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Lights, Camera, Spend: Tennesseans Boost Hollywood With Film Incentives

Did you enjoy ABC’s “Nashville” series? Good, because you’ll be paying for it to the tune of $8.5 million.

Millions of public dollars — in tax credits and, as of this year, via grants — have flowed into the state’s film incentive program to aid productions such as Larry the Cable Guy’s Christmas special, “Hannah Montana: The Movie” and promos for “Monday Night Football.”

In all, Tennessee is on track to fork over $22 million worth of handouts for Hollywood productions that are made in the state, a TNReport review of state records from 2008 to 2012 shows.

“This is one of the most insidious forms of corporate welfare out there,” Trey Moore, with the free-market think tank Beacon Center, said. “It’s hard to argue that this is a good deal for taxpayers.”

To put the amount in context: $22 million could pay for an additional 455 Nashville firefighters or five additional teachers in each of Tennessee’s 95 counties this year.

Tennessee film subsidies

Supporters of the state’s film incentive program say it boosts economic development, spurs job creation and is good marketing for Tennessee. The program is overseen by the Tennessee Department of Economic and Community Development.

Officials point to “Nashville,” ABC’s prime-time soap opera in which a 40-something country star must share the stage with a sassy young starlet.

“The program that’s had the most accolades is the recent film series ‘Nashville,’” Economic and Community Development commissioner Bill Hagerty said during a recent budget hearing.

Bill HagertyBill Hagerty

“The pilot was outstanding,” he said in November. “It still ranks number three in the ratings today, and we’re very optimistic that ‘Nashville’ is putting an important brand on the state and one that’s very positive for us.”

Over the past year, film incentives weren’t just teed up for the show “Nashville,” but to productions such as the faith-based drama “Unconditional,” and “Water for Elephants,” the circus-train romance/animal cruelty flick starring Reese Witherspoon.

Supporters of the incentives say that the program’s front-end money translates into economic benefits for the state, with “Nashville” alone bringing in $49.5 million in economic development. But for most of the program’s short history, the formulas for arriving at such numbers have been kept secret, and it’s still not clear exactly how the $49.5 million is estimated.

See all of the projects that have received public incentives from Tennessee here.

State officials say the program will be more transparent going forward. As of July 1, the state began administering all incentives as grants rather than tax credits — called “spurious” by one study.

There appear to be some benefits to this change, including greater transparency. Under former Gov. Phil Bredesen, who launched the incentive program, many of the presumed economic benefits were closed to the public. Benefits to film companies were in the form of tax credits, and a great deal of tax information in Tennessee is not public under state law.

But now, under Gov. Bill Haslam: “It is a more transparent process,” ECD spokesman Clint Brewer told TNReport. “The collapsing of the tax credit had several benefits, and that’s one of them. By and large everything we do in this department is an open record.”

It’s now easier for smaller and independent film productions to tap into the cash, too.

“The result is that we took a complicated, burdensome process that involved tax credits and a lot of paperwork and streamlined it significantly,” Brewer said.

But critics of the program doubt the benefits from the movies move the economic needle in Tennessee.

“This is just another example of corporate welfare,” said Moore, of the Beacon Center. “It’s rampant across the country when it comes to the film and movie industry, and, unfortunately, it’s hard to identify what’s really coming in the door.”

All these film incentives have Hollywood licking its chops: The Los Angeles-based Screen Actors Guild makes a web page available to all its members showing the film tax and grant benefits available in states across the U.S.

What of all those other states that have taxpayer-supported film incentive programs? Won’t jobs leave Tennessee and head there? Alabama, Kentucky, Mississippi and Missouri all have robust film incentive programs. And Louisiana is the granddaddy of film incentives in the U.S. — second only to California and New York — garnering the nickname “Hollywood South.”

“If giving away money is a good way to create jobs when you’re not getting anything in return, I would have a hard time believing that,” Moore said. “It’s a notoriously fickle industry. There’s no guarantee that even once we give them this money that this is going to stick around.”

It’s not just the fiscal conservatives who question grants to film companies.
The left-leaning Center on Budget and Policy Priorities conducted a national study on film subsidies and found that “in the harsh light of reality, film subsidies offer little bang for the buck.”

The study found:

+ Subsidies reward companies for production that they might have done anyway. Some makers of movie and TV shows have close, long-standing relationships with particular states. Had those states not introduced or expanded film subsidies, most such producers would have continued to work in the state anyway. But there is no practical way for a state to limit subsidies only to productions that otherwise would not have happened.

+ The best jobs go to non-residents. The workforce at most sites outside of Los Angeles and New York City lacks the specialized skills producers need to shoot a film. Consequently, producers import scarce, highly paid talent from other states. Jobs for in-state residents tend to be spotty, part-time, and relatively low-paying work — hairdressing, security, carpentry, sanitation, moving, storage, and catering — that is unlikely to build the foundations of strong economic development in the long term.

+ Subsidies don’t pay for themselves. The revenue generated by economic activity induced by film subsidies falls far short of the subsidies’ direct costs to the state. To balance its budget, the state must therefore cut spending or raise revenues elsewhere, dampening the subsidies’ positive economic impact.

And while Tennessee officials boast that film subsidies can lead to good public relations for the state, some states’ programs have backfired in the PR department.

Louisiana recently received a black eye when consultants determined the program wasn’t getting the results officials said it was.

From the Los Angeles Times:

Louisiana, for instance, estimates that for every dollar it paid out in tax incentives for film projects over the last three years, it got back tax revenue of 24 cents. Still, the state’s analysis shows that film jobs in the state rose from about 900 in 2001 to about 5,000 now, so although the Big Easy’s state loses money on every job, it presumably hopes to make it up in volume.

Iowa’s film program was rocked by a scandal when prosecutors charged the state’s former film chief with various felonies, including official misconduct over his handling of state film tax credits.

Michigan was hit with some ironic bad press after reporters found that the state had coughed up more than $831,000 in tax dollars for “Capitalism: A Love Story,” Michael Moore’s movie that, in part, is critical of companies that accept corporate welfare.

Tennessee film subsidies by year

Under Haslam, the state has accelerated spending on film incentives, with more dollars thrown at moviemakers in 2012 than in 2009, 2010 and 2011 combined.

“As part of Governor Haslam’s Jobs4TN economic development plan, the entertainment industry was identified as one of the key industries in which the state has a clear competitive advantage,” Hagerty said in a statement last year after legislation was passed giving the film incentive program a $2 million boost.

At the same time, the brass behind the show “Nashville” is not so subtly indicating that if they don’t get additional incentives, they’ll pack up their Dobros and go home.

“The show’s backers are saying additional incentives — the extension of a heightened state reimbursement and other possibilities — will likely be needed to justify the cost of continued filming in Music City,” the Nashville Business Journal reported. “The fact that the show, which has seen ratings drop since its premiere before regaining some ground (in November), has been picked up means there will be a full season for backers to tout and public officials to weigh.”

Trent Seibert can be reached at trent@tnreport.com, on Twitter at @trentseibert or at 615-669-9501.

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Featured Tax and Budget

About Half a Billion in Gov’t Bacon ID’d by Beacon

In Tennessee, taxpayer money has been used to dabble in the movie-making business, prop up car companies, and promote country music heritage — in Virginia.

Such projects are cataloged in a new Pork Report tracking $468 million in waste and public malfeasance in the past year, $216 million worth of loin, butt and chops at the state level, the Center says.

Authored by the Nashville-based Beacon Center, the report identified more than $182 million in what the center calls “corporate welfare.” Furthermore, “politicians went hog wild” spending the citizenry’s resources on what Beacon Center president Justin Owen described as “taxpayer-funded tourist traps,” including a country music museum in Virginia and a planned water-and-snow theme park in Nashville.

“Many times politicians try to convince us that somehow their visions are grander and more wonderful,” said Ben Cunningham, a Tea Party leader and spokesman for Tennessee Tax Revolt who Tuesday joined Owen at a press conference on Capitol Hill. “Sometimes they even try to convince us that they are a cut above — morally and intellectually above the rest of us — and that their grand, good intentions are somehow grander and more wonderful than the good intentions of the citizenry.

“But in fact, they’re ordinary human beings just like you and I, and they have to be held to the same standards that everybody else is held to.”

This is the seventh year the Beacon Center, formerly known as the Tennessee Center for Policy Research, has published the Pork Report. TCPR was founded in 2004 by Johnson City-native Drew Johnson, who next month will succeed 70-year veteran Tennessee newspaperman Lee Anderson as an opinion page editor for the Chattanooga Times-Free Press.

State spending Beacon’s 2012 Pork Report identified as wasteful included:

  • $2 million in film incentives in 2012.
  • $1.5 million in economic incentives for GM to expand its plant in Spring Hill.
  • $266,200 to Volkswagen to put a sign, only visible from the air, atop its plant in Chattanooga.
  • $500,000 for a planned country music museum in Bristol on the Virginia side of the state line adjacent to Lt. Gov. Ron Ramsey’s district.
  • $88.7 million for pre-kindergarten, which has “repeatedly failed to have a significant lasting impact on the education of Tennessee’s children.”

“This year state and local governments didn’t hold back when spending taxpayers’ money,” said Owen.

Political responsibility for much of the iffy spending and sketchy programs pegged in the report can be assigned to fiscally conservative-talking Republicans, who run state government and are not expected to lose their grip on power in this year’s legislative elections.

“Republicans spend just like Democrats do,” Owen said. “And when you’re spending someone else’s money, you have an incentive to spend it unwisely.”

Although the report points to spending made on Gov. Bill Haslam’s watch, the governor contends his administration is already on top of cutting out pork spending.

“I can promise you that government waste has got our full attention. Now, waste is obviously defined different ways by different folks,” Haslam told reporters Tuesday after defending spending on Pre-K, economic development and tourism.

“One of the value judgements you make every year in the budget is, what are you going to fund out of a lot of potential good things and what are you going to cut out of several things that people have an opinion about whether that’s critical or just nice to have.”

The Center thinks much remains in the latter category and says the state should adopt a law to return excess revenues to taxpayers and set up a state spending commission to root out waste.

The Center advocates strengthening a 1978 state constitutional provision meant to rein in growth. If the state is considering spending that exceeds the growth rate in personal income, lawmakers are required to take a separate vote on the amount beyond that cap. The Center says this vote should require a two-thirds approval, rather than the current majority, and that the measure of personal income growth should be replaced by a figure based on population growth plus inflation.