Subsidies boost movie industry in South; some question benefits of tactic

Subsidies boost movie industry in South; some question benefits of tactic

August 6th, 2014 by Ellis Smith in Business Around the Region

Zombies appear in a scene from the second season of the AMC original series, "The Walking Dead," in Senoia, Ga.

Photo by Associated Press/Times Free Press.

Lights, camera, subsidy!

Georgia boasted plenty of all three in fiscal year 2014, leading to an estimated $5.1 billion economic impact stemming from the 158 feature film and TV productions shot in the Peach State, including "The Hunger Games," "Taken 3," "Insurgent" and "Fast and Furious 7."

A handful of Georgia-filmed movies and TV productions scheduled for coming months include "Last of Robin Hood," "Dumb and Dummer To," "The Walking Dead," "Constantine" and "The Vampire Diaries." A number of studios, film facilities and education programs also have popped up in a bid to make the silver screen surge a permanent fixture.

The state surpassed the $1 billion mark for direct expenditures from movie makers, as production companies spent about $1.4 billion on movies, TV commercials, music videos, animation and even game development, according to a news release.

But questions persist, especially in Tennessee, about whether the movie business is worth financing with taxpayer dollars paid to Hollywood producers. The state of Tennessee gave the ABC TV show "Nashville" about $12.5 million to film in Nashville, even though some critics said the subsidies gave the state little tangible benefit.

Georgia offers tax credits of up to 30 percent for productions that take place within the state, which includes 10 percent merely for using Georgia's logo in the credits. That cost the state treasury about $250 million from 2008 to 2011, according to the Atlanta Journal Constitution. Tennessee's total for 2012 was closer to $15 million, according to the Tennessee Film, Entertainment and Music Commission.

Gov. Nathan Deal on Tuesday promised to push Georgia to do even more, developing a Hollywood-caliber workforce to grow the industry and "meet the needs of productions that are setting up shop in Georgia."

Today, the Motion Picture Association of America says Georgia's film industry directly employs nearly 23,500 people, and 20th Century Fox, Warner Bros., Disney, Sony, Universal and Disney paid another $696 million to 4,066 vendors for technology, lodging, real estate and food service.

Tennessee, which doesn't track economic impact for its movie investments, offers up to 25 percent in cash rebates for labor and vendor expenditures, a production subsidy that has come under fire by watchdogs who claim the investment simply isn't worth it.

"At best, these incentives (in Tennessee) have a 30 cent return on the dollar," said Justin Owen, president of the Nashville-based Beacon Center, a taxpayer watchdog group.

The reason for the disconnect is that film shoots are very brief, and often much of the money is paid to actors, producers and staff who may hail from another state, taking their money back with them, he said. Unlike Georgia, which boasts existing studios and some that are under construction by locals like Ted Turner and Tyler Perry, Tennessee has fewer permanent jobs and facilities to carry the state through the lulls between shoots, Owen said.

So why try to close the gap with Georgia, which has attracted a joint venture between Pinewood Studios and Chick-fil-A's Cathy family that, according to some estimates, could employ thousands?

"It's press release economics," Owen said. "It's so popular and exciting when you say such and such film was shot in Tennessee or Georgia, or this show is located here, they kind of get starry-eyed by the production of that here, and they overstate the value because it makes them look good."

A walker is shown in Episode 16, "Welcome to the Tombs," from Season 3 of the TV series, "The Walking Dead."

Photo by Associated Press/Times Free Press.

But Clint Brewer, assistant commissioner at Tennessee's department of economic and community development, said the state is getting plenty of bang for its buck, especially compared to traditional forms of outreach such as TV advertising.

Rather than go big like Georgia or Louisiana, Tennessee finances films that spend as little as $250,000 in the state, in hopes of appealing to smaller, local productions.

"Building Tennessee companies is what we hope will happen," Brewer said. "Unlike other states, Tennessee has a native entertainment industry. We are looking to incentivize independent productions more in line with what a Tennessee company will do in the state."

The state could find some support in a 2012 report by Ernst & Young on behalf of the MPAA that found longer-term benefits to film credits among the 37 states surveyed.

"The primary benefits of film credits to state residents are increased employment and higher incomes generated by film production activities," said Robert Cline, Ernst & Young national director of state and local tax policy economics. "However, the economic benefits to residents extend beyond the production activities themselves and include increased activity by suppliers to the film industry and increased consumer spending from higher incomes."

Chris Carr, commissioner of the Georgia Department of Economic Development, called the Peach State's film industry "sustainable."

"Since 2008, more than 90 companies have located in Georgia to support the industry," Carr said.

Beyond the dollars, there's a tourism boost when movies are shot locally, officials have said. Visitors want to see the bench on which Forrest Gump sat, the statue from "Midnight in the Garden of Good and Evil", or the Centers for Disease Control and Prevention building -- actually the Cobb Energy Center for the Performing Arts -- that exploded spectacularly in "The Walking Dead."

But movie studios have shown themselves to be fickle when states begin to taper off or eliminate subsidies. Producers behind Netflix's House of Cards, a drama about the dirty side of Washington, D.C. politics, threatened to pull out of Maryland for its third season after the state said it would fall short of the $15 million the show had been expecting.

The state eventually coughed up $11.5 million, but not before some elected officials said the company's position felt like extortion, Variety reported.

Even mighty Hollywood itself has struggled to win back productions that have fled for cheaper locales, with many lawmakers arguing for the state to increase its own subsidies to help maintain California's movie industry. The slow exodus of TV and movie productions there has happened despite the billions of dollars studios have already invested into expensive facilities in California, primarily because of the subsidy bidding war going on in much of the rest of the U.S.

The Center for Budget and Policy Priorities reported in 2010 that the nearly $1.5 billion spent by states on film tax subsidies could have paid for the salaries of 23,500 middle school teachers, 26,600 firefighters, and 22,800 police officers.

In some states, which in 2010 included Connecticut, Louisiana, Massachusetts, Michigan, North Carolina and Rhode island, the total value of film subsidies exceeded the value of tax credits for research and development, the CBPP found.

Though Owen acknowledged that film incentives would make more sense if they went toward long term projects like permanent studios and production facilities, he argued that the subsidy arms race between states for film projects could even endanger those projects if a better deal came along for producers.

"There's not a way you can shake it out to where economically it makes sense," Owen said. "Taxpayer handouts shouldn't be part of the equation."

Contact staff writer Ellis Smith at 423-757-6315 or esmith@timesfreepress.com with tips and documents.