The looming battle over film incentives

by Scott Mooneyham, The Insider, May 5, 2014.

With a legislative battle looming over the extension of state incentives to lure film and TV ventures in the state, a simple, economic reality will be hard for policymakers to overlook.

It's the fleeting nature of some film industry jobs.

Since state legislators and former Gov. Beverly Perdue spiced up the incentives three years ago, about $236 million a year in film activity has occurred in the state, about four times what had occurred in the previous three years.

Because the incentives are tied to the spending, and not the actual tax liability of the film production company, they can end up with incentives greater than their actual tax liability.

The 25 percent refundable spending credit, with a cap at $20 million of spending, means that taxpayers are essentially footing 25 percent of the costs of these productions.

That, in and of itself, has caused many critics to question whether the price tag -- $69 million in 2012 -- is too high.

But the bigger question is whether North Carolina and its taxpayers are getting much bang out of that buck.

For years, supporters and opponents of the incentives have cited opposing studies to come to very different conclusions regarding that question.

This spring, a study produced by an N.C. State University researcher, and commissioned by the Motion Picture Association of America, estimated that 3,400 workers would leave the state if the incentive program expired.

Its findings included a claim that state and local government had collected $170 million in taxes over a five-year period because of film activity, while the state paid out $112 million in the incentives.

Fiscal analysts on the staff at the North Carolina General Assembly criticized the findings, saying the benefits were overstated. They estimated that tax coffers are seeing only a 61-cent return on every dollar spent in incentives.

Regardless of who is right, it doesn't require a study to understand that a permanent job produced by government investment is far superior to a temporary job produced by the same investment.

Film and TV production companies that breeze into a community for a few days or a few weeks, and rent a few hotel rooms, patronize some restaurants and buy some local hardware are not the same as those that sit down in a place and create permanent jobs.

In relation to the film incentives, what that really means is that incentives' value to the state can mostly be found in the productions based in and around Wilmington, where an actual film workforce and infrastructure can be found.

Fortunately, a big chunk of the incentives appear to be going to that established industry in Wilmington.

The top productions last year were all TV shows, like NBC's "Revolution" and HBO's "Eastbound & Down," mostly based in Wilmington, and they received the bulk of the subsidies.

Writing the law to ensure that those types of productions are the real beneficiaries of the incentives may prove the best way to save them.