Inside the Capitol

Saturday, July 14, 2012

7-18 Finding the sweet spot for Hollywood incentives

71812 films

SANTA FE – Film industry results are now coming in for the state's fiscal year which ended June 30. They reveal a considerable drop off in activity since a cap was put on the 25 percent rebates that film companies receive.
The 2011 Legislature, at the behest of Gov. Martinez, placed a $50 million cap on reimbursable expenses in the state along with stricter limits on what could be reimbursed. Martinez was worried that with a very tight budget, money could not be found for rebates.
In addition to wondering whether the rebates do us any good, Gov. Martinez was worried about the uncertainty of how much in rebates the state would have to pay out. In the last year of Gov. Bill Richardson's administration that figure was a little over $100 million.
The $50 million cap did its job. It appears only about $20 million will be paid out for last year. That is great for the budget line item for rebates. But it also means that income to the state, businesses and individuals from the film industry took a huge hit.
The Santa Fe New Mexican reports that only four productions are working in the state at this time. In contrast, Louisiana has around 24 productions. That makes their rebate budget very high. But it is like some business managers I have known who notify their sales force that the budget for their commissions has run out because they have done such a good job.
New Mexico Film Office Director Nick Maniatis is quoted in the New Mexican as saying that our state is in a sweet spot because we are not giving too much and we're not giving too little. It appears that sweet spot has us sinking rapidly.
Maniatis says the state is just in a temporary lull and next year we will be packed. Maybe so, but the film industry is accustomed to moving around to the state that will give them the best deal. There is nothing wrong with being careful. Big state investments in solar companies currently are going down the drain and we've seen State Investment Council and retirement fund investments in the Richardson administration that were bad from the start.
But the due diligence the Martinez administration tried to exert has spooked film makers. We've heard before that business doesn't like uncertainty. In trying to create certainty in our state budget process we have transferred the uncertainty to film companies.
The rebate cap is complicated. For bigger productions, the rebate is paid out over two or three years. It also is necessary to stand in line. If the rebate money is used up, a company has to wait until the following year. State officials say film companies have trouble understanding the system and in turn, the companies have trouble explaining it to potential investors.
And the problem goes deeper. Last year Gov. Martinez was very negative toward the industry. Hollywood is taking money away from New Mexico's children, she would say. This year she is much more supportive. But it doesn't appear her heart is in it.
Former Gov. Richardson was enthusiastic about the industry. He traveled to Hollywood to romance studio executives. He invited them to New Mexico and entertained them at the governor's mansion. Gov. Martinez doesn't even talk to them. She leaves that to staff members even when top executives come to Santa Fe expecting to see her.
There's more. The governor has been hesitant about honoring rebate contracts signed with companies when there was no limit. Lawsuits are threatened. Word gets around.
A major study of film incentives' value to the state is getting started. It is badly needed. But it would be nice if another state would do it since no one is quite sure of the value. The mere fact that we are doing the study is said to be scaring people off.
Finding the sweet spot is difficult.


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