I have never been in a movie, nor do I anticipate that Hollywood is feverishly writing and casting for a production of my life story (though if that is the case, I think either Pierce Brosnan or Daniel Craig would play me well). However, Matt Tarleton’s recent post on the wisdom of targeting the biotechnology cluster made me wonder if similar rationale is not errantly driving states to incentivize the film sector.
I am by no stretch of the imagination neither a movie expert nor extreme cinephile; however my recent run-ins with the local film sector indicate to me that something is afoot. Most recently, I was excited to see that a new sporting goods store and coffee shop had gone into a vacant location in Midtown. Unfortunately, when I tried to patronize the new stores I was disappointed to find out that they were in fact just facades, created for a movie shoot. I have also unwittingly almost walked into movie shoots for two Tyler Perry movies and to-be-released ‘The Change Up,’ and been awoken by fake gunfire and car crashes. Needless to say, movies are swarming over Atlanta.
Georgia has become a destination for movie shoots, not by accident, but by deliberately offering incentives. In 2008, Georgia revamped the Entertainment Industry Investment Act. The Act provides production companies a 20 percent transferable tax credit if they spend at least $500,000 on qualified production and post-production expenditures. An additional 10 percent of credits can be awarded if an animated Georgia logo is included in the final product. Qualified labor expenses do not have to be limited to hiring local workers.
Georgia is by far not alone in offering film sector tax credits. According to the Tax Foundation, in 2002, five states (NM, LA, MO, and MN) and Puerto Rico offered movie production incentives (MPI). By 2009, 44 states offered movie production incentives (states with no MPI: NV, ND, NE, VT, NH, and DE). In 2010, the value of incentives totaled $1.396 billion, an exponential gain over the $1 million that was available in 2002. Incentives have fallen in 2011, and according to the Tax Foundation, is indicative of mounting backlashes against the practice (multiple states are not funding or pulling back support for renewing incentives legislation).
The graphs below show the growth and contraction of the motion picture and video sector (NAICS 512) in southern states; between 1990 and 2010 (growth is indexed against 1990 sector employment). The majority of southern states exhibited medium growth in these industries, with only a few growing by more than 50 percent. Standout states include Arkansas, Louisiana, and Tennessee. The perennial loser of motion picture and video sector jobs is Georgia.
The graph below shows the perennial “winners” in the sector and the perennial “loser,” Georgia. The dashed lines represent the year that the state enacted incentives legislation for the movie and film production sector. A couple thoughts on each state:
- Louisiana: incentives for the motion picture sector are the oldest in the nation. While the sector has certainly expanded over the past 20 years, employment dynamics are anything but stable. Volatility in employment indicates that incentives have not provided steady job growth. Interestingly, prior to 2005, losses in the Louisiana sector track well with gains in the other states.
- Georgia: incentives for the entertainment sector were originally passed in 2005 and then strengthened in 2008. When the 2008 legislation was signed, the Commissioner of the Georgia Department of Economic Development said, “We expect to see an increase in the number of sector jobs and overall economic impact for the state in the coming years.” While 2010 jobs were 3 percent above 2008 levels, the entire sector employs approximately 70 percent that it did in 1990.
- Tennessee: growth in the sector began to stumble in 2000, but quickly leveled off. Tennessee could be the best example of a successful incentives program, as the sector seems to be on a rebound.
- Arkansas: growth in the sector has been steady since 1990. The result of the incentive legislation is unclear as it passed in 2009.
Of course, many proponents will argue that by increasing the presence of film crews, money is spent at local institutions, such as restaurants, thereby helping the economy. I have no qualms with that argument (though it reminds me of the arguments against Groupon and Scoutmob – temporary spikes in business, without establishing repeat customers). If the intent is to grow local jobs in the sector, jobs data does a poor job of making the case.
However, if my movie run-ins are less of the fake façade type, and more of the Catherine Heigel, Keira Knightley, or Angelina Jolie type, I will sponsor the next piece of incentives legislation.