Variety is reporting that construction is due to begin today (22 April) on a new studio in Shreveport, Louisiana. The studio is being built by Nu Image/Millennium Films, which has already made five feature films in the city since October 2006: Blonde Ambition and Major Movie Star both starring Jessica Simpson, Mad Money, My Mom’s New Boyfriend, and Cleaner.
The new studio was only made possible through the generosity of Louisiana taxpayers; it is reported (by Melody Brumble of Associated Press - “Shreveport residents moved to make way for film studio”, 22 March 2008) that Nu Image/Millennium Films will receive up to US$4.8 million in tax credits over the next five years in return for its $10 million investment in the studio.
Millennium received pre-certification for up to $4.8 million in tax credits in October [2007], but it must spend at least one-fourth of the total project cost before receiving the first round of credits. The credits will be paid out over five years, with more than three-quarters of the payout scheduled in the first three years.
The development highlights the growing practice of governments providing tax credits, low-interest loans and other forms of incentives to production companies to secure production infrastructure and film projects. Almost forty US states now offer some kind of production incentives. And the cost to the public purse is not limited to these incentives to production companies; the city, through the Shreveport Housing Authority and the Community Development Department, bought up land and properties at the site and is providing housing vouchers and paying relocation expenses including utility deposits for residents of the Pendleton Apartments building which is being razed to make room for the studio.
For many governments, such developments are opportunities to ‘revitalise’ or remediate or rebuild urban areas, although the long-term benefits to the community are moot. In her chapter in the forthcoming book Cross Border Cultural Production: Economic Runaway or Globalization? (eds Janet Wasko and Mary Erickson, Youngstown, NY: Cambria Press), Susan Christopherson notes:
In her State of the State Address in January 2005, Louisiana’s governor, Kathleen Babineaux Blanco, said that Louisiana’s $73 million growth in tax revenues in 2004 would be unavailable for teacher raises because it would,instead, fund the (currently) $70 million film tax credit program (p.68)
In another chapter of the book Shenid Bhayroo and Eileen R. Meehan (”The Other L.A.: Louisiana Woos Hollywood”) describe the development and implementation of Louisiana’s generous film incentives program. (I also have a chapter in the book, co-authored by Tom O’Regan, entitled “International Film Production: Interests and Motivations”.)
Earlier this month, the state of Michigan introduced a 40% rebate on production spending, and tax credits for expenditure on production infrastructure. Michigan’s governor, Jennifer Granholm, described the state’s incentives as the most “aggressive” in the country. Louisiana offers a 40% tax credit for studio development, although the scheme has been compromised by developers including golf courses, hotels, and retail stores in their applications for the credits. The credits can be used to reduce the developer’s state income tax liability, or they can be sold often at a discount to brokers acting on behalf of (non-film) investors to reduce their income tax payments.
The Shreveport studio development comes less than a year after plans for a $185 million studio in New Orleans were shelved following the arrest of Louisiana’s former film commissioner on suspicion of taking bribes in return for inflating the value of state tax credits. The Times-Picayune newspaper reported on 4 April that Mark Smith pleaded guilty to accepting bribes in September 2007, and was due to be sentenced earlier this month. Sentencing was postponed until the end of July as the FBI’s investigation into the state’s incentives program is still ongoing. There is no suggestion that Nu Image/Millennium Films were in any way involved in this case.
The Louisiana state legislature enacted a 40% tax credit for production infrastructure built in the state after 1 July 2005; the scheme has recently been overhauled after the Louisiana Economic Development Foundation received 34 applications for a total of $3.9 billion (see Gary Perilloux “State Hones Film Rules” The Baton Rouge Advocate 25 Jan 2008). Eligible film productions can also claim a 25% tax credit.
In an article in the Boston Globe (”Show Me the Money” 17 April 2008), Bruce Mohr describes how the credits work:
Traditional tax credits reduce how much tax a company has to pay on its profits. They are of little value to movie production or life science companies that often wait years before turning a profit. What these companies desperately want is to monetize their tax credits and turn them into cash. Refundable or transferable tax credits allow them to do just that. In essence, the more money a company spends on a targeted business activity the more money it gets back from the state.
The 25 percent film tax credit is a perfect example. A movie spending $20 million here [Massachusetts] would receive credits worth $5 million that could be sold to someone who owes taxes in Massachusetts or sold back to the state at 90 cents on the dollar. Either way, the production company walks away with cash that helps defray the cost of the movie.”It’s free money,” said John Hadity, a former Miramax executive who now runs a New York consulting business that helps studios maximize the tax credits states are showering on them. “Credits have become the math for making films.”
Nu Image/Millennium Films also owns the NuBoyana Studios (the former Bulgarian national film studio), where Brian DePalma’s The Black Dahlia was shot in 2006. Last year the company built a giant New York backlot in Bulgaria.
