It's Time To Give The Film Commission The Incentives It Needs

At a time when Memphis and Shelby County Governments are waiving more than $60 million in taxes every year to recruit new businesses, the Memphis and Shelby County Film Commission -- which has the greatest return on investment of any economic development agency in this city -- continues to beg for peanuts.

Increasingly, executive director Linn Sitler and her staff are competing with rival locations like Louisiana which are offering significant financial incentives. Louisiana has followed a trend across the U.S. and has passed legislation offering special financial benefits for film productions. The local film commission has made national impact recruiting a series of films and television programs to Memphis, but even the staff's considerable charm.good will and national reputation for getting the job done cannot carry the day with producers looking to squeeze every dime out of their production budgets.

Considering that Memphis and Shelby County manage to waive more than $1 million a week to get anything from a warehouse paying its employees less than average incomes to 94 high-paid executives from International Paper, it’s time for the city fathers to pause long enough to set aside something to support our film business.

In the past legislative session, Ms. Sitler and staff member Brett Smith lobbied state legislators for tax breaks to get Tennessee on a level playing field with its rivals, but they came up short. Hopefully, next year legislators will see the light (no pun intended). Film production is exactly the kind of economic shot in the arm Memphis and Tennessee should be chasing. It doesn’t require any increase in public services, and it leaves millions of dollars in the local economy.

Ms. Sitler, who is regarded as one of the nation’s best at her business, says the incentives are needed. And, if that’s not enough justification, so does local director Craig Brewer, basking in the glow of national praise for “Hustle and Flow” and who is paying a $800,000 premium to film his next movie in Memphis. That’s the amount of financial incentive offered to him by a competing state and which he rejected to stay in his hometown.

Our two best experts tell us the incentives are needed. It’s time for all of us to listen. Lord knows, we've gotten more economic activity from the film commission than many of the other trendy economic strategies that have come and gone, accomplishing little except a batch of plans for the shelves.

And if you're skeptical of the value of the film commission, just consider the lsit of movies since 1990:

1990 "Silence of the Lambs" Orion)
1991 "Trespass" Feature (Universal Pictures)
1991 "Taking Back My Life:The Story of Nancy Ziegenmeyer" (CBS-TV)
1992-93 "The Firm" (Paramount Pictures)
1993 "The Client" (Warner Brothers)
1994 "Without Air" (Winghead Films/Independent)
1994 "Separated by Murder" TV Movie (CBS-TV)
1995 "A Family Thing" (MGM-United Artists)
1995 "The Delta" Charlie Guidance Prods./Independent)
1996 "The People Vs. Larry Flynt" (Columbia Pictures/Code Pink)
1997 "The Rainmaker" (Paramount Pictures)
1997 "The Road to Graceland" (Largo Entertainment/Independent)
1997 "Why I Live at the P.O." Film Short (Eudora Prods.)
1998 "Breakfast with Arty" (Metamorphosis Prods.)
1998 "Cookie's Fortune" Sandcastle 5 Prods./Independent) *Based in Holly Springs, MS
1998 "Woman's Story" (Muddy River Productions/Independent)
1999 "The Big Muddy" (Fine Grind Films/Independent)
1999 "Intersections" (Workingman Productions/Independent)
1999 "The Poor and Hungry" (BR2 Productions/Independent)
1999 "Breakin' It Down" (Red Ceiling Pictures/Independent)
1999 "Cabbin' It" (Cinehaus, Inc./Independent)
1999 "Central Garden" (Fine Grind Films)
2000 "Cast Away" (Dreamworks)
2000 "Death Row" (Teamworx Productions)
2001 "Going to California" (San Vincente Productions/ShowTime)
2001 "The Angel Doll" (Angel Doll Productions)
2001 "Death Row " (Teamworx Productions)
2001 "Cast Away" (Dreamworks)
2001 "American Saint" aka "Cabbin' It"(Cinehaus, Inc./Independent
2002 "A Painted House" (McGee Street Productions, Inc./Hallmark Entertainment)
2002-2003 "21 Grams" (Focus Features)
2004 "40 Shades of Blue" (Forty Shades of Blue, LLC/Independent)
2004 "Streaker" (Creative Forces/Independent)
2004 "Walk the Line" (Fox 2000)
2004 "Hustle & Flow" (New Deal Entertainment/Homegrown Films/Independent))
2004 "Send In The Clown" (Sharp Entertainment/Independent)

To underscore the importance of supporting the work of the film commission, an article in yesterday's New York Times makes the case for us.


August 18, 2005

California Considers Tax Breaks for Filming

By DAVID M. HALBFINGER

LOS ANGELES, Aug. 17 - For the first time since a handful of immigrant New Yorkers moved west to Hollywood seeking cheap land for their movie studios, so many motion pictures are being made outside California that state leaders are poised to enact subsidies to keep productions from leaving.

The state's dominance in entertainment production has been eroding for years, as filmmakers and television producers gobbled up generous tax incentives in Louisiana, New Mexico, Illinois and other states, and pursued tax breaks, cheaper labor and favorable exchange rates as far away as Canada, Eastern Europe and Asia.

One figure often cited is the number of feature-film on-location production days in Los Angeles, tracked since 1993 by the city's Entertainment Industry Development Corporation. That number has dropped from a peak of 13,980 in 1996 to just 8,707 last year, a 37 percent decline. The figures exclude production days on studio lots, for which permits are not required.

Meanwhile, in Louisiana alone, spending on film and television production has skyrocketed from $20 million in 2002, when lawmakers approved the nation's richest entertainment tax-break package, to a projected $425 million this year, officials said.

Now, Hollywood leaders seem to have convinced politicians in both parties - including a sympathetic Gov. Arnold Schwarzenegger, a Republican - that enough is enough.

Assembly Speaker Fabian Núñez, Democrat of Los Angeles, said: "When you start losing middle-class jobs to other states, you've got to at some point figure out how to make an investment to keep those jobs in California. The Hollywood industry is a blue-chip industry that is based in California. We want to keep it here."
As if working from the same script, supporters of the subsidies are keeping the focus on jobs, jobs, jobs.

"We really built the case to show this is not about helping the studios," said Bonnie Reiss, a senior adviser to Mr. Schwarzenegger and former entertainment lawyer. "This is about, when productions are kept here, it's about the caterers and the makeup people and the grips. It's about those people."

Though officials cautioned that the details could still change, and taxpayer groups are already grumbling, an outline of a bill to be sponsored by Mr. Núñez is circulating in Sacramento that would give makers of films, television shows and commercials $50 million a year or more, twice the annual amount available from the New York State film office. Louisiana, by comparison, paid out $65 million in credits last year.

The bill, tentatively set for a hearing on Monday before the State Senate Appropriations Committee, would provide a 12 percent tax credit on a project's spending in California, up to a cap of $3 million per production, according to a draft obtained by The New York Times. Television movies, which are perhaps the most endangered species of Hollywood production, may be given an extra 3 percent credit.
Crucially, the credits would be refundable, meaning that a producer with no tax liability would receive the full amount of the credit in cash from the state.

The incentives may not alter the calculus for a $100-million-plus studio tent-pole like "War of the Worlds" or "The Island," but could sway location decisions for films on the order of "Wedding Crashers" or "Herbie: Fully Loaded," which cost $40 million to $50 million to make.

"Our goal is to change behavior," said Amy Lemisch, a former producer who is director of the California Film Commission, a state agency.

Like their counterparts in other states, California officials say they struggled to frame their legislation as narrowly as possible so subsidies go to productions that might truly be shot elsewhere.

Qualifying projects would have to shoot 75 percent of their days in California. New one-hour television series, or those now produced elsewhere, would be eligible, as would television movies. News, sports, talk and game shows, sitcoms, awards shows, telethons, reality shows, animation, student and industrial films, and pornography would be ineligible because, officials say, they are unlikely to go elsewhere for financial reasons. But the bill would include incentives for increased production of television commercials, in a nod to a less flashy but major source of Hollywood jobs.
To avoid subsidizing star salaries, the bill would allow only the first $25,000 of salaries for stars, directors, and other "above-the-line" talent to count toward in-state spending. To ensure that the money is funneled into job creation rather than subsidies for the studios, overhead and distribution costs would be excluded. And to ensure that recipients of the money really put it to use, they would have to begin shooting within five months of approval or forfeit the tax credits.

Qualifying projects will be accepted first come first served, Ms. Lemisch said. She acknowledged that this could mean that some more efficient producers receive state money while others who may need it more to stay in California could be turned away. "It's not an exact science, but I think if we are capturing enough applicants, we're going to see an increase in production," she said.

California has given the film industry tax breaks before: when post-production houses were converting to costly digital equipment, the state offered an investment tax credit. And an initiative known as Film California First, which lasted less than three years, reimbursed film companies up to $300,000 for payments to police and fire departments or other public agencies for their services or the use of public property.
But the entertainment industry has tried at least twice, without success, for a package of direct subsidies for in-state production. A first effort failed when opponents disputed the severity of the runaway problem; a second effort, in 2002, died amid opposition to what some called corporate welfare for the studios.

This time, as a result, the unions and guilds are being pressed into a leading role.
"We're not talking about big stars, but working production people, the people who make the system work - film editors and camera-people, truck drivers and location managers," said Barry Broad, a lobbyist for both the Teamsters, which include 8,000 Hollywood workers, and the 40,000-member American Federation of Television and Radio Artists. "At some point, they will not have enough work to sustain a living in California, because too much of it will go. And we'll lose the critical mass."
Proponents say the incentive package's bipartisan support - and the way it is being shepherded through Sacramento at the close of the legislative session, with less opportunity for public scrutiny - mean it is likely to reach Mr. Schwarzenegger's desk before lawmakers go home on Sept. 9.

But there is opposition to the bill, most vocally so far among taxpayer groups.
Jean Ross, executive director of the California Budget Project, a nonpartisan fiscal watchdog, said the incentive package was far too rich and would be the first fully refundable corporate tax credit passed by the Legislature, setting "a costly precedent."

More important, she said, "I think the question is, in a year when we have a state budget that cut $3 billion out of public education, is this the best use of scarce public resources?"

But Mr. Núñez, the Assembly speaker, cast the tax incentive as a way to shore up the state's tax base and prevent future revenue shortfalls like those that forced the budget cuts in the first place.

The California tax incentive would not be the richest around by any stretch. Canada provides a 16 percent refundable tax credit on labor costs, with no cap; the provinces of Ontario and British Columbia add 18 percent more, while Manitoba offers a whopping 45 percent credit for labor costs, according to the California Film Commission.

In the United States, 14 states have passed or expanded incentives for production this year alone.

But Louisiana remains the leader in enticements to the film and television industry. The state offers a tax credit of 15 percent of a production's total costs, even it is only partly shot in Louisiana, and an additional 20 percent of a film's in-state payroll. A revised credit, which takes effect in January, will apply only to spending in Louisiana but will rise to 25 percent of spending, plus 10 percent of payroll.

"It's an absolutely amazing incentive," said Jeff Begun, a vice president of Axium International, an entertainment production payroll company that tracks incentives by state.

He added that Louisiana still had no sound stages but noted that several were under construction. "One of the arguments for California is that it may cost you a bit more, but everything you need is here," he said. "But they're building all that stuff in Louisiana."