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Rebuilding New York's Economy: Hooray for Hollywood, but What About the State?

6:06 PM, Oct 14, 2013   |    comments
Movie production crew set up to shoot scene on New York street (AP)
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By Joseph Spector, Gannett 

Albany Bureau Chief

ALBANY -  New York provides $50 million a year for venture capital initiatives and $5 million a year to promote tourism.

In recent years, Gov. Andrew Cuomo has touted $220 million a year in new money for projects picked by the state's 10 regional economic development councils.

But one industry gets a larger pot of state cash: $420 million a year goes to lure film and television productions to New York.

Click here for a database on tax credits by 

At a time when the state posts annual deficits and is trying to boost the upstate economy through tax-free zones and other incentives, New York has become a national leader in tax breaks for the film industry.

New York has drawn criticism for targeting a sector that has a debatable long-term impact: When the films leave, so often do the jobs.

"They'll talk a lot about the number of jobs created, but in the film and television industry, a lot of these jobs are temporary," said Joseph Henchman, a policy analyst at the Tax Foundation, a conservative group based in Washington D.C.Records obtained by Gannett's Albany Bureau through a Freedom of Information request showed that some of the tax breaks go to shows and movies tied to New York City. They included Sex and the City 2, HBO's Bored to Death based in Brooklyn and Saturday Night Live.


State officials were knocked earlier this year for essentially carving out a new tax credit to lure the The Tonight Show back to New York.

 

 

And how much each show receives in taxpayer money has been kept secret by the state.

New York officials point to the program's success: 400 projects have filmed or applied the state's tax credits since Cuomo took office in 2011. A decade ago, New York only had 14 productions. The state gives a 30 percent tax credit to productions for many expenses, up from 10 percent in 2004.

In May, the largest production in the state's history, Spiderman 2, was filmed in Rochester.

"We've created thousands of new jobs and generated billions of dollars in economic activity through the thriving film and television industries," Cuomo said in a statement Sept. 23 after 16 New York-based productions received Emmys.

The state boasts that the 133 projects that applied for the breaks in 2012 are expected to create 126,150 jobs and $2.2 billion in new spending.

The productions have largely been in based in New York City, but there have been a growing number of projects through the Hudson Valley and into upstate cities, including Albany, Rochester, Syracuse and Buffalo.

The effort to set up studios outside New York City comes as the state this year boosted incentives to have productions in 40 upstate counties. They receive an extra 10 percent credit on most labor costs if they produce upstate.

Film companies said the added credits, plus lower costs upstate, has lured productions outside the city.

"The industry has really changed and has become so dependent on these tax credits," said Yana Collins Lehman, chairwoman of Post NY Alliance, a Manhattan-based association that works with post-production companies across the state. "People are making their decisions on location on where they are going to get the biggest bang for the buck."

Big breaks for big industry

Records obtained by Gannett's Albany Bureau from the state's Empire State Development Corp. shows that $472 million has been doled out to production companies since 2011. Sometimes it can take years for the state to pay the studios because the production costs are a reimbursable expense.

The 30 percent credits are to reimburse the cost to hire a crew and buy equipment, which can be about 50 percent of a production's cost. Seventy-five percent of the expenses must be spent in New York. So-called "above the line" expenses, such as the salaries for actors and writers, cannot be reimbursed.

HBO got the most in tax breaks, more than $91 million since 2011, the records showed. Second was NBC/Universal, which received $83 million.

HBO defended the tax breaks, saying shows like Girls, Boardwalk Empire and Bored to Death wouldn't have otherwise been filmed in New York. Just because a show is scripted in New York, doesn't mean it has to be filmed there, studios said.

"Because of the tax incentives, New York moved near the top of our list as a possible shooting location," Bruce Richmond, HBO's executive vice president for production, said in a statement. "We were able to come into the region with large productions that otherwise would have been cost prohibitive."

How much each show or movie receives in tax breaks has been shrouded in secrecy. Empire State Development, which oversees the program, had refused to provide the details, claiming it was proprietary.

But that changed this year.

The state Legislature extended the film-tax program for five years in March and required the agency to make public how much money is going to each production. It's not retroactive, though, and only applies to new projects.

Sen. John DeFrancisco, R-Syracuse, said it was important to increase transparency.

"I don't know of any other program where the general public was not aware of who was getting what and for what and what the results were," DeFrancisco said.

A report in 2010 from the state comptroller's office said New York was second only to California in film and show production. New York's program has expanded, while some states have contracted their film incentives.

Connecticut has limited its program only to television shows. Michigan has lowered its tax breaks, which was as high as 42 percent of production costs. 

"It's basically just the state writing a check for 42 percent of the production cost of the film," said John Nelson, Michigan's budget director.

Nelson said the program has uncertain results.

"States are always competing," Nelson said. "The one thing I know about the film industry, though, it's a very mobile industry. There are those films that are going to come to New York because it's New York, but the question is how much more activity are these film incentives generating?"

Upstate left out?

DeFrancisco, head of the Senate's powerful Finance Committee, has been holding hearings around the state on New York's various tax incentives.

He said the film-tax breaks are so large and so disproportionate to help New York City that it's troubling. He said the added increase for upstate, which starts in 2015, will hopefully help.

"It benefits mostly downstate, and that's why there was some attempt by kicking a little extra in the credit if you did something upstate," DeFrancisco said. "The numbers that are involved in the tax credit are so much greater than all the other types of economic development projects."

The industry has also been a major campaign contributor to state politicians, a review by the New York Public Interest Research Group found. The industry gave $900,000 since 2010. The most went to Cuomo, who received $219,000.

Cuomo's office dismissed that the contributions have had influence over state policy, saying many of the contributors have long been supporters of the governor. And the $219,000 is a small amount in Cuomo's coffers: He had nearly $28 million in his campaign account in July.

The film-tax credit dwarfs most other programs. An economic-development fund to retain and expand New York businesses, mainly upstate, offers $165 million each year. Cuomo this year enacted a tax-free program for businesses that locate near college campuses, especially upstate, but critics say it won't help existing companies.

Films and television shows still make New York City mainly their home in the state. Between 2004 and 2010, 81 percent of stage days for productions were in New York City, a report last year from the state Taxation Department showed.

Some film industry officials said that appears to be changing. A post-production studio was opened this year in Buffalo, and shows and movies are being shot with increasingly regularity in the Hudson Valley, in particular.

"We're just booming," said Andrea Bloome, the chief operating officer for Alchemy Post Sound, based in Peekskill, Westchester County, which does post-production work for shows and movies.

Natasha Caputo, director of Westchester County Tourism and Film, said the tax breaks have made the county more attractive to filmmakers.

"Our location, ease of access, and we've worked hard to build a film friendly business environment," Caputo said.

The production of Spiderman 2 in Rochester is also seen as a major entry in the western New York market.

Nora Brown, executive director of the Rochester/Finger Lakes Film Office, said Rochester was able to accommodate the blockbuster picture because larger cities could not. She's hopeful it will lead to more major productions there.

"What they needed to accomplish was not going to be able to happen in New York City," Brown said of Spiderman 2. "I think that extreme road closure and the footprint they needed to get up to speed, to do their shot, that required a large amount of street closures. That was not going to happen in Manhattan."

JSPECTOR@Gannett.com

 

www.twitter.com/gannettalbany

 

Findings:

 

  • $420 million a year goes to lure film and television productions to New York, more than other other economic incentives.
  • $472 million has been doled out to production companies since 2011, the most to HBO at $91 million.
  • Between 2004 and 2010, 81 percent of stage days for productions were in New York City.
  • Shows with plot lines in New York City have received tax breaks, including Girls, Boardwalk Empire and Bored to Death and Saturday Night Live.

 


About this series

This is the 10th installment in a yearlong Albany bureau series, "Rebuilding New York's Economy," looking at key factors affecting the state's economic recovery and whether it is succeeding. Previous installments looked at New York's unemployment rate, matching training with jobs and whether New York is undergoing a farm boom.

NEXT: Upcoming installments will look at whether the state's regional economic development councils are succeeding and whether New York has improved its business climate over the past year.

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