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New legislative studies advise caution on film tax credits

CA LAO Study

The latest report by the California LAO

Yesterday the California Legislative Analyst’s Office (LAO) issued a new report on the impacts of that state’s 10% tax credit for film and television production. This follows on the heels of a similar report from North Carolina. Both states are debating whether to continue the tax credit programs, and these reports are bad news for supporters of movie production incentives (MPIs) in both states.

The California LAO study avoided clear recommendations for lawmakers, but their key takeaways were:

  • States shouldn’t compete for film productions using subsidies
  • Since they do compete, California may need to protect its industry by doing the same
  • But lawmakers should proceed with caution, since the subsidies are both expensive, and do not pay for themselves

Obviously the admonition to other states is somewhat predictable, given the fact that Los Angeles County alone is home to some 50% of film industry employment nationally. And it is true that film production has declined in the state, both because of general declines in the industry and losses to other states. But the last issue — that the high costs of MPIs are not offset by the economic benefits — challenges more rosy pictures painted by many previous studies, including one from the Milken Institute from February. According to that report:

California should not attempt to capture or keep productions that are looking for the highest possible incentives — that’s a game it can’t win. Instead, the state must facilitate the preservation of the core employment base and production infrastructure, as well as help local filmmakers restructure and adapt to the new age of digital production and distribution… California should ensure enough incentives to balance out its higher costs and the increasing aggressiveness of other states without sacrificing its future. (Klowden et al., 2014)

The LAO study revisits an earlier study by the Los Angeles County Economic Development Corporation (LAEDC), which suggested that “…every $1 of tax credit returned $1.11 in state and local revenue.” The LAO estimated that a more accurate figure would be %0.65 for every $1 spent. In addition to the cautions suggested above, the report points out that film and television production could decline in the state regardless of legislative actions, that subsidizing this industry both sets an awkward precedent and could stoke a “race to the bottom” with other states, and that the effectiveness of MPIs could be difficult to assess in any case.

The California study follows closely a memo by the North Carolina Fiscal Research Division (FRD), which itself was a response to an industry-supported study by researchers at North Carolina State University. Though the memo was more preliminary than the California LAO report, it did find several concerns with the more optimistic results of the NC State report. Similar to the California case, initial calculations suggest that instead of returns of $1.06 and $1.42 for state and state + local for each $1 of tax credit, the FRD found returns of $0.46 and $0.61 per $1 respectively. The 25% tax credit for North Carolina productions is set to sunset at the end of 2014, barring action by the legislature to extend it.

Look for more such dueling studies as increasingly states question the efficacy of MPIs as a tool for employment and economic growth going forward.

 

 

Two recent presentations shed light on metro film jobs & the rise of Atlanta as a filmmaking mecca

It’s been a busy few weeks for me…

First, I traveled to San Antonio for my fourth Urban Affairs Conference. My presentation was a comparative study of 22 states offering movie production incentives (MPIs) over the last 10 years, with a special focus on the metropolitan nature of film employment. [see the complete presentation here].

Film industry employment is metro employment

San Antonio at Night

San Antonio at Night

Besides showing that across states, an increase in film industry employment has a lot more to do with the level of existing employment — showing a path-dependent relationship — than with the level of tax incentives available, I was able to show that film jobs are heavily concentrated in metropolitan places. In a pooled sample from 2007-11, 94% of film industry workers lived in metro areas, with nearly half (43%) in the metros’ central cities. In addition, over half (53%) lived in the top 10 filmmaking cities, with nearly 40% of workers residing in the greater Los Angeles (*including Riverside-San Bernardino) and New York metros.

Top 10 Metros

Top 10 Metros by Film Employment (Source: IPUMS ACS 2007-11 Pooled Sample)

In Georgia, nearly 90% of film industry jobs were in the 4 central counties of the Atlanta metro (Fulton, DeKalb, Cobb & Gwinnett).

GA Film Emp Map

GA Film Employment by County (Source: GA CEW data)

 

The rise of “Hollywood South”

Anyone who has lived, worked, or even visited Atlanta lately can easily recognize the signs: a line of white trailers, covered windows with adjacent scaffolding and lighting rigs, and the occasional celebrity/zombie sighting… all evidence of the recent growth in film & TV production in Atlanta and the surrounding area.

GSU Centennial Hall

The auditorium @ GSU’s Centennial Hall

Yesterday I was fortunate enough to attend the Second Annual Atlanta Studies Symposium, held at the newly acquired and renovated Georgia State University Centennial Hall, formerly housing the Atlanta Life Financial Group. This is noteworthy because GSU has led the revitalization of downtown Atlanta, taking over former office towers and commercial spaces nearly as fast as their tenants could skedaddle to the northern suburbs. But I digress…

Amidst a great assortment of presentations on Atlanta past and present, I was on a panel that included research on the option of local, organic food for low-income urban families; and a look at the new trend in “open streets” programs in cities around the U.S. and beyond. I had tough acts to follow, but I persevered. Mine was the last panel presentation of the day, before the closing keynote by Regime Politics author Clarence Stone, so I felt some pressure to keep my audience awake so they wouldn’t miss hearing from this icon of urban politics. I was really wishing I could still make some changes to my PowerPoint, but I was forced to improvise a bit at the last minute when, just moments before the panel began, I received a tweet informing me of an article just released by The Hollywood Report entitled “How Georgia Toppled Louisiana in Attracting TV Productions.” Needless to say, I wanted to include this in my talk, so I found myself opening by reading quotes off my iPhone… [See my tweet/blog piece on this article shortly]

After giving a litany of recent productions shot in or near Atlanta in the last several months, including the Hunger Games series (all 4 films so far and counting); Anchorman 2, which had my beloved Manuel’s Tavern converted to a New York watering hole after replacing all the Atlanta sports memorabilia (and one naked portrait) with that of NYC teams; and of course The Walking Dead, whose popularity is such that after 4 seasons, it has spawned a cottage industry of TWD locations tours.

According to Georgia’s Film, Music & Digital Entertainment Office, nearly $1 billion was spent directly in the state in fiscal year 2013, generating an estimated $3.3 billion in economic impact. That’s an increase of $55 million from FY2012, and nearly a quarter of a billion since FY 2011, when the industry spent $689 mil. That is nothing to sneeze at. But of course they didn’t mention the cost of the program, which could be up to 30% of that direct expenditure, or upwards of $300 million from state revenues, since the tax incentives are based on the production budget, not the taxes owed. Producers are allowed to sell their excess credits, often heavily discounted, to other companies and individuals who owe Georgia state income taxes, which has spurred a new industry for brokers of such tax credits.

So given this growth in productions, what does that mean for the Georgia-based film industry? So far, it’s hard to tell. Based on the latest numbers I have (2011), film industry employment is at approximately the same level as it was in 2000, prior to the passage of a series of increasingly generous tax credits. There has been some growth since the bottom of 2004, following the passage of the first film tax credits in Louisiana, but the biggest spikes come immediately after increases in the credits, and then drop and/or level off (see the chart below).

Film Jobs in GA, 2000-11

Film Jobs in GA, 2000-11 (Source: GA CEW data)

Occupational data looked a bit more promising, but while the four major film & television occupations showed growth overall, only the largest and least production-specific group — Audio & Video Equipment Technicians — showed actual growth. (see the following chart).

GA BTL Occupations 2000-11

GA Film Production Occupations 2000-12 (Source: Bureau of Labor Statistics)

In short, the last 2 years may in fact tell a different story, but in the mean time, I think we should be asking some tough questions about how this program is working, and whether it is really benefiting Georgia taxpayers, or even Georgia filmmakers.

The Mac put the “personal” in personal computing, and changed my life in the process

Image

Still have my original Mac, circa 1985

This week marks the 30th anniversary of the Apple Macintosh computer. I don’t think that it is an exaggeration to say that this humble machine changed my life.

For those of you unfamiliar with it, here are a few fun facts:

  • 128 kilobytes of RAM (that’s right, not megabytes, let alone gigabytes)
  • One 400 kb. 3.5″ floppy drive (with one additional external drive optional)
  • No hard drive (unless you count the hardshell “floppy”)

But it was still quite innovative in its time, with:

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From an early Mac ad

  • The first GUI on a personal computer
  • The first mouse
  • The first screen with black text on a white background (it had a 9″ monochrome monitor)
  • First modifiable fonts & bitmap art, a.k.a. “what you see is what you get” (WYSIWYG)
  • And although it came with a word processor (MacWord) & paint program (MacPaint), I paid a bit extra for Microsoft Word for Macintosh 1.0.

It doesn’t look it now, but it was actually quite sexy back then. But why did this particular machine change my life? Well, first, I bought it my first year of grad school, January 1985. A critical time, to be sure. It was my first computer, and though I used it primarily for typing papers, it changed the way I understood technology and how it worked in everyday life. I don’t know if it was love at first sight, but I started a relationship that wasn’t like the one I had with my toaster or my alarm clock. It truly was a “personal” computer.

Professionally I became quite competent with MS-DOS computers, and programs like Lotus 1-2-3. But my first love was always there. In my first business as a computer consultant I used both systems side-by-side. I still remember using special software and a cable connection to copy Lotus files to the Mac so I could do 3-way sorts using MS Excel for Mac, before it was even available on the PC. I thought I was pretty cool, I guess…

Human Face Logo

Human Technologies “Technology with a human face”

Eventually I decided to focus on the Mac exclusively, despite the fact that it was even less ubiquitous then than it is now. My first company was called Human Technologies, and the logo was a Macintosh icon with a smiley face on the screen (no doubt a copyright infringement, in retrospect, but fortunately I remained well below Mr. Jobs radar. That company was never much more than a sideline, but it helped lead to a series of temp jobs, and eventually a regular gig doing admin for a prepress company’s desktop publishing division. All because I knew Macs…

PhilaWeekly

That’s me on the left… with partners Jason O’Grady & Ryan Kaplan

After that came a stint as a Mac tech, after which my partners and I started what must have been one of the first Mac-based Web design and hosting companies in the Philadelphia area. We had a good run, but trying to host websites on a bank of mid-1990s era Macs was a challenge. But I think it’s safe to say that we had a lot of fun trying…

Apple was about to go through some tough times itself… with a shrinking market share and the post-Jobs strategy of aping IBM-clones. But then Steve Jobs returned triumphantly, and the glory days of Apple would begin a few years later; first with the iPod and iTunes Store, then the mobile phone that changed everything.

Strangely, I was slow to get on the iPod and iPhone bandwagons, though I’d always had a Mac as my primary computer. My first iPod was a 1G Nano, and my first iPhone was the 4. But now, when people hassle me for being an apple fanboy because of my MacBook Pro, iPad,  iPhone 5s, Apple TV, and even an old iPod Nano (I love the radio feature for NPR on the go), I have to tell them this long history.

Ok, maybe I am a fanboy… but I come by it honestly. Apple has always been there for me, and it’s co-founder has always been one of my heroes. And yeah, maybe I wasn’t there for the Apple II, let alone the Apple I, but I can’t imagine what my life would be like if I hadn’t seen that SuperBowl commercial 30 years ago this week, followed by an intriguing introduction by my first graduate stats professor.

So, happy 30th birthday, Macintosh! And they said it wouldn’t last… Here’s to 30 more years of thinking “different.”