By Richard Schneider
Reprinted from the CFVA e-Bulletin
www.cfva.com

When it comes to ideas for selling the benefits of production tax incentives to state legislators, there are plenty to go around. Granted, there are the naysayers, but they are in the distinct minority. In Colorado, an effort is underway to expand our state's modest and non competitive film and television production incentive program.

During the 2008 State Legislative session, a bill to expand the Colorado's current limited 10% cash rebate to a far more flexible 25% transferable tax credit was killed in a House committee. The bill never got to the House floor for a full debate.

The bill's sponsors are working with a Legislative Task Force, spearheaded by the Colorado Film Commission, to redraft the legislation and introduce it early in the 2009 Legislative Session. But the effort needs to be viewed as a long-term campaign, a marathon rather than a sprint, as Colorado Film Commission Executive Director Kevin Shand has said.

A number of states have now had several years experience with production incentives and the success stories are available to place before Colorado lawmakers as they consider the bill in the upcoming session, which cranks up in January 2009.

Here is a brief look at how production incentives are shaping up in the northeastern states of Massachusetts, Connecticut, New York and Rhode Island.

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As you speak with your state representatives and senators to express your support for expansion of the Colorado incentive program, you can share these stories to show how incentive programs can achieve two key goals for Colorado - spur economic development and create permanent jobs.

Massachusetts

The Boston Globe reports that incentive supporters say Massachusetts' relatively new tax incentive will help the state become a prime locale for advertising productions, creating jobs and pumping millions of dollars into the economy. The program, which includes commercials and well as film and television productions, seems to be paying off.

Boston had been mostly overlooked as a commercial production location, in favor of such production behemoths as New York and Los Angeles. But the incentives are attracting more production business and permanent economic development to Bean Town.

Eran Lobel, owner of Boston's Element Productions, said he managed to attract 2 commercial shoots, one for Procter and Gamble, because the spots qualified for the state incentives. And Picture Park's Mark Hankey says he's using the tax incentives as a tool to bring work here that wouldn't have been here otherwise, including spots for Intel, ServiceMaster and Just for Men.

Producers in Massachusetts are exempt from sales taxes on filming-related local expenses. Plus, they are eligible for a 25% tax credit on their total local production expenditures. The tax credit is transferable, so it can be sold at a discount to other companies that might have a higher Massachusetts tax bill.

Originally, the Massachusetts program required a minimum local budget of $250,000 to qualify. That has been lowered to $50,000, greatly expanding the number of productions that can qualify. The state also is considering a higher subsidy to be used in the construction of proposed sound stages and other permanent production facilities.

Still, all is not rosy with the Massachusetts program. State officials reported in Spring of 2008, that the 2 year old program had issued nearly $137 million in tax credits and reduced state tax revenues by about $3 million. Balanced against $19 million in new income tax revenue, that left a state revenue shortfall of $121 million. However, state budget analyst Howard Merkowitz said the figures were preliminary, adding that the positive economic impact on other industries the so-called multiplier effect and other new tax revenues are expected the decrease the shortfall significantly.

Supporters of the incentive program point the the fact that the production industry generated $545 million in economic activity and created hundreds of jobs during the period covered by the state report.

Massachusetts Film Office director Nick Paleologos said local businesses benefited enormously from the 88 productions covered by the state report and cited the hard-to-calculate tourism advertising value for the state as another key benefit. He said the Kevin Spacey film 21, a story about Massachusetts Institute of Technology students who beat the odds in Las Vegas, was like a love letter to Boston. There are more beauty shots of Boston and Cambridge than any movie I have seen in the last 10 years.

Connecticut

When Connecticut implemented it's 30% tax incentive for both digital media and feature film productions, it not only generated motion picture production, it also spawned some serious activity in the commercial real estate market. The latter was helped along with a one-time investment credit of up to 20% for those who finance studio and production support facilities.

Shortly after the incentive was implemented, producers Kevin Segalla and Bruce Heller partnered with a commercial real estate firm to set up the Connecticut Film Center and purchase a huge building in Stamford to provide short term studio space along with other production support services for film and television projects brought into the state. Segalla said he and his partners were looking at the estimated $300 million in production business the incentive was expected to generate in 2007.

Subsequent Penn, Williams as in Robin, Travolta, DeNiro and DiCaprio spottings on the streets of Connecticut were an early indicator of incentive successes.

The one-time tax credit for permanent facilities coupled with the production incentive to entice production business to the state solidified the real estate deal that led to the opening of the Connecticut Film Center. Segalla's and Heller's partner, urban redevelopment specialist Clayton Fowler, became the prime investor in the building, which had sat vacant since belt maker Swank, Inc. blew town a few years earlier. Not one prone to being star-struck, Fowler told the New York Times To me, this is just a real estate deal.

New York

Egged on by neighboring Connecticut, New York state bumped it's production tax credit from 10% to 30% in early 2008, in an effort to lure production dollars and jobs back into the Empire State.

When Connecticut implemented it's 30% incentive in mid-2006, the tiny state saw a quick $400 million increase in feature film, television and commercial production. Some of that business would have gone to New York, but the Connecticut incentive was more attractive, largely because it covered both above the line costs that included actors, directors, producers, scriptwriters as well below the line costs that included crews, wardrobe, props, catering, location fees and equipment rentals.

New York's program still covers less, but the increase to 30% is expected to make it more competitive. Even though New York had nearly a billion dollars worth of production on the books, the recent increase in the incentive quickly drew in another $215 million in projected production business.

Hal Rosenbluth, president of Kaufman Astoria Studios in New York City, said increased incentive programs in surrounding states drained business from New York. Increasing the state incentive is going to bring those jobs back here and get us back on track, he told the New York Times. Producers also get an additional 5% incentive if they shoot in New York City.

Rhode Island

Rhode Island may be the smallest state, but it's no lightweight when it comes to film and television production incentives. It's 25% incentive program was one of those eyed when New York tripled its incentive to remain competitive with the other northeastern states.

Even though the tiny state's incentive program prompted big bad New York to sharpen its competitive teeth, it's taken a Rhode Island film festival aficionado to pose an interesting and maybe even logical suggestion. George Marshall, who heads the six-day Rhode Island Film Festival, thinks there is even more strength in looking at a regional film industry when it comes to attracting large-scale productions.

As the dust settles over the various tax incentives promoted by each state to lure in film productions, it becomes increasingly important that the New England states begin pooling resources and taking a regional approach to bring in big ticket productions, he told the Boston Globe.

Indeed, some are starting to refer to the New England states and their robust production industry as Hollywood East. Maybe Colorado could team up with New Mexico, Utah and Arizona and become Hollywood Southwest.

Better still, we could partner with Wyoming and Montana to become Hollywood Wild West. Sounds like much more fun.