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Sunday, November 15, 2009
Taxpayers Foot Bill for SF Studios
By Phil Parker
Copyright © 2009 Albuquerque Journal
Journal Northern Bureau
SANTA FE — It sounds like a pretty sweet deal.
State government gives you $10 million and local government loans you another $6 million to build a movie studio.
You've bought a site, also from the county, but you don't have to start paying for it until you start creating jobs.
Your only contributions up front for the studio, expected to cost $18 million to $20 million to build, are the construction design, your experience in the film world and posting collateral equal to one-third of the county loan.
That's the arrangement made by a company led by a couple of Hollywood veterans, with help from prominent local politico Javier Gonzales, a former Santa Fe County commissioner and currently state Democratic Party chairman.
Backers of Santa Fe Studios say the economic benefits of the new development, to be located south of the City Different, will more than justify the millions in public financing for the two-stage, 40,000-square-foot facility.
The commissioners agreed to grant Santa Fe Studios the loan in September, giving developers a total of $16 million in public funds after the state's Economic Development Department approved the grant of $10 million earlier this year.
The studios' presidents, Lance and Jason Hool, have agreed to buy 65 acres of county land off N.M. 14 where they will build the facility. The Hools are to purchase the land for $2.6 million, with installments of $520,000 for every 100,000 hours of above-minimum-wage job activity the studio produces. They have also put up $2 million in collateral to back their loan from the county.
"I think, in listening to the public, some people were concerned about appropriate use of tax dollars," said Santa Fe County Commissioner Liz Stefanics. "I feel more comfortable now that we have controls."
Stefanics said the county's $6 million loan is safe because of how Santa Fe Studios must finance construction. Contractually, the $10 million in state money has to be spent before developers can start dipping into funds they've received from the county. By the time they're spending that $6 million, "they should be pretty well entrenched in the entire project," Stefanics said.
If Santa Fe Studios somehow can't pay the county back, then whatever has been constructed becomes property of the county, said Gonzales, a minority owner and spokesman for Santa Fe Studios.
"They're going to pick up a studio for $4 million if that's the case," he said.
Gonzales also pointed out that the state grant is contingent on the company's producing jobs. But the developers' investment, for now, is minimal compared with the amount of public funds financing the studio's construction.
Added tax revenue
The Hools tried to get a $24.6 million construction loan from Los Alamos National Bank toward a bigger project. There would also have been considerable public help with that deal — the New Mexico Finance Authority had agreed to purchase $5 million of the bank loan — but the financing package fell through when Santa Fe Studios failed to meet a June 30 deadline.
"This is not unusual, for states to provide a variety of incentives," said Eric Witt, deputy chief of staff for Gov. Bill Richardson. "Whether it's direct capital investments like this or tax incentives. There are a number of different forms these kinds of incentives come in. ... It's all about putting some benefit to the bottom line."
Backers of Albuquerque Studios didn't need taxpayer money to construct their sprawling $74 million facility in 2007. But they benefit — by virtue of their location in the Mesa Del Sol development — from tax incentives maintaining the surrounding infrastructure, such as sewer lines and roads, Witt said.
Albuquerque Studios is also considering applying for new market tax credits, a federal tax credit issued to the state, then allocated to help businesses like Albuquerque Studios pay down any money they owe. (A representative of Albuquerque Studios declined comment for this article.)
Santa Fe Studios, on the other hand, is getting money up front, but will be fully taxed on everything, Witt said. Stefanics said tax revenue, in addition to jobs, is one of the primary reasons county commissioners wanted it for Santa Fe and agreed to loan the additional $6 million.
Witt noted that two previous developers had put forth proposals to build a studio on the Santa Fe County land, but neither materialized. He said the Hools were the first to offer production experience along with a comprehensive plan.
Gonzales said the Hools hired a renowned architect named Gary Bastien for the project and put together an advisory board that includes officials from several film studios, including Warner Bros. and 20th Century Fox.
"The Hools have been in the film industry for over 40 years," said Gonzales, "everything from being actors to successful producers."
Among their credits are the films "Flipper" and the Denzel Washington revenge flick "Man on Fire."
The Hools expect to break ground on the project by the end of this year, Gonzales said, pending final approval by the County Commission.
Filming base
Witt said the $10 million of state money — comprised of $3.5 million in local economic development funds and $6.5 million from capital appropriations to what's commonly called Richardson's "media fund" — was designated years ago for that specific section of county land because of the potential to become a popular stop for filmmakers.
"A lot of pictures want to come not just to Santa Fe," Witt said. "These guys (Santa Fe Studios) can act as a base for filming all over northern New Mexico."
Gonzales said Santa Fe has hosted numerous productions, but for only a short while.
According to the New Mexico Film Office, five TV shows or films were shot in Santa Fe in 2009, including "The Sunset Limited," a Cormac McCarthy adaptation directed by and starring Tommy Lee Jones; and another Washington action vehicle, "The Book of Eli."
"In Santa Fe, all that's been happening is people will come in and film some outdoor scenes and then they go back to Hollywood," Gonzales said. "The idea now is, basically, if you build these production soundstages you receive the benefit of the full production of the movie, everything from pre- to actual production to postproduction — all here in Santa Fe."
Which could mean a boost for the economy. Beyond the jobs created by the studio's construction, numerous staff will have to be hired to support productions. In order to receive the $10 million grant, Gonzales said, Santa Fe Studios made a promise to deliver 500,000 hours of film-related jobs, which will pay more than the average Santa Fean's salary.
"When you evaluate how public investment should be placed in a private project, you want to physically produce jobs," Gonzales said.
If it doesn't produce the jobs promised, the company is required to pay back part of the grant.
Stefanics said the entire community stands to benefit financially when movies start being made here.
"It'll trickle down in terms of the economy," she said. "Jobs, services. They'll have to eat, and they'll have to have catering. They'll need tailors, people to fix machinery. It'll all trickle down into businesses in Santa Fe."
Broad support
Gonzales said the Hools invited him into the project a couple of years ago. He said he met them, and they learned of his experience, which includes working as an executive with Accenture, a worldwide consulting, technology and outsourcing firm. Gonzales — son of a former Santa Fe mayor and elected twice to the County Commission in the 1990s — said he came to the table with "a knowledge and understanding of the county and this site."
He said he didn't have to lobby or use political pull for the project. "It stood on its merits from Day One," said Gonzales.
Richardson in recent years has named Gonzales to the boards of regents of New Mexico Highlands University and, currently, New Mexico State University.
Witt said Gonzales' participation in Santa Fe Studios had nothing to do with state support for the project.
Other businesses granted millions of state dollars to get construction off the ground include the massive Hewlett Packard facility in Rio Rancho ($6 million) and the $210 million Schott Solar manufacturing plant in Albuquerque ($4 million), according to Witt.
Santa Fe Studios will be much smaller than Albuquerque Studios.
"Although it's a smaller facility, it suits more the kinds of productions that come to Santa Fe," Witt said. "Albuquerque gets the 'Terminators,' but Santa Fe gets a lot of pictures that are a smaller sort of film."
And, Stefanics said, she was heartened to hear Albuquerque Mayor-elect Richard Berry's comments last month that "Albuquerque is open for film business."
"I felt like it was very interesting that the brand new Republican mayor said as one of his first things, 'I'm going to keep the studio,' " Stefanics said. "It must be doing some good there if the Democratic mayor and the Republican mayor both want it."
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