In­cen­tives for film, TV face big cuts

Pre­vi­ous re­duc­tions have led in­dus­try to spend less in Texas.

Austin American-Statesman - - FRONT PAGE - By Bob Sech­ler bsech­ler@states­man.com

Plenty of movie block­busters have been built around the theme of plucky pro­tag­o­nists tri­umph­ing over ad­ver­sity through grit, hard work and the right­eous­ness of their cause.

Boost­ers for the film and video game in­dus­tries in Texas are hop­ing to write them­selves just such a Hol­ly­wood end­ing at the Capi­tol, where a tax­payer-funded in­cen­tive pro­gram — which back­ers say is crit­i­cal to lur­ing movie, TV and video game pro­duc­tions to the state — hangs in the balance.

They’re try­ing to carve out $50 mil­lion to $75 mil­lion for the pro­gram in the state’s up­com­ing 2018-19 bud­get, even though House and Se­nate bud­get writ­ers ini­tially ear­marked only $10 mil­lion for it over the two-year cy­cle and re­cent leg­isla­tive ac­tion has cut the Se­nate’s pro­posed ap­pro­pri­a­tion even more. In ad­di­tion, some Repub­li­cans are angling to elim­i­nate the in­cen­tives en­tirely — and abol­ish the Texas Film Com­mis­sion, which over­sees it.

That leaves ad­vo­cates — who say pre­vi­ous cuts in in­cen­tive pay­ments have al­ready cost the state mil­lions of dol­lars in in­dus­try spend­ing — with the task of

con­vinc­ing law­mak­ers the pro­gram is im­por­tant enough to war­rant more re­sources be­fore the bud­get is fi­nal­ized in May, at a time when the state is wrestling with a multi­bil­lion-dol­lar bud­get gap.

They also must sur­mount philo­soph­i­cal ob­jec­tions from con­ser­va­tives op­posed to tax­payer-funded in­cen­tives of all stripes as in­ap­pro­pri­ate med­dling in the pri­vate sec­tor, and who, in some cases, take a dim view of the cul­tural im­pact of the film and video game sec­tors.

“Un­for­tu­nately, our pro­gram is one that, from the out­side look­ing in, looks like wel­fare for Hol­ly­wood,” said Mindy Ray­mond, ex­ec­u­tive di­rec­tor of the Texas Mo­tion Pic­ture Al­liance, an in­dus­try lob­by­ing group. “But it’s re­ally a big mis­con­cep­tion. It doesn’t ring true to how it works.”

The pro­gram — known as the Texas Mov­ing Im­age In­dus­try In­cen­tive Pro­gram — al­lows qual­i­fy­ing projects to re­ceive re­bates on money they spend in Texas. Ap­pli­cants must sub­mit re­ceipts to the Texas Film Com­mis­sion to prove their so-called Texas spend.

The in­ten­tion is to en­sure the in­cen­tives cre­ate jobs for Texas crew mem­bers, set de­sign­ers, video game pro­gram­mers and oth­ers rather than go­ing to line the pock­ets of Hol­ly­wood or cor­po­rate big­wigs. The amount of the re­bates is based on a slid­ing scale, but movies, stan­dard TV shows and video game projects can re­coup a max­i­mum of 20 per­cent if they spend $3.5 mil­lion or more in the state.

Ac­cord­ing to the Texas Mo­tion Pic­ture Al­liance, the in­cen­tives have re­turned $5.55 for ev­ery dol­lar spent on them and cre­ated nearly 143,000 Texas jobs over the past decade. Some crit­ics have coun­tered that many of those jobs are tem­po­rary be­cause they end when pro­duc­tions wrap, but sup­port­ers say that’s not the case when the in­dus­try is ro­bust enough to sup­port a steady flow of projects.

Re­gard­less, the job num­bers lately ap­pear to be go­ing in the wrong di­rec­tion. The Leg­is­la­ture al­ready cut fund­ing for the in­cen­tives to $32 mil­lion for the cur­rent bi­en­nium, down from $95 mil­lion in the 2014-15 cy­cle, prompt­ing some pro­duc­tions to leave Texas for states with more lu­cra­tive en­tice­ments. Among nearby states, New Mex­ico bud­gets $50 mil­lion each year for its pro­duc­tion in­cen­tive pro­gram, while Louisiana bud­gets a whop­ping $180 mil­lion a year.

In­dus­try spend­ing in Texas dropped from $442 mil­lion in the 2014-15 pe­riod to an es­ti­mated $121 mil­lion for 2016-17, ac­cord­ing to the Texas Mo­tion Pic­ture Al­liance, a de­cline it at­tributes to the in­cen­tive cuts.

High-pro­file mem­bers of the Texas ex­o­dus in­clude the third sea­son of “From Dusk Till Dawn: The Se­ries,” which re­cently moved from Austin to New Mex­ico, cit­ing the in­cen­tives, and the show “Amer­i­can Crime,” which left for Cal­i­for­nia for the same rea­son. Mean­while, the ac­claimed 2016 film “Hell or High Water” is set in West Texas but was filmed in New Mex­ico.

The trend is ex­pected to con­tinue if Texas re­duces in­cen­tives even more or ends its pro­gram al­to­gether.

“I’ll prob­a­bly have to leave,” said Red San­ders, pres­i­dent of Red En­ter­tain­ment, a small Fort Worth­based pro­duc­tion com­pany that de­buted its low-bud­get com­edy film “A Bad Idea Gone Wrong” at South by South­west last week­end. “We’re a small busi­ness, and with­out (the in­cen­tives), I don’t think we will be here.”

San­ders de­clined to re­veal how much his com­pany spent on the movie but said he’s hop­ing to re­ceive a re­bate of about $18,000 from the film com­mis­sion. He said the movie em­ployed 38 Tex­ans out of a crew of 42.

Panav­i­sion, a sup­plier of high-end cam­eras and other equip­ment to the in­dus­try, al­ready has plans to leave the state if the in­cen­tive pro­gram is cut to $10 mil­lion or be­low.

John Schrimpf, a Panav­i­sion vice pres­i­dent who over­sees its op­er­a­tions in Texas, New Mex­ico and Louisiana, said the com­pany ex­pe­ri­enced a $1 mil­lion drop in Texas rev­enue in the wake of the pre­vi­ous cut to the in­cen­tive pro­gram, although he de­clined to re­veal the per­cent­age of the drop. Panav­i­sion em­ploys eight peo­ple in its Texas of­fice, he said, which is in Dal­las.

“We have to be where our cus­tomers are,” Schrimpf said. “If (state law­mak­ers) take the pro­gram down to $10 mil­lion, our cus­tomers won’t be com­ing here, and there’s no rea­son for us to be here.”

But such warn­ings are un­likely to sway some state law­mak­ers, who have ar­gued among other things that iden­ti­cal ap­peals could be made by any in­dus­try, and that it’s not the proper role of gov­ern­ment “to pick win­ners and losers” by de­cid­ing which to sub­si­dize. Some con­ser­va­tives also bris­tle at the no­tion of giv­ing a hand­out to Hol­ly­wood, even as in­dus­try ad­vo­cates stress that’s not ac­tu­ally hap­pen­ing.

Two mea­sures, Se­nate Bill 99 and SB 244, have been in­tro­duced in the state Se­nate to abol­ish the in­cen­tive pro­gram and the film of­fice, and one, HB 779, has been in­tro­duced in the House.

“The ques­tion is, is it ap­pro­pri­ate for the state of Texas to take tax money from a sin­gle mother who has got two jobs try­ing to make ends meet and give it to a pro­ducer or ac­tor?” said state Rep. Matt Sha­heen, R-Plano, who spon­sored HB 779. “I don’t think so.”

State Sen. Bob Hall, R-Rock­wall, is the spon­sor of SB 99, while state Sen. Konni Bur­ton, R-Fort Worth, spon­sored SB 244. At a leg­isla­tive hear­ing on SB 99, both said the in­cen­tive pro­gram is a form of cor­po­rate wel­fare and money spent on it would be bet­ter left in the pock­ets of tax­pay­ers. They ap­peared to have sup­port from some other GOP mem­bers of the Se­nate com­mit­tee on Nat­u­ral Re­sources and Eco­nomic Devel­op­ment, which held the hear­ing to so­licit in­put.

But ad­vo­cates for the in­cen­tives say they are un­daunted.

“A lot can change be­tween now and May” when the leg­isla­tive ses­sion ends, Ray­mond said. “It’s not over ’til it’s over.”

Some pow­er­ful al­lies are on record as back­ing the in­cen­tives — in­clud­ing Gov. Greg Ab­bott, who has asked for $72 mil­lion for the pro­gram in his own 2018-19 bud­get re­quest. Ab­bott’s of­fice didn’t re­spond to a re­quest for com­ment, but Bryan Daniel, who heads the gov­er­nor’s eco­nomic devel­op­ment team, at­tended the re­cent leg­isla­tive hear­ing re­gard­ing SB 99 and de­fended the pro­gram as pre­sent­ing “a pretty ro­bust eco­nomic pic­ture” for the state. The film com­mis­sion is part of the gov­er­nor’s of­fice.

The Texas As­so­ci­a­tion of Busi­ness also sup­ports the pro­gram.

Mean­while, the film and video game in­dus­tries have been pre­sent­ing a united front in their ad­vo­cacy for the in­cen­tives, a change from two years ago when some say in­fight­ing made it easy for law­mak­ers to tar­get the pro­gram for cuts. About two dozen sup­port­ers of the in­cen­tives, in­clud­ing rep­re­sen­ta­tives of both in­dus­tries, turned out to tes­tify at the re­cent hear­ing over SB 99 and stress how im­por­tant the pro­gram is to them.

Other law­mak­ers friendly to the in­cen­tives pro­gram have pushed bud­get rid­ers in the Se­nate and House at­tempt­ing to in­crease fund­ing for it by an ad­di­tional $62 mil­lion for the bi­en­nium beyond both cham­bers’ ini­tial $10 mil­lion al­lo­ca­tions, although the ef­fort in the Se­nate re­cently died.

Frank Cop­per­smith, who chairs the Austin Game De­vel­op­ers As­so­ci­a­tion, said the pro­gram is crit­i­cal to main­tain­ing an ecosys­tem of gam­ing-soft­ware de­sign tal­ent in the state. His as­so­ci­a­tion con­sists mainly of small, in­de­pen­dent de­vel­op­ers and com­pa­nies, many of which were cre­ated by for­mer em­ploy­ees of larger video game stu­dios that might be lured out of state if Texas no longer is com­pet­i­tive in terms of in­cen­tives.

“With­out a few of the big­ger stu­dios to both serve as train­ing grounds and fo­cal points, even­tu­ally your in­die com­mu­nity will fade,” said Cop­per­smith, a vet­eran of the Texas gam­ing in­dus­try who now serves as chief ex­ec­u­tive of Pos­sum In­ter­ac­tive, a soft­ware con­sult­ing startup fo­cused on ar­ti­fi­cial in­tel­li­gence. “If you don’t have that (ecosys­tem), a lot of that tal­ent will move. And once the tal­ent is gone, it is go­ing to be re­ally hard to re­place.”

Ray­mond, of the mo­tion pic­ture al­liance, and oth­ers say they’ll keep fight­ing. Fund­ing for the in­cen­tives pro­gram might be a grain of sand on the beach com­pared with the state’s es­ti­mated $215 bil­lion over­all spend­ing plan for the up­com­ing bi­en­nium, but they con­tend it’s es­sen­tial if Texas hopes to re­tain and nur­ture a vi­brant cre­ative class of film, TV and video game in­dus­try work­ers.

“We don’t need the big­gest in­cen­tive pro­gram, but we do need to be com­pet­i­tive” with other states, Ray­mond said. “We have al­ready seen a pretty big de­crease in crews, be­cause there is just not enough work for them” in Texas.

ERIN GREEN / AUSTIN COM­MU­NITY NEWS­PA­PERS 2013

Pro­duc­tion of “From Dusk Till Dawn: The Se­ries,” seen shoot­ing in McDade, left Texas for New Mex­ico to do the third sea­son af­ter state in­cen­tives were cut.

CON­TRIB­UTED

John Ri­d­ley, an “Amer­i­can Crime” di­rec­tor, pre­pares to shoot a scene at Lake­way Re­gional Med­i­cal Cen­ter. The se­ries left Texas for Cal­i­for­nia af­ter leg­is­la­tors slashed in­cen­tives for the film and TV in­dus­try.

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