New study rekindles debate over economic impact of NC film incentives

pgannon@ncinsider.comApril 3, 2014 

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Emily Blunt and Colin Firth prepare to film a scene for the movie “Arthur Newman” at Nash Square on McDowell Street in Raleigh.

SHAWN ROCCO — 2011 <capitals>News & Observer file photo</capitals> Buy Photo

The loss of the state’s film incentives program would decimate the film and television production industry in North Carolina, causing an estimated 3,400 workers to move to more film-friendly states, according to a new study.

The study – conducted by Robert Handfield, a professor of supply chain management at N.C. State University working as a private consultant – also shows that North Carolina receives a positive return on investment from the money it pays out to film companies in incentives.

The 50-page report, a copy of which was obtained by The News & Observer, is titled “A Supply Chain Study of the Economic Impact of the North Carolina Motion Picture and Television Industry.” It was commissioned by the Motion Picture Association of America and several regional film commissions in North Carolina. The same groups are leading the charge for extending the film incentives program during the coming legislative session, which begins May 14.

But some incentive opponents and General Assembly staff are questioning the study’s findings.

The new report adds to a growing library of studies on the state’s film industry. The studies present conflicting data and paint much different pictures of the industry’s economic impact and the number of jobs it supports.

Under the existing program, production companies can claim a 25 percent credit – up to a cap of $20 million – on productions spending more than $250,000 in qualifying expenses. If lawmakers don’t extend the program, the perks will expire at the end of the year. Film industry advocates say the loss of the incentive would mean movies, TV shows and commercials would go to other states. Opponents say the industry’s presence isn’t worth the millions of state taxpayer dollars paid out each year to production companies.

The Handfield study found that for every dollar of film incentives paid out by the state, the industry spends $9.11 in North Carolina. The film and television industry spent more than $1 billion in North Carolina from 2007 to 2012, while the state paid out $112 million in tax credits, according to the study. It also found that the local and state governments collected $170.3 million in taxes as a result of film and television production from 2007 to 2012, meaning for every dollar spent on incentives, the industry generated $1.52 in tax revenue.

Handfield also determined that the incentive has allowed the state to maintain a permanent crew base, providing more than 4,250 jobs at an average wage of $66,000, a third higher than the national average for private industry.

Ending the incentive, the study found, would cause more than 3,400 film workers and their families to move from North Carolina and leave the industry’s remaining employees with little or no work. Handfield said that number was based on surveys of film industry employees.

“A competitive incentive is necessary to keep film and TV projects and jobs in North Carolina,” said Vans Stevenson, the Motion Picture Association’s vice president for state government affairs.

Handfield acknowledged in a phone interview that the study was presented recently to General Assembly staff and that they expressed concerns with some of his “calculations and numbers.” As lawmakers debated the issue last year, legislative staff compiled a report that showed the $30.3 million North Carolina spent on tax credits to film companies in the 2011 tax year likely attracted 55 to 70 jobs that wouldn’t have materialized if the credits didn’t exist. That’s 290 to 350 fewer jobs than would have been created through an across-the-board business tax cut of the same magnitude, according to the analysis. And reports from the state Commerce Department attribute fewer jobs to the industry than the Handfield study.

Figures ‘not credible’

Jon Sanders, director of regulatory studies at the conservative John Locke Foundation, said the new study doesn’t take into account the “opportunity costs” of the state revenue used for the incentives. “That’s money that could go to teachers or to roads, but instead the state has chosen to invest in the film industry,” he said. “It’s like robbing Peter to pay Paul, focusing on Paul, but not accounting for what Peter could have done.”

Sanders said the return-on-investment findings, which he deemed “not credible,” are consistent with similar studies used to bolster particular industries.

Handfield, asked what he would say to lawmakers as they debate the incentives program later this year, said: “If the incentives leave, the jobs leave. If the jobs leave, the people leave.”

He added that he recommends extending the film incentives legislation in its current form. “Just renew it,” he said.

Handfield declined to say how much he was paid for the study, adding that he was “grossly underpaid for the amount of work that went into it.” The Motion Picture Association also wouldn’t say how much the study cost.

Patrick Gannon writes for the NCInsider.com, a government news service owned by The News & Observer. www.ncinsider.com

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