Monday, January 19, 2009

Lights. Cameras. Subsidies?

Everyone else feels entitled to a government handout; why not Hollywood?

The movie and television industry last week began lobbying Colorado legislators to subsidize filming in the state, reports The Rocky Mountain News, arguing that other states are going it and our failure to follow suit will cost us economic development dollars. But this is one idea I hope Colorado leaves on the cutting room floor.

I object to this in principle, but there are practical questions, too, about whether giving handouts to Hollywood really pays dividends. I’ve seen nothing indicating that show biz is suffering recession-related hardship. And even if it is, it ranks low on the list of American industries one might classify as “too big to fail.”

The jury is still out on whether this form of corporate welfare delivers the economic benefits that backers promise. In New Mexico, which began subsidizing the film industry in 2003, two recent reports paint starkly different pictures of the situation. One study, commissioned by the office of Gov. Bill Richardson, a film subsidy supporter, found that the strategy is paying off, bringing in an estimated $1.50 for every dollar doled out. But that’s contradicted by another analysis, done for the Legislative Finance Committee by The University of New Mexico, which found that the state gets about 14.4 cents in tax revenue for every dollar it spends on these efforts.

The study commissioned by the governor’s office might be slightly more suspect, given the political and economic capital Richardson has invested in the issue. But even that report concedes that the direct economic benefits don’t make up for foregone tax revenues, dollar for dollar. It manages to find a net benefit by estimating the present and future impact of "film tourism.”Does anyone really choose New Mexico as a vacation destination because some scene in an Indiana Jones movie was shot there? Could be. But this seems a slender thread on which to hang a program that has handed out an estimated $67 million in tax breaks since 2003 -- in a state that’s facing a $450 million budget shortfall. And does Spielberg really need the handouts? I think not.

While Hollywood welfare still has many boosters, the fiscal squeeze is prompting second thoughts in many states, according to a recent piece in The New York Times. A cost-benefit analysis of one film shot in Wisconsin (another state that offers subsidizes) found that it was a virtual wash, according to The Chicago Tribune, stirring debate about whether the program should continue. Florida slashed its subsidies, which has the industry working furiously to restore them. And in Michigan, where the economy is in the dumper and existing businesses are being pummeled by higher business taxes, some legislators want to cap the subsidies, while economically-desperate cities like Detroit and Bay City pin false hopes on becoming the next Tinseltown.

I’m not saying Detroit isn’t a suitable location for shooting movies – especially if they ever get around to making Omega Man II. But how many post-Apocalyptic backdrops does Hollywood need? Telling shell-shocked Detroiters that they’re on the brink of becoming another Hollywood borders on cruelty, given all the other empty promises they’ve endured. The Mackinac Center for Public Policy, a conservative Michigan think tank, has been asking hard questions about where the money is going -- here and here – but has had a hard time getting straight answers or reliable data from the state’s film promotion office.

How much gaming of the subsidies is going on is anyone’s guess, but it's almost certainly occurring. Manipulation of Louisiana's film-fare program already has led to one case of criminal corruption, in which New Orleans lawyer and film promoter Malcolm Petal pleaded guilty to federal corruption charges for bribing the state's top film official. “To get artificially inflated tax incentives on a festival film project, Petal paid $135,000 to Hammond attorney William Bradley, who acted as an intermediary to pass half that amount to the state's former movie-business recruiter Mark Smith,” according to the New Orleans Times-Picayune.

That's probably just a preview of coming attractions -- and potentially costly future distractions -- if Colorado legislators head down this road. Backers of film-fare promise an economic blockbuster, but, like virtually everything else that comes out of Hollywood, it's mostly fantasy and hype.


Paul G. said...

Thanks for your interesting and insightful comments on the New Mexico film industry. I blogged about your posting at:>.

Anonymous said...

It's easy to see where the disparity is in the two reports. The $1.50 is dollars spent in the state by the film folks. The $.14 is how much tax revenue the state gets, so that's only the amount of state tax paid on the money spent. I own seven motels in New Mexico and last year had over $150,000 spent in them by groups filming. And, those folks eat food and rent cars and buy stuff. How much does all that contribute? I think it's well worth the cost.