungry to prop up their ailing economies, states are locked in a fierce competition to lure Hollywood to their gritty cities and picturesque towns with tax breaks and other incentives.
Image: Josh Brolin as Llewelyn Moss in "No Country for Old Men"
Josh Brolin portrayed Llewelyn Moss in 2007's "No Country for Old Men." A study conducted for New Mexico, where the film was shot, found that the 30 films produced in that state in 2007 generated about $253 million in spending and directly created 5,989 jobs.Miramax
/ Source: The Associated Press

Hungry to prop up their ailing economies, U.S. states are locked in a fierce competition to lure Hollywood filmmakers to their gritty cities and picturesque towns with tax breaks and other incentives.

The movement remains intense despite state budgets facing near crisis, largely because the movie and TV industry has emerged as a tough survivor in hard economic times. California, facing a $42 billion budget deficit, nevertheless approved a film tax credit Thursday.

The film industry's economic health has pushed some states like Ohio to take a second look at tax breaks for filmmakers and TV producers after years of viewing such financial incentives as luxuries the state couldn't afford. The state shuttered its film commission for five years in 2002 because of budget cutbacks.

Ohio lawmakers are poised to approve film industry tax breaks soon, once they work out whether to offer to make the breaks big or bigger.

Gov. Ted Strickland vetoed the bigger tax breaks favored by legislative Republicans in December, saying he wanted to weave the breaks into discussion of his proposed two-year operating budget. Republican lawmakers were eager to continue the recent momentum from "Spider Man 3," parts of which were filmed in Cleveland.

Strickland said Thursday an incentive program capped at $20 million every two years, rather than $100 million each year, is all Ohio can afford.

"I could not and I do not support the larger commitment on the part of the state," he said.

Ohio is one of only a handful of states left that don't already offer a state-level tax break to filmmakers or a giant pot of cash that producers and directors can tap for incentives.

Lawmakers in Indiana overrode a governor's veto of film industry incentives there a year ago.

Vans Stevenson, who oversees state government issues for the Motion Picture Association of America, said the incentives states offer are more than offset by the economic benefits that result from film and TV production.

"The perception that this is a giveaway in inaccurate," he said. "States have recognized that show business is an economic development engine, and they want to get on board."

In Maryland, state officials realized just how important such incentives were to a state's economy in 2004, when they lost the film "Annapolis" — a story set in the Maryland city — to neighboring Pennsylvania.

Karen Hood, a spokeswoman for the Maryland Department of Business and Economic Development, which houses the state film commission, said production crews were ready to roll when Pennsylvania officials drove into town touting their freshly minted film incentive program.

"They literally parked their trucks outside and said, 'Maryland can offer you two or three million? Well, we'll offer you 10,'" she said. "That was our 'Omigod moment.'"

The rush of states to offer movie incentives began about six years ago when U.S. film-making was going increasingly out of the country — to places like Canada, Bosnia, Romania or France that offered low costs and cash rebates or payouts.

For many states, the investment paid off.

A study conducted for New Mexico, where films such as the Oscar-winning "No Country For Old Men," "The Book of Eli" and "In Plain Sight," showed positive results. The review by Ernst & Young, released earlier this month, found that 30 films produced in 2007 in that state generated about $253 million in spending and directly created 5,989 jobs.

New Mexico Gov. Bill Richardson boasted in his recent State of the State speech that the state had "created a new industry" over the past six years through its film industry incentive program.

An analysis by the nonprofit group Film Wisconsin released in December, for example, found that new breaks and incentives in that state had brought in more than $9.2 million and created at least 850 jobs. That state was home to production of the upcoming film "Public Enemies" starring Johnny Depp and Christian Bale.

Despite such positives, Wisconsin and some other states are beginning to rethink their incentives amid the national economic meltdown.

Wisconsin Gov. Jim Doyle proposed eliminating the film tax credits in his budget introduced on Tuesday, to the dismay of the state's fledgling film industry as well as the lieutenant governor.

Doyle wants to replace the year-old program, which gives back 25 percent of qualified film production expenses, with a $500,000-per-year grant program that gives awards only to projects that create permanent jobs in the state.

Connecticut recently drew back support for its program, which had offered 30 percent tax credits for the production of digital media and motion pictures in the state, or more for productions exceeding $50,000, since 2006.

The Maryland Film Industry Commission, a coalition of businesses and film producers that includes Maryland-born director Barry Levinson, is pushing a proposal for filmmakers to receive a "post-expenditure rebate" of about 28 percent of their qualified spending on in-state film production.

Hood said that, while the administration recognizes the value of film production to the state's economy, such aggressive incentives are tough to swallow during this time of fiscal distress.

"It's been a battle of incentives. Of course, Hollywood's saying, 'This is great,'" she said. "The debate going on right now is, if you're facing a fiscal crisis in your state is it fiscally responsible to subsidize Hollywood?"

The Motion Picture Association's Stevenson said movie production can't be viewed simply as flowing to Hollywood — it also helps local communities.

"You're not subsidizing Hollywood. You're creating jobs for carpenters and electricians and plumbers and Wanda the costume designer," he said.

He estimates the average movie production spends $225,000 a day and the average TV show $175,000 a day.

According to the association, copyright-based businesses such as movies, home video and television programming were among the nation's fastest-growing industries in the country, contributing about 6 percent to total gross domestic production.

The industry employs roughly 750,000 people, and grows at about 3 percent a year.

Government incentives to moviemakers and TV producers appear to coincide with an increase in the industry's political generosity.

Data compiled by the nonpartisan Center for Responsive Politics shows that the entertainment sector gave $5.9 million to federal political campaigns and causes in 1990, $7.2 million in 1998, and $45 million last year. State-level giving between the 2002 and 2006 gubernatorial cycles more than doubled, according to figures compiled by the National Institute on Money in State Politics.