Saturday, January 17, 2009

NM Film Incentives, Round Two: Ernst & Young Report

Good news for our community yesterday with the release of the Ernst & Young study on the impact of film on New Mexico. Visit the NM Film Office website to download and read the report. There is coverage in the NM Business Weekly and Santa Fe New Mexican locally -- and hopefully we'll see more. Spread the word!

From the NM Business Weekly:

Ernest & Young: NM film incentives = good ROI

New Mexico Business Weekly - by Megan Kamerick NMBW Staff

The film industry and its supporters in New Mexico are most likely breathing a sigh of relief.

The long-awaited study by Ernst & Young on the economic return by the state's film and media incentives found that for every $1 extended in state tax credits, state and local governments received $1.50.

Gov. Bill Richardson made the announcement Friday and said the state's incentives to attract film and television productions have created high-quality jobs, health coverage and benefits for New Mexico workers.

Ernst & Young found that film production activities created 2,220 direct film and media jobs in 2007. This included about 1,670 below-the-line employees (typically crew jobs) that paid $49,500 annually and 550 actors, directors and producers working in New Mexico.

These 2,220 direct jobs created 1,609 additional jobs in other industries, resulting in a total employment impact of 3,829 jobs.

Film-related capital expenditures and projected film tourism spending attributable to 2007 productions here generated an estimated 3,769 direct jobs.

Combining the 2,220 direct jobs from film productions with the 3,769 jobs from capital expenditures and film tourism results in 5,989 total direct jobs attributable to the state's film production tax credit.

These direct jobs create a total of 3,221 indirect jobs, resulting in a total employment impact of nearly 9,210 jobs, according to Ernst & Young.

About 300 new film-specific businesses have been established in New Mexico since 2003, which is directly attributable to the production tax credit, according to the report, and more than 600 additional New Mexico businesses are benefiting from film activities.

Tax collections are up as a result of the economic activity created by the tax credit. State tax collections from film production activities in 2007 totaled $22.6 million. Additional state tax impacts from capital expenditures in 2007 and film tourism during 2008-2011 are estimated to total $21.5 million, with a total state tax impact of $44.1 million.

The study was conducted by the Quantitative Economics and Statistics division of Ernst & Young. It is available online at the Web site for the New Mexico Film Office.

An earlier study by the Arrowhead Center at New Mexico State University, commissioned by the Legislative Finance Committee, found that New Mexico gets about 14.4 cents in tax revenue for every dollar it spends on a tax rebate for film productions. Critics, including Richardson's staff, said the report was not comprehensive enough in reviewing the total economic impact of the industry. His office paid $50,000 for the Ernst & Young study.

Film industry proponents have been on edge as the start of the new legislative session on Jan. 20 draws closer because of the Arrowhead study and the fact that the state is facing a deficit of nearly $500 million. There have been some concerns that the tax rebates, which have grown to $98 million, would come under increased scrutiny in the tight economic environment.

"This is a successful initiative worthy of our continued support, especially in these difficult economic times," Richardson said of the new report.

And at the Santa Fe New Mexican:

New Mexico film incentives' impact, take two

Study for state stresses industry's benefits go beyond financial

Robert Nott | The New Mexican

1/16/2009 -

On the heels of an economic survey stating that New Mexico's film program is reaping less than 15 cents on the dollar in tax returns, a new report suggests the state receives $1.50 in tax revenue for every dollar spent.

The study also says the film business created 2,220 jobs in 2007.

The new report, prepared for the New Mexico State Film Office and State Investment Council by the Ernst & Young accounting firm, was released Friday.

The study noted the 30 films produced in 2007 generated more than $250 million in spending in the state.

Much of this information differs from the results of a Legislative Finance Committee-sponsored report released by New Mexico State University's economic-development branch, Arrowhead Center, last year.

Eric Witt, Gov. Bill Richardson's point man on the movie industry, said at a news conference that the Ernst & Young report — which cost $50,000 — proves the state's film industry has an "impressive economic impact."

"For every dollar put out in taxes, we get back a combined revenue of $1.50," Witt said. He reiterated his criticism of the earlier financial study, suggesting it had a narrow focus and did not take into account such factors as film projects that didn't qualify for the state's tax rebate and income tax paid by out-of-state film artists.

The state's film incentive program, which includes a 25 percent refund for production costs and a zero-percent loan for up to $15 million for qualifying productions, came under scrutiny last year. Senate Finance Committee Chairman John Arthur Smith, D-Deming, proposed a $30 million cap on the rebates in an effort to ensure the popular and highly profiled plan pays dividends for the state.

In addition to looking at the rebates, the Legislature also is looking at other state money being spent on the film industry. The Associated Press reported Thursday that the Legislative Finance Committee is considering cutting nearly $17 million for film and media production facilities and training. Some of that money is for a proposed film studio in the Santa Fe area.

The new study stresses that the benefits from the state's tax-credit program reach beyond any direct financial impact. For instance, film companies and studios invest in the economy through building infrastructure and by employing not just technicians and artists, but contracting services including transportation and catering.

To emphasize that point, Witt introduced Victoria Lucero, a single mother who worked in craft services on the New Mexico-based television series Breaking Bad and the recent production of Terminator Salvation: The Future Returns. Lucero said the film business gave her a chance to earn a good wage and qualify for health insurance. "I'm just one of many to say that this industry has had an incredible impact on my life," she said. Lucero later acknowledged she'd been working in the industry for less than a year.

The study also said below-the-line film technicians are earning an average wage of $49,500, and more than 200 new film-related businesses have started in New Mexico since 2003. That's the year in which Richardson led the effort to expand the incentive program, signed into law by then-Gov. Gary Johnson the year before.

More at: New Mexico film incentives' impact, take two
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