Celebrity sightings around New Orleans are becoming almost commonplace as the city attracts more and more film production business, and that must be a good thing. The chance of glimpsing a movie star on the street surely adds to New Orleans’ allure. But according to a recent report, the benefits of our rising star power go well beyond celebrity autographs.
A study released in April by the Louisiana Economic Development Department assesses the impact of efforts to attract various segments of the entertainment industry to the state. Produced by Chicago- and New Orleans-based BaxStarr Consulting Group LLC, the study examined the effects of tax credits Louisiana granted to businesses since 2002 for film production, sound recording, digital media development and live performances. Because the tax credits for the film industry were the first of this category to go into effect, naturally, the impact on that part of the entertainment sector have been the most significant.
“Louisiana’s flagship incentive program has been a catalyst for substantial film production growth statewide,” consultant Cheryl Louise Baxter said in the report. During the period 2008-’10, about 92 films per year qualified for the tax incentives, almost triple the annual number that received the credits during the first six years of the program.
Baxter said that total spending by film producers in Louisiana also rose sharply during that same period, to a 2010 estimated total of $674 million. (Last year’s direct payroll spending by producers to Louisiana employees hit more than $5 million, according to the report.)
Among the Louisiana-shot feature films of 2010 were local productions that included the Mark Wahlberg and Kate Beckinsale thriller Contraband (set for a ’12 release), and the action comedy Red featuring Bruce Willis, Helen Mirren and Mary-Louise Parker.
Some 20 features currently under way in the state include the New Orleans productions Cogan’s Trade, starring part-time New Orleans resident Brad Pitt; 21 Jump Street, featuring Johnny Depp; and Medallion, starring Nicolas Cage.
The proliferation of movie production activity in New Orleans also helped draw the attention of television producers, which led to the well-received HBO series “Treme” being set and shot in the city. The series spent about $7.5 million in the area for its first-season production, the consultants said. The second season production continues even as the series airs on HBO.
While the BaxStarr report paints a picture of a Louisiana film industry that’s gradually coming into its own, the verdict is still out on the long-range impact of the state’s film tax incentive program. Though Louisiana was a leader in using tax policy to attract the industry, many other states followed, and that has attracted the attention of national policy wonks.
Late last year, the Center on Budget and Policy Priorities released an assessment of state tax incentives that questioned the value of such programs. In the report, analyst Robert Tannenwald criticizes state film subsidies, in general, as being too costly to states and too generous to movie producers. He likens the idea that tax credits are effective job generators to “a Hollywood fantasy.”
Among problems Tannenwald cites with the incentive programs, he complains that the jobs they create for state residents tend to be at the low end of a production’s pay scale, while the highest-paying positions go to non-residents. Also, he says, many of the jobs are temporary and part-time positions.
Perhaps most seriously in terms of the implications for state budgets, Tannenwald speculates that the tax credits reward producers for projects they might have undertaken within the state anyway.
Notably, the analyst doesn’t take issue with many specifics of the Louisiana program, although one aspect that may merit closer examination is the transferability of the tax credits. As the Louisiana program is structured, producers who qualify for the credits can sell them to other companies that owe taxes to the state. This transferability enables a producer to receive an immediate cash benefit from the program, which comes in handy for meeting a film’s upfront costs. But that tax benefit then resides with another company that – were it not for the credit – would have been sending tax revenue into state coffers. And the holder of the credit may wait several years to use it before it expires. That can complicate the job of revenue estimating and budgeting from year to year.
Still, the policy analysis stops short of declaring Louisiana film tax credits useless. In fact, Tannenwald points out that Louisiana and New Mexico, because they were the first states to get into the film incentive game, likely will be the ones to reap the most rewards.
“If any states have made progress in establishing a media cluster, they are New Mexico and Louisiana, the two states that have been offering large-scale film subsidies the longest,” Tannenwald writes, noting that Louisiana has had success in promoting the construction of sound studios and other production infrastructure using its incentive program.
So far, state lawmakers have seen fit to retain and extend the film tax credit program, despite some missteps. Realistically, it could be another five years or so before Louisiana can make a meaningful assessment of the program.
Our burgeoning film industry is still in its youth and only beginning to establish its permanence with the studios, sound stages and support structure that help ensure long-term business and better jobs. Eventually, activity may expand to the point where it’s clear that we have a “real” local film industry. Until then, New Orleans may have to content itself with enjoying those celebrity sightings and knowing that our star is likely on the rise.