Should Virginia roll out the red carpet for the motion picture industry?
- February 15, 2010
Tourism is an important industry in Virginia. It generates more than $19 billion a year in revenue, supports more than 210,000 jobs and provides $1.2 billion in state and local taxes.
So it’s no wonder that Gov. Bob McDonnell wants to beef up the state’s commitment. Among his economic development initiatives: double the budget for the state’s marketing agency to $3.6 million a year, increase the Governor’s Motion Picture Opportunity Fund to $2 million and provide tax credits to production companies that film in The Old Dominion.
Alisa Bailey, president and CEO of the Virginia Tourism Corp., is thrilled with the governor’s proposals. In a recent e-newsletter, she says the extra funding would restore out-of-state advertising and allow upgrades to the Web site that would assist visitors in trip planning.
As for tax credit incentives for filmmakers, plenty of people like to point out that Virginia has been losing productions to states with higher tax breaks. Recently, a film about Secretariat, the Triple Crown-winning horse from Virginia, was filmed in Louisiana and Kentucky. “The Box,” a thriller released in November that starred Cameron Diaz with a story line set in Richmond, was filmed in Boston.
As the argument goes, production companies supposedly spend millions while filming — patronizing local businesses and hiring local workers. So, it makes sense to offer them a carrot. The Virginia state Senate already has passed a bill championed by the governor that would provide tax credits of up to $10 million over a two-year period to production companies with qualifying expenses of at least $250,000. A companion bill in the House has been assigned to a subcommittee.
Yet, a recent report from the non-profit Tax Foundation in Washington, D.C., questions whether film tax credits actually spur economic growth. “Motion-picture incentives are often touted as ‘job-creating’ programs, but they create mostly temporary positions with limited upward mobility,” said William Luther, a Tax Foundation adjunct scholar who authored the report, “Movie Production Incentives: Blockbuster Support for Lackluster Policy.”
According to the report, 44 states, the District of Columbia, and Puerto Rico offer significant movie production incentives, up from five states in 2002. However, some states are reviewing programs, because of record budget shortfalls and revelations of mismanagement. The report says Kansas suspended its program and an Iowa panel recently recommended eliminating that state’s film tax credit after findings of program abuse.
In the Iowa case, the attorney general’s office this month charged the former manager of the Iowa Film Office with misconduct in office, a misdemeanor. It also filed first-degree theft charges against two film producers, a felony, for allegedly reporting inflated values on applications for film tax credits. Other film executives, who have not been charged, remain under investigation and are accused of buying luxury vehicles with the Iowa tax breaks.
While the potential for corruption exists with many state programs, the larger question now for tax incentives for motion pictures might come down to economics. Can Virginia afford to hand out goodies when the state faces a $4.3 billion budget shortfall? On the other hand, can we afford to pass up opportunities that might pay off further down the road?