The fight over the state’s controversial film tax credit program heated up Monday — a week before the Legislature begins its annual session — when the film industry released a study claiming that the tax credits generate thousands of jobs and billions of dollars in investment in Louisiana.
Skeptics of the program remained unconvinced and even questioned the film industry’s key claim that 14.5 percent of the state’s tourists come because of the generous subsidies given to produce movies and television shows in Louisiana.
“It’s hard to believe; it’s a stretch,” said Steven Sheffrin, a Tulane economics professor — and director of the university’s Murphy Institute — who recently helped produce an analysis of Louisiana’s tax credits for the state Legislature.
The future of the film tax credit program will be one of the major story lines during the upcoming session.
Powerful legislators have put it on the chopping block — at least with a paring knife — because of the need to find ways to close a $1.6 billion projected deficit for the upcoming year and legislators’ desire to avoid deeper spending cuts to the state’s colleges and universities and its health care system for the poor.
State Rep. Lance Harris, R-Alexandria, is one of those powerful legislators. Harris wants to phase out the film tax credit program “and spend the money instead doing the primary things the government should be doing, such as higher education, the state’s hospitals and having better roads.” Harris chairs the 59-member Republican delegation in the 105-member House.
The state gave away $222 million in film tax credits in 2014.
“There’s a lot of money on the line,” said Loren Scott, a retired LSU economics professor who produced a report for the Louisiana Economic Development agency last month showing that the program generated only 23 cents in tax revenue for every dollar paid out by taxpayers in 2014.
The 69-page report released Monday sought to rebut Harris, Scott and other skeptics. It was produced by HR&A Advisors, a New York-based consulting firm, for the Louisiana Film and Entertainment Association and the Motion Picture Association of America. Neither group wants the state Legislature to touch the program, which is credited with allowing Louisiana to eclipse Hollywood as the nation’s feature film production capital.
HR&A’s study found that the Louisiana Motion Picture Investor Tax Credit — as the program is formally known — created 33,520 jobs in 2013, generated up to $1.2 billion in personal income that year and up to $4 billion in economic output.
The tax credits “have changed the face of our industry,” said David Tatman, a lobbyist who is executive director of the Louisiana Film and Entertainment Association, in a conference call with reporters.
Shuprotim Bhaumik, a partner with HR&A, said that since the state Legislature created the tax credit in 2002, the number of film industry jobs in Louisiana has gone from fewer than 1,000 to more than 6,000. Three film industry studios have been built in the state, he added. They are Celtic Studios in Baton Rouge, Second Line Stages in New Orleans and Millenium Studios in Shreveport.
Under the tax-credit program, the state reimburses movie and television producers for 30 percent of their local costs incurred while filming in Louisiana. In most cases, the filmmakers do not owe any income taxes to the state, so they sell the tax credit to those who do have such a liability. Filmmakers also may return the credits directly to the state for a check worth 85 cents on the dollar.
The program’s cost has risen from $40 million in 2003 to $246 million in 2013 and the $222 million in 2014.
Both supporters and critics of the program agree that it has created jobs and tax revenue. But two sides sharply disagree over this question: Is the subsidy worth it?
The industry-financed report showed no net loss to the state treasury when all of the factors are considered, Bhaumik said.
Scott, Sheffrin and other independent economists say the state actually gets a poor return on its investment. Scott put the net cost in 2014 at $170 million to the state treasury, after including all of the tax revenue created by the film industry’s investment.
While that money created film industry jobs, Scott said, “how many jobs are being lost at LSU and the state hospital system because we don’t have that $170 million? That money is not free.”
Much of the dispute over how many jobs the film tax benefit creates — and the investment it creates — comes from the tourism numbers.
Bhaumik said Federated Sample, a New Orleans-based polling firm, did an online survey of 1,400 people who said they had visited Louisiana as tourists during the past two years. Of those tourists, 14.5 percent cited movies or television shows made in Louisiana as the reason for visiting the state, the report said.
That number is crucial to HR&A’s analysis because the film tourists account for fully two-thirds of the overall benefits from the tax credit. For example, film tourists created 22,720 jobs of the 33,520 jobs credited to the tax break, the study found.
The fine print of HR&A’s report raises questions about the accuracy of its own claims. While claiming that all of film tourists came because of the tax credit, the report admitted that “respondents named a number of films made prior to the Credit, such as ‘A Streetcar Named Desire’ (1951), ‘The Big Easy’ (1986), ‘Interview with the Vampire’ (1994), and ‘Steel Magnolias’ (1989).”
The Louisiana Budget Project, in a report critical of the film industry study Monday, said HR&A inflated the tourism impact.
The budget project noted that “the study attributes 14.5 percent of state tourist visits to film and TV production but says that ‘should be considered upper-bound estimates’ and that there ‘may be other factors that contributed to their visitation and spending patterns.’ ”
Follow Tyler Bridges on Twitter, @TegBridges. For more coverage of the State Capitol, follow Louisiana Politics at http://blogs.theadvocate.com/politicsblog.