States Without Tax Incentives Are Not In The Mix - Example: Texas

Jul 07, 2008

We're not allowed to consider shooting in any state without a competitive incentive program. Texas just isn't in the mix.  That statement by an unknown Hollywood film exec, may not be an exact quote but it's darn close to what a few hundred members of the TXMPA were told last week in Austin.  

The TXMPA, the Texas Motion Picture Alliance is a lobbying organization formed to try to rescue the Texas film business from heart failure. During the last legislative session, the TXMPA and its lobbying firm Hillco Partners were able to get the legislature to pass and fund a $20 million film incentive program that is just now starting to write checks to producers.  Is it too little, too late?

Follow the money. Nobody needs 'Deep Throat' to set them on the path to discovering where all the Texas film jobs have gone.  There's no Watergate-like conspiracy afoot. Though one could certainly make a case that there is a conspiracy. A conspiracy of dunces. What else would explain the Texas legislature passing a bill to establish a film production fund...and then NOT funding it as they did in the previous session?   Can you send a louder message to the industry that Texas doesn't wish to continue as a player in the location film business? Genius. Sheer genius.  

But that was yesterday. This past session, through the efforts of the TXMPA, our heroes in Austin stepped up to the plate and, in the face of losing untold jobs and millions of dollars to Louisiana's and New Mexico's 25% film incentive programs, they passed AND funded our incentive package.

Here's the summary of the program:


   1.  Eligible projects, upon completion of an audit of their Texas expenditures, may receive a payment equal to 5% of their total  Texas spending not to exceed $2 million for feature films, $2.5 million for television programs, $200,000 for commercials and $250,000 for video games.

   2. Projects that complete at least 25% of their total productions days in an Underused Area may receive an additional payment of 1.25% of their total in-state spending.

   3. Payment may be denied because of inappropriate content or content that portrays Texas or Texans in a negative fashion.

The total payout for the program is capped at $20 million.

Those attending the recent TXMPA confab were told that production executives in Hollywood are not even considering Texas as a potential shooting location right now because our 5% incentive just isn't competitive.   5% vs 25% or 40% is not competitive?  Who knew?

Look at the films slated to shoot in Texas.  Almost all are low budget, ultra low budget or no-budget films, but...well they are films.   Where on the list of films that have applied for the Texas incentive payouts are the big budget films?  And how do they compare to our closest geographic competitor, Louisiana?  A look at our state's film production slate will verify that the words of that unknown film exec were true: "Texas is not in the mix."

Follow the money.  It was recently reported that Drew Barrymore's production, WHIP IT! starring Ellen Page was moving its production from Texas (Austin), where the story is set, to a location in Michigan. It seems that Michigan's new 40% film incentive was just too much for the producers to turn down. For a 40% rebate, Michigan apparently starts to look a lot like Texas.  Let's face it, a roller rink in Ypsilanti can probably look like one in Austin.

According to Bob Hudgins, director of the Texas Film Commission, if Texas had even a 15% incentive available, WHIP IT! would have remained in Texas. Why? Our excellent local film artists and technicians. By filming in Austin, the producers could have hired a majority of their crew on location. That would save them thousands of dollars in travel, housing and other expenses.  By relocating to Michigan they will be hiring a majority of the crew in L.A. and picking up those expenses that a Texas shoot would have saved.  

But Texas doesn't currently have a 15% incentive.  Looking at the 40% Michigan incentive vs the current Texas incentive of 5% one can see just one more example of why the Texas film business is in a serious recession.  At a time when the Texas economy is feeling the fallout of the sub prime lending debacle and new job growth is stalling out, running jobs out of state is not a good move.  

All those crew people and actors who live locally, who pay property and school taxes locally, who buy their cars and bicycles and home improvement supplies and groceries locally will not have those production dollars to distribute into the Texas economy.

If the Texas legislature doesn't think Texas film production requires a more robust incentive program, maybe someone can convince the powers that be to read the recent series of Daily Variety articles about the success of the New Mexico film incentive program.

Maybe they'll finally get the picture that a significant portion of the millions of dollars now flowing through the economies of New Mexico ($632 Million in the most recent fiscal year per Variety) and Louisiana once would have been flowing into the state coffers in Austin.  

How long will it be before one of Texas' main production assets, a large and experienced base of professional film crews, will be so seriously depleted that even a larger film incentive will not be enough to win back the bigger budgeted films that bring large numbers of jobs?  How many have to relocate to Shreveport or Albuquerque or worse, flee the industry altogether before we reach that tipping point?

"We have a 25% rebate, but it's direct cash to the crew," explains Eric Witt, head of Richardson's media arts development initiative. "Productions prefer that, because we literally write you a check."

One can't blame the producers for this one.  Making a profit on a film is not a 'done deal'.  If a producer is offered the chance to recoup 25% or 40% of his/her shooting budget, then who among us could argue with them for doing so?  Eventually the AMPTP and SAG will settle on a contract and work will once again begin to flow. But how much will flow to Texas? And how much production coin that WOULD have been spent in Texas will instead be spent in Michigan, Louisiana or New Mexico?

From a recent Daily Variety article about New Mexico film production:

When it comes to justifying to taxpayers why their money is helping to subsidize local film production, it helps to have an Oscar winner you can point to.

In New Mexico's case, 2007 was an especially good year. The state can claim partial responsibility for 14 Oscar nominations, including best picture honoree "No Country for Old Men" (with "3:10 to Yuma," "In the Valley of Elah" and "Transformers" rounding out the ballot).

For Gov. Bill Richardson, that kind of performance is a point of pride, not because he likes winning (he does), but for the simple fact that it indicates progress.

"New Mexico used to be very prominent when it came to filmmaking, and then for the last 20 years, we fell asleep," Richardson says, sitting comfortably in his Albuquerque office (his real base of operations is 45 minutes north in Santa Fe). "We started out slow, but now it's reached the point where we've made about $1.8 billion in state revenues."

Richardson's office just announced the 100th film to collect on its 25% rebate</strong> ("Run for Her Life". Twenty-two of those pics further benefited from the state's no-interest production loan. And though other states have stepped in with more aggressive programs (most recently Connecticut, New York and Michigan, whose tax credits range from 30% to 42%), Richardson isn't fazed by the competition.

New Mexico was first, and the state's plan was engineered to create a long-term, sustainable industry, with extra incentives for productions that advance local talent. As a direct result, an entire infrastructure has sprung up where only a loosely organized wisp of film professionals existed before, many of them refugees from Hollywood who'd taken to the more relaxed New Mexico way of life. Today, the state boasts more than 1,800 professionals and the largest crew base outside Los Angeles and New York, a community deep enough to support at least six productions.

"Legion" co-producer Steve Beswick, shooting at the College of Santa Fe's Garson Studios, estimates 95% of his 160-person crew are locals, most of them already quite polished: "A lot of the crew has worked on big movies with big heads of department -- big production designers, big d.p.s -- and they've learned a lot from them. The construction crews here are as good as I've seen around the world."

Read the full story HERE

It's not too early to start to talk to your legislator about the necessity of significantly increasing the Texas film incentive program.  Otherwise we can all start talking about the Texas Film Business in the past tense.