This letter to the editor of the NY Times was written by Nick Smerigan, COO of Albuquerque Studios. We think its instructive to those who want to understand more about the nature of film incentives. The key thing you'll continually find when it comes to film incentive programs - New Mexico gets the highest marks for the sustainable nature of its program, and its success. Dozens of States have tried to replicate our model, with varying levels of success - some, in fact, with awful results.
One of the reasons the New Mexico incentive program and film industry is so successful is that much of the production money that is spent here, stays here. Productions use local resources, hire local crew, and, increasingly, are able to do post-production work here, all of which contributes to an evolving creative class of individuals and businesses who earn a solid wage, and who have been able to integrate the film industry into their lives and businesses.
If its any testimony to the busy-ness of the industry, crewnewmexico.com has added nearly 140 advertisers to our site in just a few months, and our web traffic come from sources wide and strong.
United States Film Production Incentives
Over the past 4 to 5 years there has been a lot written and discussed in regards to the various tax incentives and rebate programs that many states have offered film and television productions to entice the productions to bring work to their states. The tax incentives and rebates were, to the best of my knowledge, established to create jobs and act as an economic stimulus for the state. To that end, most states have never been able to quantify whether the incentive packages that they offer are actually stimulating their economy or creating new jobs because, to date, there is no clear process by which to determine the impact of the dollars spent. Whether quantifying dollars spent directly by the productions or the multiplying effect of those dollars within the local economy, it has been difficult to measure how that spending is extending into local communities.
The programs do, in fact, keep jobs and production in the U.S. . There's no question about that. But, important questions need to be answered. Are these rebates and incentive programs a rush to compete in the marketplace with little or no thought as to how they are administered or awarded? And, how do these programs ACTUALLY impact the state's economy? In your article you mentioned how successful the New Mexico program has been. One of the major factors in my decision to lend my expertise to a $90M+ infrastructure project in New Mexico was how the New Mexico Film Incentive Program was being executed and how knowledgeable the people are who make the decisions to extend the rebates to the productions.
Many legislators, legal consultants and other political advisers use the argument that states are paying out millions of dollars to production companies and that expenditure does not equal the tax revenue the state is receiving in return. First, how can a state rebate more than the production actually spends? Isn't that impossible? For example, with a 25% rebate in New Mexico , the local taxable spend is always guaranteed to be four times the rebated amount. That spend not only generates sales or gross receipts taxes but also filters through the economy as it multiplies from salaries to home purchases to development and back to salaries, etc, etc. Second, the focus should not solely be about state income tax receipts but about the benefit production activity and spending provide the populace of that state. This is the "economic stimulus" that differentiates these rebate and incentive bills from the other economic development programs mentioned in your article. The question then becomes, "How do we quantify how much the populace is benefiting from the local production generated by the programs?" Shouldn't we focus on the fact that a particular production can inject many millions of dollars into the state economy in a timeframe much shorter than any other industry? Or, that many of the local production support personnel and companies in the state hired by the production would not have otherwise had that job or that business? The production companies are going to make their project somewhere and, without an incentive, a local market has little to no chance of capturing that economic development opportunity.
Truly sustainable incentive programs should be determined by many reasonable factors including location (both look and proximity to the powerbases of Los Angeles and New York ), available local crew and access to equipment and services, to name a few. An incentive program should not be based solely on one state's desire to outdo another. Film and television production is in an intricate business with many moving parts. The people who pen these rebate and incentive programs not only need to understand how each piece of a proposed incentive will impact the local economy but must also understand the production industry and its processes. Each state is different and presents its own advantages and disadvantages to potential production clients. With the appropriate incentives on offer, a state can direct its approach in order to attract specific types and quantities of production. Each incentive program should take this into account and states must craft their legislation to benefit their local economy by capitalizing on these differences.
Albuquerque Studios infused over $91 million of infrastructure into the local economy, without state or local investment, because the structure and administration of the New Mexico rebate program was attractive to our clients. New Mexico had an established production support and crew base and the location was close enough to Los Angeles to make it more attractive. The program is SUSTAINABLE as a result of how it is funded and the way each dollar spent is recycled time and time again through the economy. This investment alone should prove that the right incentive packages work. Glamour has always been Hollywood's calling card but the individuals who create that glamour are hard working people who have created a multi-billion dollar industry – an industry that has created an untold number of jobs and wealth across the world. There should be no doubt that they are business men and women who look to manufacture their product in the most financially beneficial arena. Why shouldn't they? They provide jobs, in most cases high-paying union jobs, to local citizens no matter what their socioeconomic backround. They use services and products from the various locales and put an incredible amount of money into the communities. And, yes, they do pay taxes in those areas.
It can get tiring hearing the same arguments from the same people over and over again. The answer is simple. Without an incentive program there is virtually no chance that you would have attracted any of the production money spent thus far in your state (or any future production business). Whether it is $1 million or $100 million, production spending benefited your local economy by its very nature. If you want to quantify this impact then put together a method by which that can be done – don't just say that it isn't working. New Mexico is in the process of creating such a methodology right now. While a certain incentive program may not be working because it is not crafted to take advantage of a state's particular set of economic and geographical conditions, a wisely crafted, sustainable program DOES work. Films are now being made in America that historically would have been made in other countries, where Americans would not get an opportunity to work on them. Whatever we do going forward, let's start by looking at simple business policies before we just throw a percentage on the table. What is it you are trying to accomplish for your state and communities? What are the benefits to your local work force? How are the local businesses going to benefit and, most importantly, how do you measure the program's impact on your state's economy?
If approached cautiously and intelligently, state-specific production incentive programs are successful. I came to the desert of New Mexico because I believed in the production incentive which provided a "competitive edge" for the Studio. I stay in the desert because I believe that system is working and will continue to provide that "competitive edge" far into the future.
Nick Smerigan
COO
Albuquerque Studios
Albuquerque , New Mexico
