Sublet your place, drop the dog off with your mom and hop on the redeye. The state of New York has committed more than $2 billion in incentives for film and television productions over the next five years.
This is a story about how New York taxpayers created the largest pool of incentive money of any state to date, how some of it in the next five years could indirectly wind up in your pocket, and about how so far, the strategy seems to be working.
On the strength of 30% production incentives, the Empire State attracted a record 12 pilots in the first quarter of 2011, and 16 for the season, according to Pat Kaufman, director of the New York State Governor’s Office for Motion Picture and Television Development. There are a dozen multi-season television shows filming in New York, including Boardwalk Empire, Nurse Jackie, Rescue Me, 30 Rock, two Law & Order entries and the 36th season of Saturday Night Live.
Meanwhile, the Big Apple has turned the tables on the longstanding practice of shooting stories that take place in New York elsewhere, and parachuting into the city for two days of filming exteriors. Kaufman quotes her organization’s motto, “If it’s in the script, it’s in New York.”
Kaufman is a North Carolina native who retains her southern accent, nevertheless she speaks with the unmistakable speed and directness of a native New Yorker. It makes for a fascinating juxtaposition – rapid-fire southern drawl – but it can’t mask her glee as she relates the Mildred Pierce story. Every frame of the HBO mini-series starring Kate Winslet which is set in Hollywood, Malibu and Pasadena, was shot in New York.
Kaufman laughs when the Nancy Meyers film, It’s Complicated is mentioned. The film takes place in Santa Barbara but stars East Coasters Meryl Streep and Alec Baldwin and was shot in New York, with the exception of – you guessed it – a couple days of filming in Santa Barbara.
“We can give as good as we get,” Kaufman says. “We’re Ohio and Indiana; we’re Paris and Spain. We’re California more often than you think.”
Such is the power of incentives. Various locales have claimed to be all things to all producers for years, but suffuse those claims with a 30 percent rebate and they suddenly take on far greater meaning. It took New York a long time to get there.
Kaufman traces the beginning of her state’s journey to incentives prominence, back to 1997 when Canada became the first governmental entity to offer incentives. The idea that producers could receive a rebate from the government of Canada on every dollar they spent making a film or television show there, plus the fact that the exchange rate then heavily favored the U.S. dollar, was enough leverage to begin moving producers out of L.A.
“It took a while for Canada to get fully up to speed and develop crews,” Kaufman says. “At first, they were attracting movies-of-the-week, which had never been very big in New York City. Then they started getting TV series, and the first ones (they got) were leaving L.A. and going to Vancouver,” so New York was not significantly affected.
“Around the year 2000, we started feeling it,” Kaufman says. “The trend toward Canada got stronger and stronger, and then other countries like Australia and Great Britain got on board.” In 2002 and 2003 the first U.S. states, Louisiana and New Mexico, started offering incentives, Kaufman says “and by 2004 we made the decision to jump in too.”
The New York legislature passed incentives without much prodding. “I’d like to think it was because the program we proposed made sense,” Kaufman says. “We wanted to be strategic in deciding what our incentives would cover and what they would not. Our incentive package was designed for the specifics of New York.”
In writing their incentives, the New Yorkers looked closely at what types of productions they were losing and which types they were not struggling to retain.
The three major types of productions they targeted with their incentives are narrative feature films, series TV, and pilots that lead to episodic TV shows, Kaufman says. “They were the ones that were taking advantage of Canada, the strong U.S. Dollar, cheating Toronto for New York, shooting in California and coming here for a couple days,” she says.
Soaps, talk shows, sports and documentaries were among the types they decided not to “incentivize,” Kaufman says, because for a variety of reasons they were committed to New York. New York incentives also don’t cover productions that shoot only a small portion of their scripts in the state.
“Without disparaging any other states, because every state is different, there are some special things about New York that we wanted to highlight,” Kaufman says. “With that in mind, we didn’t think we had to cover everything.”
One of the key things they decided not to cover with their incentives, she says, is above-the-line payments. “Other states do cover above the line,” she says, “and we understand that. But we feel you get so much added value in New York,” that covering above-the-line expenses with their incentives wasn’t necessary.
Kaufman explains why. “First, you get New York City,” she says. “That’s priceless.” It’s a look, it’s a feeling and it’s lots of energy that you can’t authentically duplicate anyplace else,” she says.
“Second, we have a tremendous infrastructure. We come from a position of real strength in that regard. We have great crews, you never have the burden of bringing in actors, equipment – everyone and everything is already here.”
Finally, New York City has historically been the independent film capitol of the nation, she says, mentioning John Cassevetes, Woody Allen, Martin Scorcese and many others. “There is a history here that breeds quality, creative filmmaking.”
Some of the other states were starting with very little in terms of crews and infrastructure, she says, and so it made sense they had to offer larger incentives in order to attract producers.
In 2004, New York, began by offering 10% incentives on covered production expenses. “Since we were one of the earliest states offering incentives, that (10%) was pretty exciting,” Kaufman says. But Louisiana was offering 20% and Connecticut soon began offering 30%, “so we knew we needed to increase it to 30% too. But it wasn’t going to cost us as much because we knew we would not cover above the line. We remained confident we did not have to match that because of everything else we had to offer.”
Since 2004, the amount of money New York has offered in incentives has gone steadily up. “They (the legislature) began by giving us $70 million, then $80 million, then $110 million,” per year, Kaufman says, but there was always the stipulation that if she used all her allotted funds for a given year, she could begin spending the following’s year’s money. “We were always going into the next year’s allotment,” she says, “and eventually we got to the point where we were using up money designated for a year and a half ahead.”
So last summer when the multi-year incentives law expired, “they said to us, ‘OK, we got it, you need a lot more. Let’s increase it to $420 million per year for five years,’ and that’s how we got our $2.2 billion,” she says.
Like every other state or country, New York’s incentives are complicated with many stipulations and restrictions. To read more about them, visit the film offices web site, nylovesfilm.com.
Here are some other key aspects:
• A 10% credit on postproduction expenses when you post in New York, no matter where you shot your film.
• Commercial production companies can receive a 5% credit when 75% of a commercial’s costs are spent in New York. Companies can receive a 20% credit on increased year-over-year expenditures when they grow the amount of business they do in New York.
• A production can receive state tax exemptions for equipment they purchase in New York. This exemption may also apply to services and repairs related to equipment, as well as fuel and utility costs.
• Producers can receive up to 5% on investments in construction and upgrades to facilities.
But Do Incentives Really Work?
If a state’s taxpayers write a producer a check rebating anywhere from 10-40% or more, on the amount of money he or she has spent filming in that state, will they ever see a return on that investment?
That question has been asked in nearly every state capitol in the nation, and legislatures have turned to consulting and accounting firms to give them a straight-up answer.
Not surprisingly, the results have varied widely, from a big, fat “Yes,” to the tune of $6.00 return on investment asserted by a Michigan study, to a more modest $1.50 estimate cited in a New Mexico study.
“The naysayers will always say they don’t believe it,” says Joe Chianese, the senior vice-president for Entertainment Partners’s incentives and tax benefits division. “Here’s what I ask people to do,” since the results vary widely, Chianese says. “Get together and decide what parameters you are going to include, and use the same ones in every study. Then you’ll get similar results.
“What you can’t disagree with,” Chianese says, “is that the end result will be that, yes, they’re worth it,” because the production spending they attract brings more money into the state than the incentives pay back out.
“It’s really that simple,” he says. “They absolutely work. Canada, the UK, Australia – 15 countries and 43 or 44 states – these people are not charitable institutions. They know what they are doing. They have done their due diligence. They’ve determined what is in their best interests. They are getting a very good return on their investment, I guarantee you they are.”
Consistent film business means long-term jobs at a decent wage, which results in people putting roots down in a community, buying homes, investing in their trades by buying equipment and becoming permanent taxpayers, Chianese says.
But it takes time to grow a film infrastructure, and states that don’t have one will have to pay higher incentives and sustain them. “You’ve got to make it generous enough to lure people and allow time for the infrastructure to develop. Then you can lower the rate,” he says.
It’s also important for each legislature “to do what New York did and think it through in terms of what’s best for them,” he says. For instance, a nuance in the New York law is that independent producers can’t convert any random warehouse space into a stage, rather, they are required to rent a permanent film stage that’s been recognized by the state. “That’s one of the ways they grow and take care of their infrastructure,” Chianese says.
The “above-the-line question,” has been a hot button for many legislatures. “It’s hard to defend a rebate on really expensive labor,” he says. One of the things people don’t understand is that the rebate on revenues earned by highly paid actors and directors might sound huge, but it’s offset by the fact that a percentage of that money comes back to the state in the form of state taxes the Hollywood talent is required to pay.
“It takes five years at minimum to grow an infrastructure, but look what happens when you stick with it. New Mexico’s crew base was less than 300 but today it’s more than 3,000. And now you’ve got the industry making permanent investments in the state,” such as stages and other facilities, he says.
“No one’s giving away money. Incentives work,” he says.