Tax breaks for films debated
Incentives could cost Ohio $40 million this year; movie with scenes shot in Dayton got $3.4 million in tax credits.
A tax break and subsidy for people making films in Ohio could cost the state $40 million this year after state lawmakers doubled the cap of the Ohio Motion Picture Tax Incentive.
But as area residents bask in the Hollywood spotlight and snap selfies with Robert Redford and Casey Affleck, some states are determining the fame isn’t worth the cost.
A 2016 survey by the National Conference of State Legislatures
found that 10 states have ended their film incentive programs since 2009 — most recently Michigan, New Jersey and Alaska. Budget deficits and unclear economic benefits are among the arguments against the credits.
Ohio seems to be moving in the other direction, even as it too faces a tough budget year.
The state has green-lighted 110 projects for a total of $130.3 million in tax credits since 2012, according to state data. The amount has grown steadily to
$40.1 million last calendar year (which included the second half of FY 2016 and the first half of FY 2017).
“It’s great for the headlines. It’s great for the front pages of the newspapers for the politicians to say ‘We made this happen.’ But
you’re not likely to create the deep supply chain link- ages in the industry that are going to build a long term industry in the state,” said Matthew Murray, economics professor at the University of Tennessee who released a study in March that spurred legislation to kill Alabama’s film tax credit.
Murray’s study found “a negative impact on tax revenues and only marginal
impacts on employment and economic activity that do not justify the revenue cost of the program to the state.”
Jobs created were shortterm and paid an average of only $20,585, the study found. And it noted there is was a good chance some of
the films would have been shot in Alabama anyways.
‘Old Man and the Gun’
The NCSL found 37 states still have some sort of film incentive.
Lisa Grigsby, director of Dayton’s year-old film commission FilmDayton, said the tax credit is a must-have for Ohio to compete onthe national stage.
And when Second Street in downtown Dayton was transformed into the 1960s for Robert Redford’s film “Old Man and the Gun” this month, the production hired 70 local extras, employed dozens of area film profes-
sionals, paid for catering and other services for a crew of nearly 100, Grigsby said.
“Most of them are hired locally,” she said.
“Old Man and the Gun” is the largest production to come to Dayton so far, she said, creating community pride along with the eco- nomic impact.
“That whole second floor of the Arts Garage was full of people wanting to see a star,” she said.
The movie, which also filmed in Cincinnati, Hamilton and other southwest Ohio locations, was approved for nearly $3.4 million in tax credits.
The credit is equal to 30 percent of the cost of eligible production-related expendi- tures. The film’s tax credit application says producers planned to hire more than 850 Ohioans — 750 extras, 70 production crew members and a couple dozen actors.
The production budget also includes more than $3 million in equipment rental and purchases, $313,247 in lodging, $311,750 in location fees and $525,039 in other
costs — including catering and transportation.
The film’s total planned production budget is $15.8 million, all of which was to be spent in Ohio. About 71 percent of those expendi- tures qualified for the 30 percent credit. Producers have to file paperwork prepared by an accounting firm to get the credit.
Statewide, filmmakers have already claimed $10.8 million in tax credits through the third quarter of this fiscal year, which ends June 30.
The tax credits can be applied to offset each film company’s tax liability, and any extra can result in a payout.
Ohio Department of Taxation officials say confiden
tiality rules prohibit them from disclosing exactly how much was paid to any specific production.
Local studies
Some say the tax credit is paying off.
A study released last year by the University of Cincin- nati Economics Center esti- mated the film industry created a $54 million economic impact in greater Cincinnati in 2014 and 2015 and created 8,800 full- and part-time jobs since 2014 with $11.8 million in taxpayer support.
A 2012 study by econo- mist Candi Clouse at Cleveland State University found that every dollar spent on film tax credits there generated more than $2 in eco- nomic impact.
“The state is investing pub- lic dollars, and those dollars come back to the state econ- omy,” Clouse said.
The money doesn’t just pay caterers and hoteliers, she said; it’s also building a film infrastructure.
“I interviewed countless people who said, ‘I live in Ohio, but I’ve never worked here before’, because they have to travel to stay in the
industry,” she said. “Investing in getting people on the ground will pay off in the long run to making this more sustainable.”
Murray’s study found the tax incentive program did lit- tle to build Alabama’s film industry. He said a more wise investment of public money would be in education or helping companies build actual facilities in the state
that provide long-term jobs. Short-term impacts don’t provide lasting benefits, he argues. “We could drop $20 mil
lion over the University of Alabama football stadium on football Saturday, (and) every dollar spent will generate $2 through the ripple effect of economic impact. Then it’s over. It’s finished. Everybody goes home and
the deal is done,” he said. “That’s not a very good way to spend the money.”
‘We chased tax credits’
State records show that
more than half the money allocated in tax credits so far has gone to productions in northeast Ohio.
“White Boy Rick,” starring Matthew McConaughey and filming this year in the Cleveland area, received more than $9 million in credits, the most in the program’s history.
Local filmmaker Michael Webber has produced and co-produced films for 20th Century Fox, Lionsgate and other companies.
“We chased tax credits. It means everything,” he said. “(Before Ohio’s tax credit) it was disheartening because we were shooting in places like Florida, we were look- ing at the Carolinas, we were looking at Europe. A lot of
the time we were chasing those tax credits.
“We were unable to shoot films in Ohio, and I couldn’t even propose it to my partners.”
He now has a production company in Miamisburg and says the tax credit is invaluable for luring financing from outside the state.
Webber received $110,370 in tax credits for a docu- mentary he’s making called “American Exotic” about people who keep exotic animals as pets. He is currently lining up financing for two other films.
“This is money that comes from out of state and comes into the state,” he said.
Another local filmmaker, Mike Mergler, has received more than $1 million in tax credits for several movies. One titled “Over the Rhine” was featured this month at the International Christian Film Festival in Orlando.
“(The tax credit) is abso- lutely critical to the fund- ing package, absolutely crit- ical,” Mergler said. “Part of the idea of the tax credit was to try to build an industry.”
Grigsby said that bringing film production to Ohio helps prevent “brain drain,” such as with Wright State film school students. Another benefit that’s hard to quan- tify is the appeal that comes with being the backdrop of a big movie.
Murray, the University of Tennessee economics professor, noted there is a bene- fit from that, but he said it’s a costly one.
“If you place sufficient value on that marquee effect, whatever it is, then paying $55,000 for a job is worth it,” he said. “But the resi- dents and taxpayers of Ohio have to decide whether they really see a marquee value of that magnitude.”
‘That whole second floor of the Arts Garage was full of people wanting to see a star.’ Lisa Grigsby Director, FilmDayton