Despite changes made by lawmakers to rein in the state's film tax credit, taxpayers still lose roughly two-thirds of the money they put into the program.
New preliminary figures unveiled Thursday show for every dollar spent on the tax credit programs for the entertainment industry in Louisiana — mainly the film tax credit — state and local governments get about 36 cents back in tax revenue, said Michael N’dolo, vice president for New York-based Camoin Associates, which conducted the study for Louisiana Economic Development.
That’s in the “same ballpark” as previous studies of the tax program, N’dolo said at the Louisiana Entertainment Summit. The tax break for the film industry has drawn controversy in recent years for its cost to a state that has dealt with repeated budget shortfalls and cut spending for things like health care and education.
The state’s motion picture production tax credit reimburses film and TV producers up to 40 percent of the cost of their in-state productions.
Lawmakers in 2015 capped the amount of credits that could be claimed at $180 million, then revised it again in 2017 to cap the amount of credits that could be issued at $150 million.
The state has issued $1.5 billion in tax credits as part of the program since 2012, according to figures provided by Louisiana Economic Development. That includes roughly $150 million handed out in 2018.
Still, speakers at the industry event, including Gov. John Bel Edwards, made the case that the program is worth it, pointing to the thousands of jobs that help keep a creative class of Louisianians from leaving the state to find work. More than 250 filmmakers, producers and others in the industry attended the event at the L’Auberge Casino and Hotel in Baton Rouge.
Edwards traveled to Hollywood last fall to promote the new version of the tax break for filmmakers, and on Thursday talked up the changes as a stabilizer for the industry. He touted Oscar-winners who filmed in Louisiana, as well as TV series like NCIS New Orleans, which has shot in the Crescent City for years.
Filmmakers in Hollywood “have renewed confidence that our program here is stable, it’s predictable and they want to return,” Edwards said. “And in fact, they are returning in a big way.”
The film industry in Louisiana has rebounded since taking a nosedive following the first round of changes. The amount of certified spending in Louisiana was up by $104.7 million in 2018 to $446.0 million, while the estimated amount of spending was down slightly. Certified spending represents the amount of audited expenditures in a calendar year, which often reflects spending from months earlier. Estimated spending represents the total amount spent by film and TV producers during a given year. Certified Louisiana resident payroll was up to around $150 million.
Currently, 17 productions are going on in Louisiana, said Louisiana Economic Development Secretary Don Pierson. Collectively, they are expected to spend $300 million in the state, and most are TV series, which Pierson said provide longer-term job prospects than movies.
To get those numbers, the state budget took a net $122 million hit, even after factoring in the tax revenue that flows back into the state coffers from the industry, the economic report found. The industry also generates $25 million in local tax revenue. While the report is still a draft, N’dolo said in an interview he doesn’t expect the final results on the return on investment to change much.
A study on the program is done every two years, and it was previously done by local economist Loren Scott. Two years ago, Scott found taxpayers get a return of less than 25 cents on the dollar for the tax program, as the state handed out $282 million in credits and the industry generated $63.2 million in state taxes.
The study done by N’dolo and Camoin also includes the sound and live entertainment industries, though the vast majority of the spending comes from the film industry.
Every dollar of the $150 million in tax credits spent last year also led to $2.20 in local earnings, and $6.29 in total spending in the industry. N’dolo said the tax credit program costs about $12,000 per job, when including the “indirect” jobs created by the industry.
“That’s the question,” N’dolo said. “Is that worth it for a state?”
The film tax credit program has been around since 2002, and N’dolo said Louisiana helped usher in an explosion of tax credits in 44 other states. Many have since backpedaled and ended their programs.
N’dolo argued a positive return on investment is not to be expected with government incentive programs. Though he said a similar study in New York found the return on investment there is significantly higher than in Louisiana — because New York is a much higher-tax state.
The economic impact studies on the program have drawn the ire of the film industry in the past, as backers of the program argue it doesn’t capture all the ripple effects of the industry. N’dolo said the estimates are “conservative.”
“We understand these facts and figures don’t necessarily show the important stories and faces that are behind our entertainment industry,” Pierson told the crowd. “As I speak today about facts and figures, please note there are tremendous secondary effects of the entertainment industry here in Louisiana.”