Stateline Story

Star-Struck States Sweeten Film Incentives

  • February 21, 2008
  • By Daniel C. Vock
  How film incentives work

Along the desert outskirts of Albuquerque sits a collection of cavernous buildings the size of airplane hangars, some more than six stories tall. Built for $75 million, with another $15 million expansion in the works, they house make-believe worlds - city streets, basketball arenas, stately mansions or even mountainsides (complete with trucked-in snow). Anything a movie producer might desire.

In short, Albuquerque Studios, which opened in June, is the crown jewel in New Mexico's efforts to attract big money from the film industry. New Mexico's top politicians and film experts lured the facilities with what the developer called "visionary" incentives, including tax rebates, no-interest loans and training credits. Now, the studios will play a key role in the state's strategy for making sure the industry keeps coming back to New Mexico for a long time.

New Mexico was the second state (after Oklahoma) to pursue film projects with tax breaks, and its efforts have paid off handsomely - in both money and prestige. The film industry spent $476 million in the state last year, compared to $1.5 million in 2001, the year before it enacted film tax incentives.

Come Sunday (Feb. 24), New Mexico may even be able to brag about an Oscar or two. Four films nominated for Academy Awards this year were shot in the Land of Enchantment: "No Country for Old Men," "3:10 to Yuma," "In the Valley of Elah" and "Transformers."

The new movie studios, and others like them across the country, are the latest carrot some states are offering to snare movie business from other states offering increasingly more generous tax breaks.

States such as New Mexico, Louisiana and Massachusetts, many of which already attracted lots of film business with their tax incentives, are natural places for the new studios. Film crews are already familiar with the states, and they have plenty of financial motivation to stay. The studios draw bigger, longer-term projects and sometimes spawn permanent production crews who live nearby.

In December 2006, Louisiana had six sound stages, but it had enough work to support 10 that year, according to a studydone for the state.

Pennsylvania and Rhode Island are on track to get state-of-the-art studios soon. Pacifica Ventures , the real estate developer responsible for Albuquerque Studios, has announced plans for film facilities in those states.

And a group of studio executives are considering building a new movie facility at a former naval base in Massachusetts, if the state will extend the same tax breaks to the film industry as it gives to manufacturers.

"Infrastructure allows a state… to draw real production - big time production - that doesn't just swing in for three weeks and shoot second-unit stuff," said Jeremy Hariton, senior vice president of Albuquerque Studios. "They actually move in for six months and use the local restaurants and stay in homes and patronize businesses and do the kind of stuff that really leaves dollars in town."

In Louisiana, the tax incentives were so successful they set off a building spree by private investors that may leave the Bayou State with a glut of facilities.

A state study by the Chicago firm Economic Research Associates determined Louisiana would need up to 15 sound stages to meet demand in the coming years, compared to the six it had at the time. But with the state, in essence, paying up to 40 percent of the cost of new projects, developers rushed to plan another 32 sound stages by 2010 to meet the anticipated demand.

"Clearly, it is unlikely that all of these developments will be supportable in the marketplace," the study concluded.

But with some states successfully pulling hundreds of millions of film dollars into the local economy, the tax incentive derby shows no signs of stopping.

Last Thursday (Feb. 14), Indiana lawmakers overrode a veto from Gov. Mitch Daniels (R) for the first time, approving a $15 million film incentive package. Wisconsin's first-ever incentives went into effect at the beginning of the year.

Michigan Gov. Jennifer Granholm (D) suggested during her Jan. 29 State of the State speechthat Michigan offer "the most robust incentives in the nation," perhaps as high as 40 percent.

Other factors have also steered film business to the states. The federal government started offering its own tax incentives in 2004, allowing film producers deductions on their federal taxes as well. Meanwhile, a weak U.S. dollar has made filming abroad in Australia, Western Europe and Canada considerably more expensive than staying in this country.

But the incentives don't always guarantee filmmakers will come.

"If you're going to have to bring your entire crew to Connecticut, you may get a credit. But you're also housing your entire crew and feeding your entire crew," said Joseph Chianese, a vice-president of the Los Angeles consulting firm Entertainment Partners.

That's why Lisa Strout, director of the New Mexico Film Office, said her state's pitch to filmmakers offers more than its generous film production rebate, which effectively reimburses film companies for 25 percent of the amount they spend in New Mexico. She touts the largest number of local crew of any state between the coasts, with 1,800 local people in the industry.

She also points out that New Mexico's varied landscape (including deserts, mountains, prairies and cityscapes), is so diverse it doubled for seven states in one movie.

"This is new money coming into our economy. All the crew that I see have new trucks, they're buying homes, they're sending their kids to college. It's the way you want it to work," she said.

New Mexico plans to study the overall economic impact on the state, but economists often estimate that local economies get a boost of $1.50 to $3 for every $1 spent by the film industry, Strout said.

There's one fan who's clearly reveling in New Mexico's film heyday: recent presidential candidate Gov. Bill Richardson (D). The governor, who's in Hollywood talking to TV executives this week, ran a Western-themed TV ad during his 2006 re-election bid that highlighted the movie boom. As he rode off into the sunset on horseback, he told his companions, "Next time, let's make a space movie."