Wednesday, December 01, 2010
Film Credits Under Fire
By Dan Boyd
Copyright © 2010 Albuquerque Journal
Journal Capitol Bureau
SANTA FE — New Mexico's film tax credit is under fire again, this time in a national study that says film subsidies provide states with little bang for their bucks.
A report issued last month by the Center on Budget and Policy Priorities concluded that the tax credits offered by New Mexico and 42 other states are wasteful, ineffective and largely benefit nonresident television and film producers — a finding disputed by program supporters.
The new report casts specific doubt on a 2008 study commissioned by the New Mexico Film Office and State Investment Council. That study, performed by Ernst & Young, found that state and local governments receive a combined $1.50 in return for every dollar spent in the form of tax credits.
The new report says the Ernst & Young study exaggerated the subsidy's impact on tourism and suffered from a lack of transparency.
"In light of these upward biases and ambiguities ... it is highly unlikely that New Mexico's film subsidies 'paid for themselves' in 2007," the report says.
"Consequently, to finance these subsidies, New Mexico probably had to cut state services, offsetting at least part of the subsidies' boost to jobs, income and tax revenues to New Mexicans."
Advocates of New Mexico's film tax credit, which offers filmmakers a 25 percent rebate on direct in-state expenses such as lodging, food and vehicle rentals, said Tuesday that the report doesn't place enough emphasis on the trickle-down benefits of a booming film industry.
Jon Hendry, business agent of the local International Alliance of Theatrical Stage Employees, said Tuesday that the program was not designed to provide immediate dividends.
"The intent is to create a business environment that would help businesses make money and put money back into the state," Hendry said. "We honestly believe we're making money for New Mexico."
The new report is the latest in a string of studies with contradictory findings.
Although the Ernst & Young study said the state made money off the program, other studies, including one done at New Mexico State University, have found the economic benefit for the state to be much less.
New Mexico Film Office Director Lisa Strout said the report is not an unbiased economic study, calling it "the opinion of one individual with a political agenda."
The Center on Budget and Policy Priorities describes itself as a nonpartisan research and policy institute. The author of the report is Robert Tannenwald, a former vice president of the Federal Reserve Bank of Boston and director of the bank's New England Public Policy Center.
The Film Office has stood by the Ernst & Young study. It also claims that the film industry has helped create about 10,000 direct and indirect jobs and brought in more than $1.2 billion in direct, taxable expenditures.
The program is a big-ticket item during tough budgetary times.
New Mexico spent an estimated $65 million on film credits in the recently completed budget year and about $76 million in the previous year.
Gov.-elect Susana Martinez, a Republican, has said she plans to order an immediate review of the film tax credit program.
Meanwhile, outgoing two-term Democratic Gov. Bill Richardson has been a staunch supporter of the state's film incentives, which were created in 2002.
He has worked to bring stars such as Robert Redford to New Mexico and has been mentioned in connection with a movie industry position when his term expires Dec. 31.
While several legislative attempts to eliminate or cap the rebates have failed, Rep. Dennis Kintigh, R-Roswell, said Tuesday that he intends to make another run at scrapping the program during New Mexico's 2011 legislative session.
"I just think this is fundamentally flawed," Kintigh said. "People are starting to realize this is not sound economic policy."
A number of high-profile movies have been filmed in New Mexico in recent years, including "Transformers," "Indiana Jones and the Kingdom of the Crystal Skull" and "Terminator Salvation."
Union executive Hendry said he's hopeful Martinez — once she takes office Jan. 1 — will grasp the value of the film tax credits and said doing away with the rebates would amount to a tax hike.
"If you cut film incentives, you're raising taxes," Hendry said.
Although the latest report cited New Mexico and Louisiana as the two states that have created the most well-rounded film infrastructures, it concluded that the ultimate success of the tax credits is still uncertain.
The report argued the position that economic development funds should be spent on public infrastructure, education and public safety instead of on film tax credits.