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Movie incentives may not be worth it

By Chelyen Davis

Last week Gov. Bob McDonnell announced that a new Tom Hanks movie would be shot in Virginia Beach.

He credited the state’s film incentives for helping lure the production, saying “Captain Phillips” will be eligible for a $300,000 grant from the governor’s Motion Picture Opportunity Fund.

“Our investments in the job-creating film industry continue to pay off for the citizens of Virginia,” McDonnell said in a statement.

Not everyone is such a big fan of film tax credits. State lawmakers initially cut part of the funding for the motion picture opportunity fund that McDonnell had wanted in the budget, although when he proposed restoring the money, the majority of lawmakers went along.

The Tax Foundation, a nonpartisan study group that focuses on tax burdens and tax policy, opposes movie incentives offered by states, saying they rarely provide the benefits they promise.

“MPIs are popular with state officials and many of their constituents but often escape routine oversight about benefits, costs and activities,” says a page on the Tax Foundation’s website. “Based on fanciful estimates of economic activity and tax revenue, states invest in movie production projects with small returns and take unnecessary risks with taxpayer dollars.

MPIs fail to live up to their promises to encourage economic growth overall and to raise tax revenue.”

Jobs created by using incentives to lure movie productions are often temporary, the Foundation says.

The group argues that states fall into a trap of spending money to attract a business that never stays, nor builds a permanent infrastructure. It’s also a never-ending cycle of keeping up with the Joneses, the Foundation says—states must keep adding to their incentives to compete with other states that have added to theirs.

As of 2010, almost every state had some form of tax incentives for films, according to a Tax Foundation map.

That year, 40 states offered about $1.4 billion in incentives, the Foundation said.

In recent years many states have reduced their film incentive offerings, the Foundation reports, but a few others—California and New York among them—have bumped up theirs, which still makes it harder for other states to compete.

A state that wants to lure movie productions has to keep up. That was the argument Lt. Gov. Bill Bolling made in 2010, in support of increasing Virginia’s film production tax credits and the motion picture opportunity fund. Actress Sissy Spacek came to a news conference at the state Capitol to push for the legislation.

According to Bolling at the time, Virginia’s existing film incentives weren’t competitive enough.

He and McDonnell are both big proponents of tax incentives to lure films. McDonnell’s release about the Hanks movie said that Virginia’s motion picture and video industries created $344 million in direct and indirect impacts in 2010, and 2,651 jobs.

Next year Virginia will expand its tax incentives to video game productions.

Virginia’s film tax credit covers 15 percent of a production’s qualifying expenses, including wages. That bumps up to 20 percent if the film is shot in an economically distressed area of the state, and productions can get additional credit for employing workers from Virginia.

Virginia’s most recent big-name production was Steven Spielberg’s “Lincoln” movie, which filmed for several weeks last year in Richmond, transforming the state Capitol into the U.S. Capitol and prompting Richmonders to keep an eye out for stars like Tommy Lee Jones and Daniel Day Lewis around town.

This week the Times–Dispatch reported that the Lincoln movie spent $32 million in Virginia, hiring 400 Virginia crew members and more than 1,000 extras.

The Lincoln film had been offered incentives including $2.5 million in tax credits and $1 million from the motion picture opportunity fund.

Chelyen Davis: 540/368-5028