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Councilors approve Netflix incentive deal

Ty Warren, Netlix vice president for physical production, talks about the streaming giant’s choice of Albuquerque for its production hub. (Roberto E. Rosales/Albuquerque Journal)

Copyright © 2018 Albuquerque Journal

Netflix is nearing the finish line in its quest to purchase and operate Albuquerque Studios after city councilors on Thursday unanimously approved a $4.5 million city economic incentive package for the California-based streaming-video provider.

Councilors also approved the city’s role as fiscal agent for the state’s $10 million contribution in Local Economic Development Act funds.

As part of the agreement, Netflix commits to direct spending on its own productions in New Mexico of at least $600 million in the first five years occupying the studio, and $400 million in direct and indirect spending, which includes leasing the facility to other production companies, in the following five years.

The deal would also bring about 1,000 film and television production jobs per year.

Numerous city officials and stakeholders in the city’s filmmaking, education and economic development areas, as well as members of the Greater Albuquerque Chamber of Commerce and Albuquerque Economic Development, had smiles on their faces as they left the council chambers.

“The LEDA money itself is specifically designed for these kinds of projects,” Terri Cole, president and CEO of the Greater Albuquerque Chamber of Commerce, told councilors. “We’ve been working very hard … together with many stakeholders, to create a strong film community. … Netflix takes the film industry to the highest level. We are excited about this.”

Rick Clemente, CEO of Albuquerque-based I-25 Studios, told councilors not to worry about his studio as a result of the Netflix deal.

“People ask me whether I’m worried that Netflix is going to put us out of business,” Clemente said. “My phone has been ringing off the hook. Netflix is going to run that place more efficiently than you can run an ordinary studio because they run the supply and the demand, and they can coordinate the timing. … It’s the most positive thing that has happened since I moved here from L.A. to be in the movie business 11 years ago.”

Officials from Netflix told a news conference earlier this month they are in negotiations to purchase the 28-acre Albuquerque Studios site with plans to make it its principal production hub in the United States. The company uses three production facilities in North America other than Albuquerque – Los Angeles, Atlanta and Vancouver, Canada – all of those are leased facilities, however.

Netflix intends to invest more than $30 million for acquisition, renovation and improvement at the Albuquerque Studios facility, as well as maintain and operate the facility for at least 10 years. Netflix officials have not released details about the sale price of the studio.

Alicia Keyes, film liaison at the Albuquerque Film Office, told councilors closure of the sale of the studio facility would take place in a few weeks. She also said the deal means more opportunities for those who conduct business with film companies, such as lumber, barricade and hospitality companies.

“It has taken us 16 years to get where we are today, welcoming Netflix to Albuquerque,” Keyes said. “This deal happened because legislators, administrators, elected officials, and the people of New Mexico and Albuquerque believed in creating a new industry and an economic driver for our community. This deal not only means $1 billion in spend to New Mexico, it means we will no longer be calling our seasoned location managers and asking them if they’re ready to step up and be production supervisors. It means we will have (production assistants) jobs … waiting for students coming out of the CNM crew training program.”

Council President Ken Sanchez, who sponsored the LEDA ordinance with Councilor Pat Davis, said it was time for “lights, camera and action.”

“… This will put Albuquerque on the world production stage because I think this is the beginning of a snowball of what we’re going to see with Netflix coming to Albuquerque. I know there’s talk of other studios wanted to locate here, plus I’m really pleased to see Central New Mexico College is doing a really fine job training the workforce.”

Albuquerque Studios, in the Mesa del Sol community, opened in 2007 with eight sound stages, production offices and a back lot.

After legal issues and defaults, the studio filed for Chapter 11 bankruptcy protection in 2010. In September 2011, Amalgamated Bank announced that the studios would operate debt-free after a wholly-owned subsidiary of the bank’s LongView Ultra Construction Loan Fund took control of the studio. They have sought a new owner since that time.

Netflix has brought projects to New Mexico, such as the Western series “Godless,” as well as “Longmire,” “Chambers,” “Messiah,” “The Ridiculous 6,” “Daybreak,” “The Ballad of Buster Scruggs” and “Walk. Ride. Rodeo.”

The company’s activity in the state has averaged two productions per year over the last three years and, according to the New Mexico Film Office, the average budget for those productions is $39 million.

According to the University of New Mexico Bureau of Business and Economic Research, about 70 percent of Netflix purchases will take place in Albuquerque – and those purchases are 100 percent taxable.

Clawbacks include monetary penalties if Netflix’s spending by Dec. 31, 2023, is less than 90 percent of the $600 million performance target or spending is not at least an additional $400 million by Dec. 31, 2028. They also include monetary penalties if Netflix ceases operations at the studio before Dec. 31, 2028.

“We appreciate Council moving so quickly in acting on the deal we reached to bring Netflix to Albuquerque,” Mayor Tim Keller said in a statement after the vote. “Our partnership with Netflix will make our city a hub for film, while creating good-paying jobs with training accessible to Burqueños from all walks of life. We also demonstrated to the national business community that we can get things done efficiently and on time when it’s in the best interests of our city.”

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