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Many states are feeling the economic shock. In Texas, for example, entertainment production fell to $140 million last year, vs. $295 million in 2000. Only four feature films were produced in Texas in 2002, the lowest figure in 10 years. Other states are still compiling 2002 data, but North Carolina's 2001 revenues of $250 million were flat vs. its 2000 intake, and the number of major projects shot in the state dropped from 81 to 44. New York City estimates that feature-film expenditures fell to $678 million in 2001, from $839 million in 1999. In total, the impact of film and television runaway production on the U.S. is around $10 billion a year, according to a 1999 report commissioned by the Screen Actors Guild and the Directors Guild of America.
Some states are pushing hard for more tax relief and rebates to dangle before filmmakers. The Oklahoma legislature has passed a "Compete with Canada" act that provides a 15% cash-back incentive on film-production spending in the state. Minnesota, Louisiana, and Texas also have passed rebate legislation. North Carolina, the No. 3 filmmaking state, offers movie crews a 1% cap on sales taxes and use taxes related to production equipment. Illinois, New York, and other states are considering bills that would give a 25% wage tax credit per employee.
HARD SELL. Tax relief for a special interest, however, is a hard sell in states facing sizeable budget deficits. California, for one, is having a tough time maintaining its incentives for filmmakers. Entertainment is the state's 18th-largest industry, yet wage-based tax breaks have only been offered for films costing less than $10 million, starting in 2004. Another incentive lets productions be reimbursed for certain film costs on public land, a program so successful that all of its $7.9 million in funds have been allocated through fiscal 2003, Constine says. How long the incentive can evade cutbacks in the face of the state's yawning budget deficit is an open question.
California, among others, is hoping for federal relief. Governor Gray Davis backs the U.S. Independent Film & Television Act of 2003, which would give a 25% wage tax credit of the first $25,000 in pay for individuals involved in movie production. But Washington is strapped for cash, too, and a similar bill died in Congress last year.
This story could yet have a happy ending. The fall of the U.S. dollar, which is now down one-third from its peak vs. the euro, will help make moviemaking in America more competitive. Technology also could lend an advantage. Digital manipulation can offer virtual substitutes for real locations -- and, in turn, keep films in U.S. studios. But without stronger financial leverage for the states, a sizeable percentage of Hollywood's movie production seem likely to be riding off into an offshore sunset.
Copyright 2003, Bloomberg L.P.
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