At the meeting of the Senate Revenue and Fiscal Affairs Committee on Monday, there was much confusion and ignorance of the true benefits of the program. According to State Senator Jay Luneau (D-Alexandria), “We’re broke. We don’t have the money to fund this.”
In reality, the program has been a tremendous success. Officials from the Louisiana Economic Development organization estimate that at the parish and municipal level the tax incentive program provides a return of $4.5 for every dollar invested. Where else can we see this type of return for our tax dollars?
The program provides tangible incentives for producers to make films in Louisiana by offering them up to a 30 percent tax credit. In addition, Robert Vosbein, President of the Louisiana Film and Entertainment Association, notes that for every industry job produced by the tax credits, there are two other jobs created through indirect spending.
At Monday’s meeting, Senators also heard from business owners who supported the tax credits, such as Gabriel Markel, a New Orleans lumber yard owner. He said, “It takes us from surviving to being profitable. It's 25 percent of our business. It's a big deal.”
Of course, the tax credits are a big deal to thousands of people in Louisiana who are employed in the industry or who benefit from the many productions that come to the state. Unfortunately, the legislative threats of ending the program will only hurt the Louisiana industry more.
In fact, last year’s decision to cap the tax credit program at $180 million per fiscal year encouraged many productions to leave the state. In the last year, the creators of the short film “Keep Film in Louisiana” say that there has been a 70% decline in business for the state. They hope that their film will increase awareness of the many benefits that are still available through the tax credit program.
Instead of threatening to end the program, legislators should at the very least maintain the current benefits or even strengthen the incentives with an emphasis on boosting the credits for Louisiana residents. The legislature cannot tamper with the tax credits during this regular session, but may address it in a potential special session in June.
Along with the $180 million cap, the bill passed last year, ACT 134, made local productions even more attractive. It not only retained the 30% tax credit for all production related expenses, but it boosted tax credits to as much as 55% for all production companies based in Louisiana. To qualify, companies need to be Louisiana owned or employ at least 3 Louisiana residents and own the property for at least one year before starting production.
One local company, Epic Shepherd, is already taking advantage of ACT 134 by raising capital from both out of state sources and local banks. This new company is now on the verge of producing both films and TV shows. As a local producer, the money earned from theaters, DVD sales, etc. will all flow back to the state. The owners will then be in a position to invest those dollars in real estate purchases, hire more local employees, pay additional local and state taxes, etc.
Now would be the worst possible time to tamper with ACT 134, just as local producers are getting ready to take advantage of the bill’s benefits. The state is on the verge of growing a true local industry, with Louisiana based owners. However, the film industry is very competitive as 42 other states offer attractive benefits and many of them have successfully enticed productions away from Louisiana.
To compete with all of these other states, the current incentive program needs to be publicized more effectively and enhanced, not diminished. At the very least, it must be maintained to keep our commitment to the companies already doing business in the state or planning to make major investments.
The goal should be to create a local industry with local ownership. Louisiana is facing a downturn in the oil and gas industry, so it is important for the state to explore opportunities to grow other areas of our economy, such as the film industry.
Over the past decade, film crews and infrastructure have been developed in Louisiana. Not only have studios been built, but local universities have added programs in film production to their curriculum.
At this point, it is vital take the next step and encourage more local industry ownership. The state has an attractive incentive program that allows for such growth. Legislators would be wise to recognize this value and not destroy a tax credit program that has been working well for 14 years.