Just like in a Hollywood blockbuster, the suspense around New Mexico’s film rebate cap is growing.
First, the backlog in state payments to the industry caused by the $50 million cap was reported to be $180 million. Just a few days later the backlog had increased to $250 million, with the potential to hit more than $700 million in four years.
That was two months ago. When Democratic Gov. Michelle Lujan Grisham announced last week her support for legislation removing the cap, she also supported legislation that would pay off a – wait for it – $324 million backlog. And that plot twist raises an important question: How can taxpayers afford unlimited rebates when the amount owed keeps going up every few weeks?
New Mexico taxpayers, the people who pony up the money for the rebates, need answers before Senate Bill 2, sponsored by Sen. Nancy Rodriguez, D-Santa Fe, eliminates the cap. It makes sense to support the film industry as an important piece of diversifying the state’s economy. But public money isn’t finite, as Louisiana found out the hard way. In 2016 that state’s film incentives generated $63.2 million in taxes and cost taxpayers $282.6 million. It adopted a cap in 2017.
New Mexico’s cap was instituted under former Gov. Susana Martinez in 2011 to safeguard the state’s budget during leaner times. There’s little doubt it did what it was supposed to do. But there’s also little doubt it left the state a mountain of IOUs. Critics claim the cap led to a slowdown of film productions in the state. Hence the move to lift it.
But publications such as MovieMaker ranked Albuquerque and Santa Fe among the best cities for filmmakers in the country. The film cap could not have hurt the industry too much with that type of ranking.
Louisiana’s lessons learned and the growing N.M. IOU present strong arguments in favor of some sort of middle ground with a higher cap on the rebates. It also should include real transparency on what the industry brings to our state.
Yes, N.M. has more than $1.1 billion in projected budget surplus, but an education lawsuit ruling, struggling pension funds and deteriorated highways aren’t leaving a lot of wiggle room for film industry rebates to grow exponentially.
Sen. Rodriguez believes the legislation would help wean the state off its reliance on the oil and gas industry. OK, but we’re not showering oil and gas companies with hundreds of millions in tax rebates, and that industry puts money directly into state coffers.
Yes, film productions provide our residents with much needed jobs, albeit many of them temporary. And the industry does pump money into local economies. But how can the public know what kind of return on investment it’s getting if it doesn’t know how much the industry spends in which sectors or what it really owes? How can the state work to attract the right additional projects if it has no idea which ones brought the state the most money? Does anyone have a clue how much New Mexico will be paying out annually once the backlog is paid off?
It’s great when blockbusters such as Marvel’s “Avengers” film here. Television series like “Breaking Bad” put New Mexico on the Hollywood map.
But the public and its public servants need hard numbers to do a real cost-benefit analysis of the industry, and they deserve to have a safeguard in place when the inevitable sequel to the last economic downturn premieres.
This editorial first appeared in the Albuquerque Journal. It was written by members of the editorial board and is unsigned as it represents the opinion of the newspaper rather than the writers.