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Film Program: Take Two

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SANTA FE — The State Investment Council’s revamping of its film loans this week marked the end of a monthslong overhaul of almost every aspect of then-Gov. Bill Richardson’s aggressive New Mexico film-production incentive program.

Despite protests on some scores from people in the movie business, the controversial Richardson-era programs have been capped, cut and tightened since he left office at the end of 2010. The reformers — including a largely new investment council, Gov. Susana Martinez and legislators — aimed to make New Mexico’s film production incentives less generous, protect investments and save the state some money.

The loan program, which at one time had the SIC offering no-interest loans to select films being made in New Mexico, was touted like other incentives as an attractive benefit to bring jobs and local production spending to the state.

But SIC members determined this week that the program simply wasn’t working for the council’s statutory purpose — adding money to the bottom line of state investments.

Charles Wollmann, the SIC spokesman, said the state was potentially out $30 million in interest that it could have made had the film-loan cash been conservatively invested in something other than films since the program started in 2002.

The state also paid a California-based consultant $2.1 million since 2002 to determine which films were good enough investments to qualify for the program.

Under Richardson’s version of the program, the SIC approved $240 million in no-interest loans to about two dozen movies and television shows — among them such major movies as “Book of Eli,” “Employee of the Month” and “Swing Vote.”

But most of the films were unprofitable. While all have paid back, or are on track to pay back, the loans, only one made any more money for the state.

“We’re not economic development; the focus for the council has to be the bottom line,” Wollmann said. “It’s not for us to judge what is best for a job creation point of view.”

Tightening up

Changes to the loan program include tougher residency requirements for film workers, more-stringent rules on loan repayments and no more no-interest loans. Instead, companies must pay the prime interest rate plus 1.5 percent.

The film loan changes by the SIC on Tuesday were the latest tweaks to a program that has frequently been overshadowed by the state’s better-known film rebates, which were targeted by Martinez to help deal with the state budget deficit earlier this year.

Under that program, the state rebates film companies 25 percent of direct in-state expenditures.

Under a legislative session compromise in March, involving lawmakers from both political parties and Martinez’s office, the film rebate program was capped at $50 million per year and allows the state to pay out the rebates over a period of three years. Previously, there was no cap on the rebates, and reimbursements were paid all at once.

Reaction mixed

Film industry representatives had mixed reviews for the new loan requirements, adopted unanimously by the SIC on Tuesday.

While some have predicted the new requirements will cause fewer films to apply for loans, others say the changes will make the loan process more straightforward.

Eric Witt, an independent film consultant who directed the film program under Richardson, said he believes the changes by the SIC are a step in the right direction — that the SIC had to change its loan program, because it wasn’t working.

“They haven’t made a loan in two years,” he said. “No one has applied for one. Hopefully, the changes to the program will get the SIC making loans again and bring some more money back to the state.”

“The biggest thing the industry wants is certainty, and with these new changes, there is a plan,” he said. “Now that there are guidelines in place, it’s a starting point.”

Rep. Luciano “Lucky” Varela, D-Santa Fe, said he has concerns that the lost incentives from the overhaul in general could reduce film activity and, therefore, employment for many residents.

“There is no job creation in New Mexico right now,” Varela said.

House Minority Whip Donald Bratton, R-Hobbs, said the changes make sense. The film industry still has access to funding, and the state gets a return on any investment, he said. It also keeps the SIC in the business of investment, instead of job creation, he said.

“I don’t think we should use the SIC for economic development,” Bratton said.

Officials with the State Investment Council, which oversees the program, say the threat of the tougher requirements hasn’t squelched film production interest in New Mexico.

Wollmann said Wednesday that several film projects have expressed interest in obtaining loans from the state under the new rules.

“There are some people who are apparently still interested in doing this,” Wollmann said.

New ground rules

Under the new guidelines, 85 percent of a film must be shot in New Mexico for the project to qualify for a loan. Previously, a majority of the film had to be shot in the state for the film to qualify.

In addition, taxpaying New Mexico residents must make up 75 percent of both the film’s crew and its total salary. That’s up from the previous figure of 60 percent.

Productions given loans will have only two years to pay the money back to the state, instead of the three- to five-year deadline under the old rules.

In March, SIC members voted to shelve the old loan program, which had offered interest-free loans to selected productions with the promise of a certain portion of any profits ultimately made.

That decision led the investment body to sever its relationship with the Hollywood film consultant who had been advising the board on what projects had the possibility of making money. The consultant, Peter Dekom, had been earning as much as $350,000 a year since 2002.

Under the new rules, the prime interest rate, along with an additional 1.5 percent, will be attached to the loans, which are capped at a maximum of $15 million per project.

Supporters of the changes have said the new guidelines will remove pressure on the SIC from having to identify potentially profitable film projects.

However, Jon Hendry, business agent for the International Alliance of Theatrical Stage Employees Local 480, said Tuesday he thinks only small-budget films will apply for loans under the new rules.

“We’ve still left a lot of the hurdles in place,” Hendry said, referring to the perceived difficulties of obtaining a loan.

Wollmann said the SIC had been turning down loan applications from low-budget, independent films because of the low possibility for a return on the investment.

Verification of the in-state shooting requirements is determined by the New Mexico Film Office, which relies on a shooting schedule supplied by the film production, said Jennifer Schwalenberg, the office’s deputy director.

Meanwhile, the state’s Taxation and Revenue Department reviews whether an individual has paid taxes and qualifies as an in-state resident.

Journal staff writers Adrian Gomez and Sean Olson contributed to this report.

Photo Credit – courtesy photos
Cutline – “Book of Eli” and “Swing Vote” were among about two dozen films and TV shows that received loans from the State Investment Council.

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