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Take 2

FOR THE RECORD – This story incorrectly described Intel as a software giant; Intel is in the computer chip-making industry.

SANTA FE — From studio work on “The Avengers” in Albuquerque to political theater in the state Capitol, it’s been a roller-coaster year for New Mexico’s film industry.

New Mexico is faced with increasing competition from other states and newly imposed restrictions on film incentive spending. A new generation of state government officials are banking on scenery, studios and a solid reputation to keep the state’s grip on the rungs of Hollywood’s A-list.

But the future is far from certain. Just ask “The Lone Ranger.”

A film remake of the popular Western TV series was on tap for filming in southern New Mexico, but budget concerns reportedly halted a “Hi-yo, Silver” earlier this year.

More recently, the film’s producer said an agreement had been reached, though the backdrop for the movie — featuring Johnny Depp as Tonto — might be at least partially shifted to Louisiana because it offers more generous film incentives than New Mexico.

Nick Maniatis, the director of the New Mexico Film Office, doesn’t dwell on such comments, saying it’s not all about the numbers.

“Sure, the bottom line is money, and studios are going to find what they feel is the best place for their film to be shot,” said Maniatis, who was appointed to his position by Gov. Susana Martinez’s administration in June.

However, he said New Mexico still ranks as a top 10 filming destination in the United States.

“We’re still top tier, and it’s because we still have a great incentive program, we have top-rate facilities, we have an incredible crew base — talented and deep — and we have proximity to Los Angeles,” Maniatis said. “All these things help us as a state. It’s more than just a tax incentive.”

While the ultimate effect of this year’s changes to New Mexico’s film rebate program remains unclear, Maniatis and some industry insiders say lights and action are increasing after a quiet summer.

But those who rely in large part on the film industry to make ends meet say they’re still waiting.

Katie Douthit, a Santa Fe makeup artist who has worked on a number of movie sets in the past 20 years, described the current film landscape as “not good at all.”

“I have worked eight days all year, if that tells you anything,” she said. “It hasn’t been this down since the (film) incentives took effect.”

Though her work in recent years fluctuated, Douthit said that, in some years, she has worked 90 days or more on film productions.

Hollywood ‘subsidies’

Martinez, the state’s first-term Republican governor, spearheaded an effort to reduce the film incentives — which offer a 25 percent rebate to film companies for most direct, in-state expenditures — during this year’s legislative session.

Martinez claimed the “Hollywood subsidies” cost the state money that could otherwise be spent on public education.

After much political wrangling — and industry claims that an annual cap on rebate dollar amounts would be a “job-killer” — lawmakers eventually approved a measure that enacted a $50 million annual cap on the rebates, as well as other restrictions.

That led to a rush from film and television projects to file for rebates before June 30, the date the new law took effect.

New Mexico ended up paying out $102 million in the budget year that ended in June, the most the state had ever shelled out in yearly film incentives. Just five years earlier, the state paid less than $8 million in film rebates, according to the Taxation and Revenue Department.

All parties seem to agree the immediate fallout from the tense negotiations at the Roundhouse in Santa Fe was a sharp downturn in movie-making activity.

With uncertainty hanging over New Mexico’s film incentive program this spring, many film studios opted to shoot summer productions elsewhere, said Jon Hendry business agent for the International Alliance of Theatrical Stage Employees Local 480.

“What it was, was the rumor the 25 percent was going away or was going to be reduced,” said Douthit, who also teaches at the film training program at Santa Fe Community College but has been on unemployment for much of the year. “That scared people away.”

Maniatis acknowledged the downturn, but said the film industry is returning to New Mexico as the political dust settles.

The Film Office is in discussions with 10 to 13 potential television shows and film productions, and there’s been a recent uptick in location scouting, he said.

“I think we’re doing better than most people think,” Maniatis said. “There was a natural slowdown when there was some uncertainty about the tax incentive, but we’ve seen that change, I would say quite dramatically, in the past couple months.”

Balancing act

This week, Senate Majority Leader Michael Sanchez, D-Belen, got a chance to see his hometown in a whole new light.

Several building facades have been built along Belen’s Becker Avenue for filming of the “The Last Stand,” an action flick starring Arnold Schwarzenegger as a small-town sheriff near the U.S.-Mexican border.

Sanchez, who toured the set with Hendry and others, visited with the movie’s producer and director and came away impressed, though slightly unsettled.

“They were pleased with the state of New Mexico, although they expressed concern about the cap and said it may lead to studios not coming into New Mexico,” Sanchez said. “It’s a big concern to me. They said specifically this one almost didn’t come here because of what was happening.”

Sanchez, who has butted heads with the Martinez administration on other high-profile issues, said he told the producer and director of “The Last Stand” — one of three film or TV projects now active in New Mexico — to invite the governor to the set.

“I hope the administration will be objective and meet with these people if the offer is made,” he said.

Martinez did not attend a Wednesday grand opening of Santa Fe Studios, which features two 18,000-square-foot stages, due to scheduling conflicts. But a spokesman for the governor said Martinez isn’t worried the film incentive cap might hurt the state’s economy.

“The governor believes the incentives remain highly competitive, and she believes New Mexico’s workforce, weather and scenery provide an ideal environment in which movies and TV productions can be filmed,” Martinez spokesman Scott Darnell said. “Fortunately, the new law finally establishes predictability in the state budget, which allows us to better fund important priorities, such as education reform efforts to improve student achievement.”

Martinez has also been sending out a letter to film executives, explaining the recent changes to the incentive program and asserting that she’s committed to the industry’s “ongoing success” in New Mexico.

Changes elsewhere

While hotly debated, the changes to New Mexico’s film incentive program weren’t as extreme as the changes enacted this year in other states.

Michigan put its previously robust program on hold after Gov. Rick Snyder, also a Republican, called for it to be scaled back.

Utah beefed up its incentive package by increasing the size of film rebates from 20 to 25 percent.

New Mexico was a trailblazer of sorts when it first started approving film incentives in 2002, and labor leader Hendry said other states might now follow New Mexico’s new direction in how film incentives are administered.

In a report circulated to film industry insiders, Hendry said it’s not practical to ask the Legislature for any more financial sweeteners after this year’s changes. Instead, he urged colleagues not to panic, claiming the state’s incentives are easier to understand than most and, even with the annual cap, they are more generous per capita than those offered by larger states such as California, New York, Florida and Pennsylvania.

“We were the first ones to put in film incentives — along with Canada — and everyone else responded to us,” Hendry told the Journal.

In all, 42 states now have active film incentive programs, including New Mexico neighbors Colorado, Texas, Oklahoma and Utah.

The ever-changing national film incentive landscape reflects an ongoing disagreement over the effectiveness of using tax rebates or exemptions to stimulate economic growth.

Two studies of the impact of New Mexico’s film incentives had different conclusions: One found the rebates bring in more tax revenue than they cost the state; the other concluded the state receives just 14 cents in revenue for every $1 spent.

A new study, mandated by the Legislature, is expected to be completed by January.

Not black and white

With several film studios, including the newly opened Santa Fe studios, and a growing number of training courses for aspiring filmmakers and technicians, some industry backers say New Mexico is well positioned for the future.

Others say the state is slipping.

Film producer and entertainment lawyer Martin Barab, who splits his time between Los Angeles and Santa Fe, believes the state should maximize its competitive advantage by retooling its film loan program, a separate tool from the rebates.

The loan program now offers film and television productions loans of up to $15 million, but the loans must be paid back with interest after the State Investment Council tweaked the program earlier this year.

No loans have been issued by the state since October 2008, when $15 million was given to the Denzel Washington movie “The Book of Eli.”

Barab, who produced such movies as “Piranha” and “State and Main,” said states such as Florida and Louisiana have benefited from the tightening of New Mexico’s film incentives, both the loan and rebate programs.

He recently said the state should make it easier for smaller-budget film and television productions to receive loans and has offered to serve as a film adviser to the state.

“This state was a pioneer, but it’s lost its edge,” Barab said.

Big bucks

Big-budget films such as “The Avengers,” “Cowboys & Aliens” and “Terminator Salvation” can pump millions into local economies.

In the case of “The Lone Ranger,” the film and its possible sequels could represent an economic impact of an estimated $1 billion over several years, Hendry said.

“That’s an Intel plant a year,” he said, referring to the software giant with a Rio Rancho facility. “That’s important for New Mexico, but we don’t want to give away the store for it.”

However, it has been difficult to gauge an individual film’s impact since the inception of the state’s incentive program because state law treats filmmakers’ applications and expense records as confidential taxpayer information.

Film industry insiders predicted earlier this year that the number of applications filed in the current budget year — which ends in June 2012 — would be deflated due to the rush to file before the new law took effect and might not even end up hitting the $50 million limit.

Maniatis said the New Mexico Film Office is estimating the amount of approved rebates at $31 million for the budget year.

Under the new system, the $50 million available annually will be paid out on a first-come, first-served basis. Some payments will be spread out over three years, depending on the size of the rebate.

While formally called a “tax credit,” the rebates actually function as a type of voucher. An application must be filed with the state and all receipts have to be submitted before a production can be eligible to receive a reimbursement.

Based on the new law, if the $50 million in yearly spending runs out, any subsequent film or television productions that have their applications approved will automatically be placed at the front of a queue for the next budget year.

“I don’t think we’re going to have cap issues for a number of years,” Maniatis said.
— This article appeared on page A1 of the Albuquerque Journal