There has been a steady drumbeat over the years to end the strategy of subsidies and tax incentives in economic development. Critics suggest — rightly so — that states will benefit much more from across-the-board tax cuts and deregulation than they will from taxpayer-funded goodies passed from politicians to cherry-picked, favored businesses.
For years, politicos in Raleigh have been fascinated with the state becoming the new Hollywood. State government has been handing out tax incentives to TV and movie productions for cultural gems like ‘The Daily Show’ and ‘We’re The Millers’. This guy in Hickory got benefits for an alleged reality show about renovating a building — which never aired.
While businesses that have been operating for years and years in The Tar Heel State have struggled with the costs of ObamaCare, green energy mandates, outrageous gas taxes, and other forms of government overreach, the ‘honorables’ in Raleigh are doling out our money so that Wilmington’s city fathers can brag that ‘Jennifer Anniston once slept here while shooting a godawful movie.’
We had held out hope that the conservative revolution on Jones Street would kiss off this godawful practice of bribing Hollywood types to come see us. That hope — in light of recent reports — is quickly fading:
The state Senate wants to transform North Carolina’s film incentives from tax credits to a grant program with financial caps.
The $20 million grant program would replace the 25 percent refundable tax credit that expires at the end of this year.
Grants to films and television series would be capped at $5 million, much less than major productions now claim in tax credits.
The $20 million would cover grants for the first six months of 2015. The legislature would decide with each budget how much to give the film grant fund.
“This allows us to look at it every single year,” said Sen. Harry Brown, a chief budget writer. “We can always add more. If it’s not producing the jobs that it should, we don’t have to allocate anything. That’s a choice we can make.”
Wow. Letting these folks pick and choose who gets paid, and how much they paid. *Not much chance for cronyism, abuse or corruption there, eh?* (During the recent US Senate primary campaign, Thom Tillis publicly praised film incentives and — a few days later — got a truckload of money from some film studio types.) MORE:
The grant plan was presented as a way to lure and keep productions while grabbing control of the costs. Its supporters argue the current system is open to abuse and doesn’t create enough lasting benefits to justify the costs. But proponents of the film industry say the grant plan doesn’t go far enough. They argue tax incentives are important to a growing industry and are essential at a time when other states, including Georgia and Louisiana, are working hard to attract productions.
Film tax credits cost the state about $60 million in 2012, the last tax year the state has complete data for. Final numbers aren’t in for this year, but preliminary figures put the cost of the tax credit so far at $35.4 million.
The Senate gave preliminary approval to the proposal Thursday, the day after representatives from the film industry and their supporters in the legislature held a news conference to promote extending the tax credits.
Grants come with strings
Under the Senate plan, the state commerce secretary would be in charge of reviewing and approving applications.
“We’re giving the secretary some leeway and some negotiating powers,” said Sen. Bill Rabon, a film industry supporter who helped push the grant proposal. The grant program would end in 2020, and grant terms could be as long as three years.
“I believe it shows we want to be good partners, that we’re serious, that we’ll continue to look at this and hopefully expand this in the future,” the Southport Republican said.
Never mind that Rabon, Wilmington Rep. Susi Hamilton and other legislators have done personal business with these movie folks. MORE:
Among the requirements to receive a grant:
• A movie production must spend at least $10 million.
• A TV series must spend a minimum of $1 million per episode, and the minimum for commercials would be $500,000.
• Talk or game shows, live sporting events and productions containing obscene material, as defined by state statute, would not qualify.
• Priority would be given to productions based on the percentage of permanent state residents they employ, whether they feature identifiable state attractions in a way that would increase tourism, and whether they invest in permanent improvements.
Needs more ‘meat’
But the proposal raised questions about whether $20 million would be enough and whether production companies would want to go to a state where long-term funding was uncertain.
Rep. Susi Hamilton, a Wilmington Democrat who wants to keep the tax credits, said Republicans talk of the importance of consistency to business and industry, but the grant proposal does the opposite.
“A one-time, nonrecurring appropriation doesn’t do a thing to create stability in the industry,” she said. “How can you enter into a multiyear contract with nonrecurring money?”
The grant is far from a done deal. The House has not voted on a film incentives proposal. Gov. Pat McCrory’s budget included changes to the tax incentives, capping them at $6 million and connecting credits to specific expenditures on wages and services.
Calling grants “a good alternative,” Commerce Secretary Sharon Decker said some type of incentive is important to keeping the industry, calling it “a job creator in this state.”
Job creator? The production companies haul in a bunch of specialized workers from out-of-state, stay on location for a year, and then leave. The real job creators are the small businesses all over this state that have invested their blood, sweat, tears and money into their work. Want to create jobs? Do your part in Raleigh to get the crushing weight of the state off of their backs.