Hollywood South In Jeopardy
Deep inside the current anemic economic climate of America today, state legislatures are wrestling down party lines in futile attempts to create jobs – any jobs. The myth that government creates jobs is just that, a myth, though the converse of that argument is true, government can kill jobs. Take for instance some of the lucrative film and television production/tax incentive programs offered throughout the United States, which are currently being scrutinized by these legislatures. Louisiana, also known as Hollywood South, is one of those states which is unfortunately caught up in this misguided partisan battle.
Roughly four out of five states have some sort of formal production incentive laws, or tax incentive laws, which arguably benefit the taxpayers and non-taxpayers of those states as well as the qualifying production business entities. Eleven states do not have any production incentive programs.
California and New York take the lion’s share of film and television production work in the U.S. These states are respectively the No. 1 and No. 2 production revenue-generating states when it comes to film and television expenditures. Louisiana, our Hollywood South, is No. 3. And it has been a long time coming for Louisiana to be No. 3 at anything good.
In 2002, Louisiana essentially became the first U.S. state to offer production incentives to filmmakers, studios, producers and other qualifying production entities, which enevitably launched copycat programs in other states. With some legislative refinement of the incentive programs in the years following 2002, Hollywood South has become an economic success and viable hub of film and television production.
The Slow Death of Hollywood
Since 1998, the year after the DVD craze took off, Hollywood, the purported filmmaking capitol of the world, has been dying. Dying in the sense that jobs, projects and money have been running away at a rate higher than was seen in the mid ’90s with the Great Escape To Canada, more of a slow bleeding-to-death rather than a BANG-you-are-dead, death. California has been voted “The Worst State To Do Business In” for so many years, I’ve lost count. New York is “The Second Worst State To Do Business In” for years running, too.
Louisiana, by contrast, has jumped from the bottom half of “The Worst States To Do Business In” (46th in 2006) to the Top 25th Percentile of “The Best States To Do Business In” (13th in 2012) and Hollywood South has a lot to do with that leap.
While the weather, beaches and snow-covered mountains in Southern California might be enticing to most people, it certainly was to me, a lot of Below The Line (generally crew talent) people have moved to better economic climates with arguably better quality of life issues, such as Louisiana. When you work in an industry such as film and television, quality of life is crucial to longevity in your career.
After three decades in Hollywood, I decided to move back home to New Orleans with a healthy credit due to NOLAbound, which I was humbled to be selected along with 26 other well-connected individuals from across the country to assess the status of New Orleans as a model of new business progress and thinking. My business sector was arts-based film and television. What my soul felt back in March of 2012 was I would be back home soon. My mind needed to make itself up. As a conservative businessman, the success of Hollywood South was clearly a deciding factor.
If Hollywood South collapsed because of these partisan political pressures, I would have no other choice than to move back to Los Angeles and put aside my production company start-up here in New Orleans, to then only end up running someone else’s company, again. I’ll bet dollars to beignets I would see a mass exodus following me back to Hollywood from Hollywood South. THAT would be a tragedy.
The Hollywood South Killer Bill
With Louisiana’s Republican Governor Bobby Jindal’s recent Tax Reform Proposal the state legislature is wrestling with, the production incentives which made Hollywood South what it is today, quite possibly could be just a footnote in Hollywood South’s film and television history. That would be devastating to thousands of crew talent, businesses and taxpayers, yes, even taxpayers.
Louisiana state Representative Edward C. “Ted” James II (D-Dist. 101) introduced House Bill 161 which, “Reduces the amount of the income tax credit for state-certified productions and removes authority to transfer or sell motion picture investor tax credits.” It might as well be titled “The Hollywood South Killer Bill.”
The Louisiana House Legislative Services says, HB161 “Reduces the amount of the income tax credit for state-certified productions from 30% to 15%, changes the number of years a credit can be carried forward from 10 years to 5 years, and deletes authority for the credit to be transferred or sold.” In my opinion, just the reduction in credits from 30% to 15% would kill-off three-quarters of Hollywood South, which saw about $1.3B in production revenue spends for 2012. The other 49 states would have better chances of landing the runaway productions, even other countries, yes, Hollywood South runaway productions.
After Gov. Jindal wholely endorsed the Academy Award Winning Pixomondo with its Baton Rouge visual effects (VFX) facility location, it is brightly clear Gov. Jindal understands the economic impact Hollywood South makes in Louisiana. However, under Gov. Jindal’s Tax Reform Proposal, elimination of personal and corporate income taxes would hobble half of the production incentives offered by Louisiana (the “tax credits” part). While there is the other half of the incentives (the “buy-back” part), an 85% buy-back of the credit’s face value directly from the state, that might not be enough to keep Hollywood South in the No. 3 slot. It would certainly shutter 100% of all tax brokerages, those little known entities which help producers sell their qualified production tax credits. That’s a chance which cannot be taken by Louisiana.
Pixomondo recently shutdown operations in London and Detroit while open jobs in their Baton Rouge facility go unfilled. Would they move their headquarters from Santa Monica, California to Baton Rouge in the future? Not if these production incentives are killed-off. Absolutely not.
Cut To The Tax Chase
It is wholly understandable Gov. Jindal wants Louisiana to be prosperous, have simplified tax structures and encourage economic growth. He has stated he wants to rollout the red carpet for businesses to move to Louisiana and has a great record in this respect. However, unintended consequences could leave Hollywood South out to dry without any tax liabilities needing offsets with production tax incentives. What would be left is the ‘buy back’ part of the production incentives.
As for Rep. James, it is clear he has a complete lack of understanding of the consequences of his HB161 would impose on Hollywood South and the destruction of an industry. Or, maybe he understands quite well and hates tax dollars being given to rich Hollywood types. I’m being facetious.
At the end of the day, when the First Assistant Director yells, “That’s a wrap!,” it quite possibly could be a wrap on Hollywood South if HB161 is signed into law. I don’t see Gov. Jindal signing it, much less a majority of Louisiana’s legislature passing it, but his own Tax Reform Proposal could have the same effect in killing off Hollywood South.
With every state-qualified production dollar spent by producers in Hollywood South, the State of Louisiana generates an estimated total economic output of $5.71. That is a very positive outlook for all of Louisiana’s economy. Film and television productions generate payroll and those paid will spend money buying goods and services from Louisiana companies.
Action! Action! Action!
As the director yells, “Action! Action! Action!,” yell back – respectfully – to Gov. Jindal’s office, Rep. James office and all the other representatives in Louisiana.
Office of Governor Bobby Jindal Toll Free (866) 366-1121 FAX (225) 342-7099
Representative Ted James, District 101 Phone (225) 925-4859 FAX (225) 925-4885
The loss of Hollywood South will affect you, too, even if you don’t work in the industry. It is the loss of jobs which will affect all of us. The Great Recession of the 21st Century has proven this is the unfortunate outcome of the loss of jobs.
Be Louisiana proud and help preserve Hollywood South with a thoughtful letter, FAX or phone call to your representatives.
Stanley B. Gill
Founder and Editor In Chief