Too Much Spent on Movie Studios?

Thursday, October 15^th, 2008

Baton Rouge, Louisiana

LOUISIANA IS HOLLYWOOD EAST

BUT PAYING ONE HECK OF A PRICE

 

How much is it worth for Louisiana taxpayers to have movies made throughout the state?   Apparently, quite a lot.  Recent studies have shown that for every new dollar created in jobs, equipment, catering and all the spin off income, Louisiana tax payers are paying out four times that amount. Bring a dollar in and pay from the state treasury four dollars out.  What kind of deal is this?

A few years ago, the Louisiana Legislature authorized a program to offer significant subsidies to motion picture producers who shoot their films in the state.  The program was designed to increase local film production, and producers from all the big Hollywood studios rushed to cash in.  Louisiana’s Office of Economic Development has bragged for years about all the new jobs the program created, and the domino effect of dollars being spent in the state.  But no one recently has put a pencil to the bottom line.  Neither Louisiana’s taxpayers, nor few in state government, have any idea how of just how much this program is really costing.

Brad Pitt has a new movie coming out soon titled “The Curious Case of Benjamin Button” that was only partially filmed in Louisiana.  Yet the movie will receive a Louisiana tax subsidy of $27,117,737.  The entire budget is $167 million, and just last week, the New York Times called the cost to Louisiana taxpayers “shocking.”Â  So the question is whether this glamour business is bringing economic development to Louisiana, or is the state getting little more than momentary glitter?

 Louisiana also has a reputation in Hollywood of playing fast and loose with the rules in place.  The program’s director until last year pleaded guilty to taking $67,000 in bribes to inflate budgets for film production.  The higher the budget, the more the program costs taxpayers. 

And get this.  Until a year ago, a production company filming in Louisiana could get tax credits for work done outside the state.  So we are talking here about inflated budgets and work done outside Louisiana, all underwritten by Louisiana taxpayers.  Is that a good deal or what?

Two years ago, the legislative fiscal office in Louisiana did a study showing that gross tax revenues from all movie production sources, including jobs, rentals, catering, and all other spinoffs brought in a total to the state of approximately $50 million.  Only half of this sum went to the state treasury, where the other half went to the coffers of local government.  But the tax credits for all this work, money taken away from the state treasury, totaled $232 million.  So the state brings in 25 million, and pays out 232 million.  That’s an eight to one ratio negative to the bottom line. What am I missing here?

But it gets even better (or worse if you are a Louisiana taxpayer).  These tax credits are transferable and for sale to anyone in the state that needs a big tax write off.  The tax credits are either sold directly or through a broker.  These brokers charge a fee of 20%, keep 10%, and sell the tax credit for 90%.  So someone that has nothing to do with the movie industry is paying a discounted rate for a tax credit that helps them avoid their state taxes.

The Executive Director of the nonprofit Massachusetts Policy Center issued a report recently that stated: “There is no evidence yet that this is an efficient or effective way to create jobs.”Â  The study went on to point out the tax credits in most states are four or five times higher than that offered to those who build in designated economic opportunity areas, and often more than eight times greater than the standard investment tax credit.

So far, Louisiana legislators have shown little interest in reviewing the economic impact on the state’s treasury.  One voice raising questions is that of Greg Albrecht, who is the chief economist for Louisiana’s legislative fiscal office.  “There’s no way you can say this makes money for the public treasury,” he said recently.  “It’s an expensive way to create jobs.  We can afford it now because of the rising oil and gas revenue.  We’re happy as larks right now to do this,” he says.  But he shares concerns about the future.

The director of Louisiana’s Office of Entertainment Industry Development sees it differently.  “All areas of the state have prospered as a result ““ everyone sees it,” said Sherry McDonnell.  But she admitted that there are no current figures by which to judge the economic impact to the state, although there is a planned study that is supposed to be ready next year.

Forty states now offer various subsidies and brag about their low ““ cost production sites.  With so much competition, any study to be made about the financial impact in Louisiana should look at whether giving such abundant tax breaks makes it economically feasible to offer such attractive incentives.  With Louisiana taxpayers having to help bail out Wall Street and taking quite a hit in their own pocketbooks, the state cannot afford the luxury of trying to paint itself as Hollywood East unless the bottom line makes sense.  And right now, the financial benefits look questionable.

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“The problem is not that people are taxed too little, the problem is that government spends too much.”

 Ronald Reagan

Peace and Justice

Jim Brown

JIM BROWN’S NEW BOOK NOW AVAILABLE

That’s right.  Jim’ NEW book is now in print and available for your review.

It’s called:  “Adventures in an Alternative Reality of Living in Louisiana-Enter at Your Own Risk.”

Quite a title.  You can check out the new book, and find out how to order it by simply going to his publishing site at http://www.authorhouse.com/bookstore/ItemDetail.aspx?bookid=54455

The book is a continuation of Jim’s perspective, often zany and offbeat, but full of “on the mark” insights of Louisiana political and social life.  So give it a look.  It’s available in both hardback and paperback.

 

Jim Brown’s column appears weekly, and is published on a number of newspapers and websites throughout Louisiana.  You can read past columns by going to Jim’s website at www.jimbrownla.com.     Jim’s regular radio show on WRNO, 995fm out of New Orleans can be heard each Sunday from 11:00 am till 1:00 pm.