So what is this film tax incentive that has Columbus and the rest of Ohio in a tizzy? Do you understand what the tax incentives entail, and what this would mean to the local and state economies?
Tax incentives have been in place for the film industry in many states for over a decade. Film industry revenue in the United States alone is close to $20 billion yearly. According to some older figures from the Alliance of Motion Picture and Television Producers (AMPTP), approximately 75% of films were produced in California, with the other 25% spread among other states in the country (Coolidge,1995). In the early 1990’s states such as Louisiana and New York started offering incentive packages to lure the multi-million dollar production companies into their home turf to produce. Other states began to follow to try to get their own piece of the film industry pie, offering perks such as free housing during shoots, reduced rates on various local products and services, and a tax rebate of up to 25% back in the pockets of the production companies.
Why would states give up the much needed tax money? Easy-because of the revenue that is created in the local and state communities during the productions. This money is created through many different means, the most obvious being the employment of hundreds of local workers and talent that are involved in the creation of the film. True, there are many big name talent that get flown in from LA, but the majority of supporting roles, extras, set construction crews, day labor, and other support staff are positions filled by local workers and local talent, which amounts to a huge amount of people being put to work. In addition to staff, there is a huge surge in the local economy during pre-production and filming as the production purchases lumber, supplies, and food for that huge crew of people working on the film. This puts money right into the pockets of local stores and services. In addition, the are secondary benefits to local and state economies that are a little harder to accurately measure, but should nonetheless be considered, including travel and tourism. Films with recognizable locations such as Natchitoches in Louisiana (“Steel Magnolias” 1989), Fort Hays in Kansas (“Dances with Wolves” 1990), and Arches National Monument in Utah (“Thelma & Louise” 1991) all experienced distinct increases in their travel and tourism industries after the release of the films, any where from 20% to 43% (Coolidge,1995).
So why would states NOT want this to happen? Well, the most common argument is that the incentives are really “kickbacks” to an industry that does very little to stimulate the local economy, and that the states actually lose valuable tax money by returning the tax credits back to the production companies. However, this argument not only ignores the information outlined above, but also the numerous studies that have been released with hard facts and figures show how the credits monetize back to the state economies. In a report prepared by an outside firm for the state of Louisiana, they calculated that for every $1 in state tax credits that are “lost” by being credited back to the film, approximately $6.64 is created for the local and state economies (Economics, 2009, p. 34). For those who are not math-minded, that is a 646% return on investment! To find an investment with more significant returns you’d probably have to contact Bernie Madoff in his prison cell 🙂
The argument is overwhelming for the use of state tax incentives to draw film production into the states. Ohio is among the few states left that does not currently have tax incentives, and is pushing to pass the legislation now. The bill would provide up to a 25% transferrable tax credit back to the production companies for films shot in the state, and is modeled after states with other successful film tax incentive programs such as Louisiana. Below is an email sent out by the Cleveland Film Commission. The CFC and Nehst Studios have partnered up on a deal to open a full time production studio in the Cleveland Convention Center, creating jobs and stimulating the local economy–pending the successful passing of the state tax incentives.
The need for a film tax incentive in Ohio is important not only to the local film industry, but to the economy in general. The figures speak for themselves as to why this needs to get passed. For more information on the local film industry and the legislation, as well as government contacts you can write to get more information, go to the CFC website www.clevelandfilm.com.
Academy Award-winning Producer Signs Lease to Bring Film Studio to Cleveland
Nehst Studios to Bolster Ohio Film Industry
Greater Cleveland Film Commission
Dix & Eaton
City of Cleveland
CLEVELAND (March 17, 2009) – Nehst Studios, a New York City-based independent film and television production, financing and distribution company, today announced plans that would locate a film studio at the downtown Cleveland Convention Center.
Nehst and the City of Cleveland have agreed on a one-year, rent-free lease with an option to renew. The signed lease is the result of two years of talks between Nehst and the city. The goal is to create a first-rate movie production studio that can service Cleveland as well as the rest of the state and region. The studio and soundstage will meet pre-production, production and post-production filmmaking needs, from office space rentals to final completion, and will support numerous genres, including documentaries, Web series, television and feature films.
“Downtown Cleveland and Cuyahoga County are ideal locations for the establishment of a film industry,” said Larry Meistrich, chairman and founder of Nehst Studios. “The city and county are ideal for their central location and versatile amenities, strong work force and affordable cost of doing business. We look forward to continuing our work with state lawmakers to bring Nehst to Ohio. ” Meistrich has produced more than 100 films, commercials and music videos including the Academy Award-winning “Sling Blade,” the Academy Award-nominated “You Can Count on Me,” Cannes Film Festival winner “Henry Fool,” “Belly” and the Cleveland-based “Running America.”
Pending approval of a tax credit bill before the Ohio Legislature, Nehst will begin producing films at the Convention Center. The initial investment of up to $80 million in film production will fund 8-15 films during the next two years. According to Nehst, the goal is to keep two to four complete film crews including talent and extras working throughout the year, with each film crew employing at least 100-200 people.
Nehst’s partnerships with area universities and colleges, such as Cuyahoga Community College, where the studio has been conducting its Aspiring Filmmakers Boot Camps presented by The Greater Cleveland Film Commission, would be expanded to enhance existing filmmaking education programs and create accredited internships. The economic benefit across multiple industries is expected to yield a multiplier effect of $120-$165 million.
“We are excited about what this investment means for Cleveland and the region,” Mayor Frank Jackson said. “Working with Nehst will open the door to potential economic growth, provide job opportunities for local residents and provide built-in marketing opportunities for Cleveland.”
Ivan Schwarz, executive director of The Greater Cleveland Film Commission, stressed the positive impact Nehst’s move would have on the regional and statewide economy.
“Having Nehst Studios come to Cleveland is the next step toward building a robust film industry potentially employing thousands of people in Ohio that produces its own content as well as competes to bring film work to the state, ” Schwarz said.
Chris Ogeneski of Barclays Capital in New York and Chris Johnson and Ryan Stefan of Fifth Third Securities’ Cleveland offices have been instrumental in creating this opportunity to help revitalize Northeast Ohio.
About Nehst Studios
Nehst Studios is a diversified film production, financing and distribution company that integrates the most powerful trends in entertainment and technology marketing and is headed by industry veteran Larry Meistrich – producer of “Sling Blade” and “You Can Count on Me” and founder of indie film studio Shooting Gallery – and entrepreneur Ari Friedman. One of Nehst’s goals is to remove entertainment industry barriers and open up the pitching and development process to anyone with a great idea. Through its inclusive, open pitch sessions and Aspiring Filmmakers Boot Camp presented by The Greater Cleveland Film Commission, Nehst Studios is revolutionizing the filmmaking process by opening up the content creation process to aspirants with talent or consumers who want an insider’s view. The company, which launched at the 2007 Cannes Film Festival, is currently developing dozens of film and television projects. For more information on Nehst Studios, visit www.nehst.com.
Coolidge, S. (1995, September 25). On-site filmmaking: A boon to states’ coffers. (Cover story). Christian Science Monitor, 87(210), 9. Retrieved March 24, 2009, from Academic Search Premier database.
Economics Research Associates (February 2009). Louisiana Motion Picture, Sound Recording, and Digital Media Industries. State of Louisiana Economic Development. Retrieved March 24, 2009 from http://louisianaentertainment.gov/apps/2009_ERA_Report.pdf.