News Column

Budget deal includes $10 million for film incentives

July 29, 2014

By Hunter Ingram, Star-News, Wilmington, N.C.

July 29--Maybe too little, too late.

That's what film advocates were saying after state House Speaker Thom Tillis, R-Mecklenburg, and Senate Leader Phil Berger, R-Rockingham, on Tuesday announced that the budget compromise they crafted over the weekend includes $10 million for the state's film incentive program. The proposal, which would cover the period from January through June, also turns the film incentive from a tax credit to a grant program.

"We are saddened by this $10 million appropriation," said Katy Feinberg, spokeswoman for the N.C. Production Alliance, which represents the state's film community. "However, the end credits on this legislative session have not rolled yet. We're hopeful that leadership can find their way to a more competitive compromise to keep North Carolina families gainfully employed by the film industry."

State Rep. Susi Hamilton, D-New Hanover, said the current proposal would deal a heavy blow to the state's film industry and community.

"If this stands as it is now, we will have effectively eliminated 3,000 film jobs," she said.

But several officials hinted that the battle to secure funding for the film program wasn't over yet.

State Reps. Frank Iler, R-Brunswick, and Ted Davis, R-New Hanover, said other avenues -- such as bills still working their way thorough the General Assembly -- were being looked at to see if they could be used to find additional funding for the program.

Bill Vassar, executive vice president of EUE/Screen Gems Studios, said such an approach has worked before.

"In the waning moments of the past legislative sessions, film has been recognized as an important economic engine to the North Carolina economy," he said in a statement Tuesday afternoon. "We are hopeful for similar results in this session before the end of this week."

But whether such an approach could work this time when the voices against film seem more entrenched remains to be seen, especially with legislators eager to adjourn for the summer and most of the "heavy lifting" for the budget already done.

About the only certainty Tuesday was that the language in the budget compromise bill would do little to promote North Carolina as a film-friendly location.

"I'm not happy about the program that's being talked about," Iler said. "That's not what we wanted."

Davis echoed the sentiment.

"It ain't over until its over," he said. "The fat lady isn't singing, but she's warming up."

The current film incentives package, which has no maximum amount the state can pay out in a single year, allows production companies to claim 25 percent of their qualifying expenses up to $20 million for production companies that spend at least $250,000.

Economic impact

While the inclusion of the money in the compromise budget does keep alive the state program that was set to expire at the end of the year, it won't come close to matching the amount North Carolina paid out to film and television productions last year. That, film backers fear, could send productions flocking to states -- like Georgia and Louisiana -- that offer more lucrative incentive programs.

In 2013, the film industry spent $244 million in North Carolina with more than 30 qualifying productions receiving just over $61 million from the incentive program, according to film audit reports. The previous year, the local industry's biggest, saw $334 million in spending and $83 million in tax credits.

But the program's lack of a cap, along with the idea that the state is picking "winners and losers" in business, has rankled some Republicans.

Many conservatives also see film jobs as temporary jobs, not the permanent types worthy of public subsidies.

But the incentive program, film advocates note, has helped North Carolina become one of the top production locations in the country -- with most of that work centered in and around Wilmington.

Johnny Griffin, director of the Wilmington Regional Film Commission, said the budget bill's small appropriation is "woefully inadequate" and fears that it won't be enough to maintain the industry's current business or grow productions.

"Even if it did cover the returning productions, we wouldn't be able to talk with our clients about any new projects," he said.

Griffin said that based on his office's calculations of current projects and the likelihood of their return business, the incentive would need to -- at minimum -- offer $40 million in funds to maintain what the industry already hosts.

"So to see that $10 million figure is concerning," he said.

'A bunch of options'

With only a small pool of incentive funds for the first half of 2015 and the specter of another bruising legislative fight to keep the program going for the 2015-16 fiscal year, the local film community is awaiting news on if production companies will pack up projects and head for more enticing incentives.

At the Television Critics Association summer press tour in Los Angeles earlier this month, "Sleepy Hollow" executive producer Alex Kurtzman said that no decision had been made about the show's future presence in North Carolina, only noting that the network and the producers are "exploring a bunch of options."

Producers for CBS' "Under the Dome" are also keeping an eye on the incentive battle.

Also speaking to the media at the TCA summer press tour, David Stapf, president of CBS Television Studios, said the "looming" issue has yet to sway their decision one way or the other.

Host of plans

Tuesday's announcement was on the low end of the proposals that had been floated in Raleigh to keep the incentive program going.

Pro-film legislators, mostly from the Wilmington area, had first submitted a House bill that would extend the existing film program until 2020. But that quickly became a nonstarter among the chamber's Republican leadership.

That was followed by a proposal by Gov. Pat McCrory to reshape the incentive program more toward one that promotes long-term capital investment by the film industry with long-term job potential.

State Sen. Bill Rabon, R-Brunswick, then proposed establishing a $20 million "grant" program for film. That's believed to be the basis of what is in the compromise budget bill, although the details won't be released until Wednesday.

Finally, Davis in early June proposed an amendment to a budget bill that would have reduced the tax credit from 25 percent to 22.5 percent, and lowered the per-project payout cap from $20 million to $15 million.

But the amendment failed in a committee vote.

Weeks of budget gridlock followed before a compromise was reached last weekend -- one that offers little for film supporters to smile about.

"We're disappointed; $10 million is an inadequate amount," Wilmington Mayor Bill Saffo said. "We won't be able to increase the business and it's going to be tough to keep the business we have.

"It's not good, not good at all."

Gareth McGrath: 343-2384

On Twitter: @Gman2000

Film expenditures and tax credits

The budget compromise earmarks $10 million for the state's film incentive program for the first six months of 2015. Here are what a few local productions in recent years spent and how much they received back in tax credits from the state.

Film productions

"Iron Man 3:" $81 million / $20 million

"We're the Millers:" $21 million / $5.2 million

"The Conjuring:" $16 million / $4.2 million

"Tammy:" $14 million / $3.6 million

TV productions

"Sleepy Hollow" (pilot episode): $7 million / $1.8 million

"Under the Dome' (season one): $33 million / $8.3 million

"Eastbound and Down" (final season): $20 million / $5.2 million

"Revolution" (season one): $57 million / $14.2 million

Source: N.C. Department of Revenue

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(c)2014 the Star-News (Wilmington, N.C.)

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