Skvarla: The state treasury gets no returns on film incentives

Staff Writer- Triangle Business Journal

John Skvarla, the newly tapped N.C. secretary of Commerce, admits the state’s incentive program pales, dollar-wise, with what Georgia offers.

But he says there’s no easy answer to give the film community – a community that has been rallying the state for more money to attract big budget projects.

Responding to a question about whether the state’s new program – which caps total grants for incoming film projects at $10 million instead of offering tax incentives – is enough to sustain and grow the industry, Skvarla admits there’s a gap between what the state is offering and what its competitors are willing to do to attract Hollywood business.

And Hollywood, he says, will follow the money.

“They set up shop wherever anyone’s giving them the best credits and they’ll admit that,” he says. “These folks, let me tell you, you talk about capitalists, they can tell you the nail polish on the pinky finger of the actress on that movie. They are that precise.”

But the answer is more complicated than just throwing incentives at Hollywood. Film incentives are an even harder sell than the economic incentives incentives used to attract large scale manufacturers to the state, he says.

“Unlike the JDIG program, the film incentive program does not return dollars to the state,” he says. “What we’re trying desperately to do is to develop a marketing model … that, number one, captures all of the revenue.”

He says the goal is to “sweep the corners clean,” and says even Hollywood is mystified at how Georgia can justify its large-scale tax incentives. He says he’s had conversations with Hollywood execs, “and they acknowledge they can’t figure out how the states return to the treasury anything from the grants.”

Georgia offers up to 30 percent of production expenditures as tax credits, no cap added. And, in fiscal 2014, 158 feature film and television products spent $1.4 billion in the state, generating a $5.1 billion economic punch according to the Georgia Film, Music and Digital Entertainment Office.

But, while the Motion Picture Association of America has said 23,500 people in Georgia are directly employed by the industry, Skvarla points out that many film jobs are temporary – as opposed to long-term manufacturing and technology jobs offered by the JDIG program.

“The movie industry is nomadic,” he says. “People come to work on the film for nine months and then they go home, so there’s no ability to determine what, at least from that perspective, what the recurring revenue is for the state.”

Further, not all counties benefit from the individual film projects – the primary benefactor is the county the project selects, he says.

But while incentivized manufacturing projects show an immediate economic benefit to the county they’re persuaded to – they are also supposed to pay the entire state back in future taxes.

Film projects can immediately contribute to a single county’s economy, though, it’s more difficult to get those returns on a state level, he says.

The goal is to try to determine a model “more like the JDIG model that can at least break even to the treasury so we can honestly say Onslow County is not supporting another county that makes money from the movie industry,” he explains.

And the state itself doesn’t get a return, he repeats.

“So, what we’re trying to do is create a revenue model to capture all the revenue and create an incentive program that will at least break even with the treasury,” he says.

The current program is in its infancy. According to Commerce spokeswoman Kim Genardo, though the 30-day application window has passed, no projects have formally been issued any grants by the state to film in 2015. She couldn’t comment on whether decisions had been made internally, but did say that an additional 30-days were needed for the “second tier” of projects. In other words, if a chosen project in the first tier turns down the money, the second tier companies could be considered for that cash.

But it’s not a lot of money to work with.

While Genardo is careful to say that “Under the Dome” has not been promised anything by the department, the CBS show, which is currently filming in Wilmington, is likely to claim about half of the $10 million, leaving little to recruit additional projects with in 2015.

“Under the Dome” spent more than $33 million in the state during its first season and is expected to spend a similar amount in 2015.

Guy Gaster, president of the North Carolina Film Office, said Thursday he had no news on any additional projects showing concrete interest in filming in the state.

Both the state Senate and House have filed bills to significantly tweak the grant program. Currently, film projects are capped at $5 million. A new bill circulating both the House and Senate would cap that at $10 million for a single project, and would become effective July 1. The plan also proposes allocating $66 million in recurring funds for the 2015-2016 fiscal year instead of the $10 million currently in the coffer.

A separate Senate measure would re-enact the film tax credit.

Comments are closed.