Spending on film productions in Louisiana nosedived in 2016, with officials reporting a 65% loss in revenue statewide and a 93% loss in the Baton Rouge area.
Nonetheless, industry experts express optimism about 2017 because the Legislature is expected to take up changes to the tax code and possibly revamp how Louisiana’s film tax incentive is handled.
“We’re bullish about 2017,” Amy Mitchell-Smith, director of the Baton Rouge Film Commission says. “The reality is a lot of people are anxious to see what happens in the upcoming session.”
Celtic Studios Executive Director Patrick Mulhearn says his studio lost three scripted TV series in 2016, with MTV’s Scream moving to New Orleans, The Sundance Channel’s Hap and Leonard moving to Atlanta and WGN America’s Underground leaving for Savannah, Georgia.
“2016 was pretty terrible for the film industry in Baton Rouge,” Mulhearn says, citing the tax incentive cap that was enacted in 2015. “For the most part, financiers and producers chose to avoid Louisiana.”
The state’s Motion Picture Investor Tax Credit, which beget the rise of “Hollywood South,” allows a 30% credit on all qualified in-state production spending, as well as a 10% in-state payroll credit, both of which can be used to offset personal or corporate tax liability in the state.
In an effort to deal with ongoing budget problems, the Legislature in 2015 capped the back end of the tax credit program—meaning the state would still be able to issue a virtually unlimited number of credits to film producers, but would only honor $180 million of them per year.
Lawmakers also suspended for one year the buyback program for credits, meaning producers could only exchange credits on the market and could not cash them in from the state.
Applications for film tax credits dipped last year, from 115 in 2015 to 91 in 2016. Total estimated spending in Louisiana dropped from around $1 billion to less than $400 million in the same time period—a 65% decline.
In Baton Rouge, the downturn was even more drastic. Spending fell from $177.5 million in 2015 to $11.8 million last year, a drop of over 93%. The Capital City, which instituted a local film tax incentive late last year, also saw a 35% drop in the number of projects from 2015 to 2016.
But Chris Stelly, director of Louisiana Entertainment, says there was an uptick in film and television production statewide at the end of 2016. He expects 2017 to be a good year.
Stelly attributes the downtown to “misinformation” about changes to the tax credit, as producers became worried the state would not give them the credits for which they were approved. The drop in spending also can be attributed to fewer large projects coming to the state, he says, adding that the number of productions did not drop by as much.
“We never went anywhere,” Stelly says. “We were always here and always had activity since 2015, but reassuring companies we were going to honor our obligations is a key point to make.”
Economist Loren Scott, who conducts economic reviews of the film tax credit every two years, says the program is much different than the typical tax incentive handed out by the state. Normally, the state aims to bring in more tax revenue than it hands out. But because the film program is so large and the jobs are temporary, the film program has a much lower return on investment of tax dollars, Scott says.
“It’s just math,” he says. “The subsidy is so generous that there’s no way you’re going to end up with anything but a hit to the state budget. And it turns out that’s not uncommon by state.”
But advocates laud the program’s job creation, and say the cap on the tax credit have roiled the industry.
Still, Gov. John Bel Edwards said at the end of 2016 he will reject attempts to increase the cap for the statewide program, warning against a “bidding war” with states like Georgia, which saw annual production spending increase from about $93 million to $1.7 billion between 2007 and 2015.
But Louisiana Economic Development Secretary Don Pierson, at Edwards’ behest, is conducting a review of the film program and will recommend changes for the 2017 legislative session.