News Column

National film producers made last-ditch effort to extend NC incentives

August 10, 2013

YellowBrix

Aug. 10--In the final days of this year's legislative session, the nation's major film and TV series producers made a last-ditch effort to extend by at least three years a state incentive program that has provided them millions in cash payments and is set to expire at the end of 2014.

They warned in a letter that inaction would cause North Carolina to lose "tens of thousands of jobs and hundreds of millions of dollars in economic investment."

The Motion Picture Association of America's senior vice president for government affairs, Vans Stevenson, wrote the letter four days before the legislature adjourned and said the General Assembly's unwillingness to extend the incentive program "is already having a negative effect on the state" and meant North Carolina "will no longer be considered for major future feature films."

The MPAA is a trade association of top production companies, including Walt Disney Studios and Paramount Pictures. The letter was addressed to Commerce Secretary Sharon Decker and copied to Gov. Pat McCrory, as well as Senate leader Phil Berger, House Speaker Thom Tillis and Tony Almeida, the governor's adviser on jobs.

But the head of the state's major film studio, Bill Vassar, said he had nothing to do with the letter, that it is not reflective of a consensus in the film industry operating in the state -- and that he was "disturbed" to hear about the MPAA's demand.

Vassar, executive vice president at EUE/Screen Gems studio in Wilmington and chairman of the Wilmington Regional Film Commission, said in an interview that North Carolina's film industry is doing well. Film supporters will hope to show lawmakers in time for next year's legislative session that extending the incentives beyond the current expiration of 2014 is good for the state, he said.

He said there was no need to try for that in the waning days of the session.

CBS' "Under the Dome" TV series has already agreed to film again at the Wilmington studio next year, and a number of other projects are underway statewide. Vassar said Fox is investing heavily in a new series, "Sleepy Hollow," that will debut in September and is being filmed in the Wilmington area.

"I have one of the biggest shows in television gearing up, 'Sleepy Hollow,' for Fox," Vassar said. "(T)hey are investing ... let's say it is a success this year. It's very unlikely that they would take this amount of money, millions and millions of dollars they have invested in sets and backlot and office setup, and move it somewhere else."

'Pretty bold'

In his letter to state leaders, the MPAA's Stevenson took a different stance on the future of "Sleepy Hollow." He said that filming was planned for 2014 and 2015 but "will be forced to relocate if the incentive program is not extended for at least three years."

Stevenson wrote that another show went to Louisiana because of uncertainty and that Disney is no longer considering the state for films.

"Governor McCrory and the General Assembly," Stevenson wrote to Decker three weeks ago, "still have the opportunity this legislative session to reverse the imminent threat of economic loss by extending the film production tax incentives for at least three years or remove the sunset of the program ..."

No action was taken by the Republican leadership before the session ended. The Republican Party in North Carolina opposes tax incentives for specific businesses such as the one geared toward the film industry.

Asked about the national organization's letter, Decker, who supports the film incentives, said: "Pretty bold, wasn't it?"

She said that she has not responded to the letter but that she believes the incentive program is good because it keeps filmmaking alive on a broader scale in North Carolina than if it were not in place. Other states offer incentives and North Carolina must compete with them, she said.

The state spent $60.5 million on the program in the fiscal year that ended June 30 and is still processing claims that totaled $69.5 million. Legislative leaders have indicated that tax changes adopted this year would provide relief to taxpayers in part by allowing current loopholes and breaks, including the film incentives, to expire as scheduled.

Decker said she is already thinking of finding sources of money other than general taxes to fund the program.

"We've just got to figure out a new way to go about this," she said. "Because there's certainly not an appetite for what we need to do to be competitive."

Decker said she was speaking only for the Commerce Department and not the McCrory administration. The governor has not taken a position on film incentives, according to his office.

Rising cost, more movies

Some lawmakers have said they plan to study the film incentive program between now and the next session, which begins in May.

Sen. Bill Rabon, a Republican from Southport, said he thinks the General Assembly will "take it up" again next year. The incentive issue cuts across party lines and has diverse factions for and against it.

Film incentives have garnered much more attention since 2010, when lawmakers and then-Gov. Bev Perdue expanded the tax breaks after losing a feature film to Georgia. They made changes to pay 25 percent refunds on film spending in the state to production companies. Taxpayers, for example, now pay up to $250,000 to offset an actor's wages.

The incentives are not tied to job creation, and there is no cap on how much the state will spend in a year, though any individual project is limited to a $20 million refund per year. The incentive is seen as one of the most favorable programs for filmmakers in the nation.

The moves attracted much more film activity. Film advocates emphasize that the incentive lures spending on workers, vendors and goods such as lumber and hard drives needed for filming. They say it has led to hundreds of millions in economic activity, brought recognition to the state and sustained an industry with as many as 4,000 employees here.

Taxpayer refunds to the film companies also shot up: The payments have gone from $6.9 million three years ago to about nine times that in the most recent period.

Critics of the film incentives say the money could be spent better elsewhere or to provide across-the-board tax relief that would also generate jobs. A legislative staff study concluded just that -- more jobs would be generated by a tax cut of the same amount.

Lawmakers have pointed to the study as reason for caution. Commerce officials have not publicly criticized the study.

But one of Decker's employees, film office director Aaron Syrett, wrote in an email message about the study that "it is laughable it is so wrong."

Curliss: 919-829-4840

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(c)2013 The News & Observer (Raleigh, N.C.)

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