In its long-running competition with other states to attract new business and high-quality employment, Louisiana has used many types of job “bait.” Louisiana taxpayers have invested hundreds of millions of dollars into business tax breaks, worker training and cash grants to encourage companies to create jobs in the state.
Through the years, though, a big question about the businesses that expanded or relocated into Louisiana often went unanswered: How many companies that chose to do business in Louisiana might have done so even if the state had not offered them incentives?
In the case of Louisiana’s tax credit program for the film and entertainment industry, an answer did become clear. The generous tax incentives, which the Legislature created in 2002, helped make Louisiana a hub for movie making almost overnight.
But after several years of accommodating movie stars and producers, it was obvious that the state was not getting a big enough employment bang for its incentive bucks. Lost tax revenue outweighed new business revenue, so lawmakers took an axe to the program. Very quickly after they capped the tax incentives, Louisiana’s movie business began to shrink.
Lawmakers continued to work toward a film industry program that would better serve the state, and recently, Louisiana Economic Development made an announcement: A well-known film producer has the go-ahead to open a substantial new studio in New Orleans.
Deep South Studios will become the first company to qualify for a new state program aimed at cultivating well-paying, permanent jobs in the motion picture, digital, music and theatrical industries. The Qualified Entertainment Company program provides a tax credit on annual wages paid by entertainment companies that create full-time jobs for Louisiana residents. Qualifying companies receive a 15 percent credit against W2 wages for each new job that pays between $45,000 and $66,000 per year. For jobs paying more than $66,000, but less than $200,000, the credit rises to 20 percent.
The program seeks to improve on a weakness of the old film-industry tax credits that drew criticism for allowing financial benefits to flow out of the state.
The fact that Deep South Studios is poised to begin construction stems from the determination of its founder. The studio’s developer is film producer and New Orleans native Scott Niemeyer, whose growing string of successful films include the popular “Pitch Perfect” movies and a sequel to “My Big Fat Greek Wedding.”
Niemeyer has been attempting to open a studio in the New Orleans area for about four years and faced hurdles as the Legislature shrank its original tax incentives, which caused potential investors in his studio to grow wary. But the producer persisted, with support from people who saw promise in the project and sought alternative ways to make it financially viable.
In 2016, Niemeyer secured a commitment from the New Orleans Industrial Development Board to exempt most property taxes on the project through payments in lieu of taxes during the initial 10 years. The board later sweetened the agreement by reducing the studio’s total payments for the first 10 years by $1 million.
The state’s entertainment tax program helped Niemeyer clinch the deal, and he expects to complete the first three of 11 studio buildings, at a site along the Mississippi River in Algiers, within the next few months. The complex of production and support space eventually will encompass 260,000 square feet, with a capital investment of $64 million.
Niemeyer sees his project as a “poster child” for Louisiana’s effort to build a long-term entertainment industry. “We hope to set an example for more entertainment businesses to create lasting, quality jobs and sustainable economic growth for the creative industries here in Louisiana,” he said in a press release. “Sustainable” is the key word in his statement.
One of the knocks against Louisiana’s original entertainment tax credit program, as that it did not produce nearly as many long-lasting jobs or even a fraction of the industry infrastructure that lawmakers had hoped for. Instead, productions tended to hire Louisiana residents for lower-paying, temporary positions, and once the local portion of a movie production wrapped up, the companies often left Louisiana to finish their films in Hollywood.
Louisiana Economic Development Secretary Don Pierson believes the new tax credit program will encourage more entertainment employers to hire and invest locally to build a permanent entertainment industry in the state. “We are providing a concrete way for in-state and out-of-state entertainment companies to accelerate their growth through meaningful, long-term investments and partnerships in Louisiana,” he said.
It will of course be a while before the state can measure the success of the new program, but judging by Niemeyer’s persistence in getting his studio off the ground, having a Louisiana native at the helm may help.
A STUDIO PRODUCTION
Film Developments
A look at Deep South Studios
Hollywood producer Scott Niemeyer plans to build a complex of 11 buildings, encompassing about 260,000 square feet, at a site along the Mississippi River in Algiers. He aims to complete the first three buildings, which will include film production and support space, within the next few months.
Investing in movies
Niemeyer is amassing about $64 million from investors to build Deep South Studios. New Orleans agreed to assist the project by allowing payments in lieu of property taxes that could be valued at about $2.5 million over 10 years. The project also qualified for a new state program that provides tax credits to entertainment companies that create quality, permanent jobs.
