A promise to make Texas the film capital of the world has left local creatives raring to cash in — and preparing for a legislative battle.
The Texas Senate has proposed injecting $498 million to revamp the state’s film incentive program, a historic sum that rivals most other states and more than doubles the $200 million lawmakers plugged into the program during the last budget cycle.
Film industry insiders, who have for years been fighting for a larger and more consistent funding stream, could hardly believe it when they heard the $498 million figure, a line item in the draft budget the Senate filed last month. According to Lt. Gov. Dan Patrick, the funding would include $48 million in grants for small films and television commercials and up to $450 million in new tax credits, contingent on a bill passing.
“It’s like we are in a ‘stars aligned’ period,” said Brian Gannon, director of the Austin Film Commission. “There’s alignment across industry, across government. Everyone is excited.”
That excitement is palpable across Texas. From the 4,100-person town of Smithville to booming urban centers like Fort Worth, local officials, film commissions and business owners say movie production is a boon to their economy because it creates new jobs, attracts tourists and keeps businesses afloat.
In Smithville, a small town about 40 miles east of Austin, restaurant owners say they continue to reap benefits from the filming of the 1998 romantic drama “Hope Floats” because fans stop by to see the house where much of the Sandra Bullock movie was filmed and then wander into their outpost for a bite to eat.
Film stars have also thrown their weight behind film incentives. In a star-studded advertisement called True to Texas, Matthew McConaughey, Dennis Quaid, Woody Harrelson, Renee Zellweger and Billy Bob Thornton urge lawmakers to help “turn this state into a new Hollywood.” The actors say they want to tell Texas stories in their home state and need state support to do so.
Even so, economists remain skeptical about the return on investment of film incentives, and some state lawmakers say subsidizing movies is not the best use of taxpayer money.
“Half a billion dollars doesn’t need to be routed towards the entertainment industry,” said first-term state Rep. Daniel Alders, R-Tyler. “There are already Texas-sized incentives out here. Don’t act like you have to have a handout in order to do business in the state of Texas.”
Texas is one of 37 states to offer a film incentive program, according to the National Conference of State Legislatures. Those programs can take the form of cash grants, as in Texas, or tax credits, which are what some of Texas’ competitors, including Georgia and New Mexico, offer.
Under the 18-year-old program, the state provides rebates to reimburse production companies between 5% and 20% of what they spend in the state, including wages to Texas residents and costs to rent film space or book hotels. At least 60% of the production must be filmed in Texas, per state law. Productions can receive an additional 2.5% rebate if they film in underutilized or economically distressed areas.
Creative professionals say the program has been successful — it has created 182,000 Texas jobs and yielded $2.52 billion in-state spending, according to the Texas Film Commission which is housed under the governor’s office. And for every $1 paid out for a grant, $4.69 is spent in state, Adriana Cruz, executive director of the Texas Economic Development and Tourism division of the governor’s office testified last October.
Patrick, the second most powerful Texas official, has made transforming Texas into a film haven a priority this session, reserving Senate Bill 22 for that purpose. The bill has not been filed as of Thursday afternoon. Patrick’s office did not respond to The Texas Tribune’s questions, and several House members declined to weigh in until a bill was filed.
Industry leaders have proposed a transferable franchise tax credit — smaller film productions making less than $2.47 million in revenue are exempt from the tax — since Texas does not have a state income tax.
They’re also pushing for a more consistent funding stream instead of an amount that is determined at the whims of lawmakers every two years.
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Economists who have studied tax incentive programs across the country have long been skeptical of their value. Research on film incentive programs in New York, Georgia, Michigan and California have found that tax credits have a negligible impact on economic activity, when measuring job growth and tax revenue.
In cases where a film incentive does spur job creation, it isn’t enough to justify the cost of the incentive, said Michael Thom, a tax expert at the University of Southern California.
“The incentives boost the industry’s profit margins, which is why they want them so badly,” Thom said, adding that the Texas Film Commission’s claim that the incentive program delivers a 469% return on investment is “preposterous.”
Some producers would choose to film in Texas even if they did not receive grant dollars, Thom said. And the figure doesn’t account for what the state could be losing by not spending that money on something else, whether public schools or safety.
Alders, the East Texas lawmaker, agrees.
“That calculation is a little disingenuous,” he said. Instead of using general revenue to refill the incentive program’s coffers, Alders suggested the funding come straight from the sales tax revenue the film industry generated.
“If we are getting money back, then that bucket should have been filled one time and should never have to be refilled with taxpayer dollars,” he said.
We’ve heard these arguments before, more than a decade ago, including from the video game industry, which was curiously unrepresented in this story. There are a lot of dimensions to this fight, including some localities that are not thrilled about big studio lots being built in their back yards, and of course a culture war angle involving the content of films seeking incentives. That led to a lawsuit that was eventually resolved in the state’s favor and is now being expressed as concerns over porn being filmed here. Because for sure that’s never happened before.
Anyway, this should be an interesting fight to watch. I don’t know that this is an issue on which Dan Patrick will go to the mats, but if he does it might provide a bit of leverage for Democrats, since it looks to me like this would not be able to pass on Republican votes alone. Gotta be aware of opportunities where they present themselves.