Despite Budget Crunch, the Great Film Production Incentives Race Continues
Pornographers and filmmakers in Los Angeles took one below the belt this week when the city council approved an ordinance requiring the use of condoms in all pornographic films shot in the city. The industry had fought hard against the proposal, and now that it’s been approved, filmmakers are threatening to pull out of the city altogether, taking their projects – and the money they spend locally to produce them – to nearby cities with less restrictive laws. “Ultimately I think what they will find is people will just stop shooting in the city of Los Angeles,” Steven Hirsch of the L.A.-based erotic film production company Vivid told the Associated Press.
Though the new rule is likely to cut down the amount of porn filming in the city, there’s much more to worry about than condoms. As cities and state across the country continue their race to incentivize film projects, Hollywood’s dominance as the film capital of the world has long since started to wane.
Increasingly generous tax incentives and credits offered by states are coaxing more and more filmmakers out of L.A. and into places like Michigan and Louisiana. Even New York, where a significant amount of filming takes place, is offering incentives that encourage more productions to stray from Hollywood.
Louisiana, for example, has one of the most aggressive incentive programs in the country, offering a 30 percent transferable credit on expenditures in the state with no cap. It’s an effective ploy that brought 150 film productions and an estimated $1.3 billion in expenditures to the state in 2011, according to the New Orleans Times-Picayune. The incentive, approved by the state legislature back in 2002, is a big part of why the trade publication P3 Update named Louisiana the number one state in which to film.
But Louisiana is by no means alone. Dozens of states have begun offering incentives to filmmakers in recent years. According to this analysis [PDF] from the Tax Foundation, 37 states offered tax incentive programs totaling $1.299 billion in 2010, compared to the four states that offered $1 million in 2001.
Michigan is one of the states that jumped on the bandwagon, passing its film incentive legislation in 2008. The program offered incentives of up to 42 percent of a film’s production costs, which the Michigan Film Office’s Michelle Begnoche calls the most aggressive in the nation. As a result, dozens of productions headed for Michigan, especially Detroit.
“In the summer of 2010 we had 8 to 10 major motion pictures filming in Detroit in one week compared to just three the whole summer a few years before,” Begnoche says.
The state awarded $115 million in incentives in 2010. A total of 119 productions applied for the incentives and 66 were approved. The incentives helped put Michigan and Detroit on the radar of filmmakers, bringing in productions like Gran Torino and The Ides of March. But in 2011, Governor Rick Snyder has significantly cut back the program and changed its function. The formerly uncapped program is now capped at $25 million per year, and the maximum incentive available is 35 percent, according to Begnoche.
The changes in the system have decreased interest in the state, which saw 84 applications for incentives in 2011. Of those, 22 were approved. Officials in the film office are expecting 2012’s numbers to dip as well, according to the Detroit Free Press.
“We’ll be picking only the projects that have the most benefit for Michigan,” Begnoche says.
But film producers will continue to pick the places that most benefit their own bottom line. All this makes it tough to compete with New York. The state offers a 30 percent refundable tax credit that is applied against qualified expenditures, similar to what other states offer. But what’s different in New York is how much the state can offer: as opposed to the $25 million in Michigan, New York offers up to $420 million in incentives per year between 2010 and 2014.
The state and especially the city of New York are already popular places to film, and the incentives seem to have made them even more attractive. In 2011, 188 feature films were filmed in the city, which is down from the 200 in 2010 but up from the 174 in 2001, according to figures provided by the Mayor's Office of Media and Entertainment. TV production has also seen an increase, jumping from 9 prime time episodic series filmed in the 2001-2002 TV season to 23 in the 2011-2012 season.
States had been undercutting each other by offering greater and greater incentives, but some of that appears to have slowed. Some states have even cancelled their incentive programs altogether. But despite tighter state budgets, film offices are still competing against each other to bring in film productions.
“Lots of people have described it as a race to the bottom,” says Todd Lindgren, vice president of communications and public affairs at Film L.A., the organization that coordinates film permits in the Los Angeles region. He argues that the short-term benefits of these increasingly attractive incentives will fade away unless states can build up the sort of infrastructure to support the film industry in the long term – exactly the sort of infrastructure L.A. has had for decades.
Film L.A. tracks its numbers based on the days of permitted production on location in the region, rather than the number of productions themselves. In 2011, there were 45,484 permitted production days in L.A., up 4.2 percent from the year before. Of those, there were 5,682 permitted production days for feature films in 2011, which is only a slight increase from the 5,378 in 2010. Filming in L.A. clearly hasn’t stopped. The California Film & Television Tax Credit Program provided just 652 of those permitted production days. But in contrast to Michigan’s $25 million a year, California has made $100 million available through its incentive program.
Lindgren argues that even these incentives provided by the state of California are having trouble competing with those in other areas. And as they continue to lure filmmakers out of Hollywood, states can be expected to keep providing the incentives.
“I don’t project that film tax incentives are going anywhere,” Lindgren says. “California’s positive attributes for filming are unmatched. But I think we will never see the level of business that we did.”
How long the incentive wars will continue is tough to tell, and most states are unlikely to halt their programs any time soon. But as film production increasingly moves beyond L.A. and New York, these non-traditional film locations are likely to become better and better at playing film set. Their incentives are helping production companies give them a try, and it may be their increasing experience that encourages filmmakers to keep coming back.
Photo credit: Rebecca Cook / Reuters