New study of Louisiana film tax credit program again finds expensive, 'significant hit' to budget

Louisiana taxpayers continue to get a return of less than 25 cents on the dollar from a controversial program in which they reimburse producers for the movies and TV shows they film in the state, a new study shows.

The state gave film producers $282.6 million in tax credits in 2016 while economic activity from the movies made in-state generated $63.2 million in state taxes, economist Loren Scott found.

That works out to a return of about 22 cents for every state dollar invested in the program, though tax credits often are not redeemed in the same year that filming, and the economic activity around it, takes place. Still, other studies have found a similarly tepid return on investment.

Scott also found that the film industry in 2016 created 14,194 direct jobs -- those directly employed in the industry -- and indirect jobs -- those who work in fields that benefit from the film industry's presence here.

In 2015, producers claimed $268.3 million in tax credits while their films and television shows generated $61.1 million in state tax revenue, Scott found. That’s a 22.7 percent per return on taxpayer dollars.

Scott got roughly the same results on jobs created and return on the state's investment in 2015, the last time he did the study. He conducts it for Louisiana Economic Development, a state agency that oversees the film tax credit program.

“We are getting jobs,” Scott said in an interview Monday. “We are getting income. But it’s pretty expensive. It’s a significant hit to the budget. It should not surprise us when we tell an industry that if they operate here we’ll cover 30-35 percent of their costs.”

Scott is not a favorite among Louisiana film industry officials and their supporters.

“He vastly underestimates the impact on small business and Louisiana workers, which was one of the original focuses of the program,” Stephen Perry, who is president and chief executive officer of the New Orleans Convention and Visitors Bureau. “He completely misses the start-up businesses, the entrepreneurs and the small businesses that have eight or nine businesses that are totally dependent on the industry. I know of hotel properties in New Orleans that have done as much as 5 percent of their top lines from the film industry.”

Scott said his study aims to take account of the spillover jobs and tax receipts from hotels, restaurants and other non-film industries.

Another economist who conducted two studies for Louisiana before Scott had similar findings. And independent studies in other states have likewise found weak returns on film incentives.

Gov. John Bel Edwards is asking legislators to rework the program again when they go into regular session beginning Monday, but he’s seeking tweaks rather than an overhaul. Edwards recently released proposals that would sweeten the pot further for Louisiana-based productions while maintaining the current annual limits of $180 million on the program’s overall cost to taxpayers.

The governor believes his changes will stabilize the cost to taxpayers and provide enough incentives to bring filmmakers back while also creating more of a homegrown industry.

“We are very aware of the less-than-desired return on investment,” Don Pierson, who is secretary of Louisiana Economic Development, said in an interview. “That’s why we want to pivot and chart a pathway to a better return at the same time with budget predictability.”

The 2015 legislation that capped taxpayers’ annual cost at $180 million per year had a fatal flaw, according to supporters. While limiting how much the state could pay out each year, it did not cap the dollar amount of tax credits the state could issue every year.

Producers, unsure when the $180 million cap would allow them to cash in their past tax credits, basically stopped filming in 2015 and didn’t begin returning to Louisiana until late last year. Most of the current productions are being filmed in metropolitan New Orleans. A bill filed this year would give an added tax incentive for filming outside of New Orleans.

State Sen. JP Morrell, D-New Orleans, the industry’s biggest champion in the Legislature, wants to impose a $165 million limit on the amount of credits the state can issue in any year. That cap, along with the $180 million limit on payouts, would help eliminate a backlog of uncashed tax credits that stands at $200 million, according to the Department of Revenue.

After three years, Morrell would increase the cap on how many tax credits could be issued from $165 million to $180 million per year, and he would do away with the cap on how many could be redeemed in any single year. Morrell believes that the changes will lure producers to Louisiana who have flocked to Georgia during the past two years.

“We lost a lot of films to other states. These producers want to come back to Louisiana because they love our culture,” said Robert Vosbein, a New Orleans attorney and film-industry supplier who heads the Louisiana Film and Entertainment Association, the main industry trade group. “Louisiana is attractive because we have special people. Instead of having the brain drain, we’re drawing young people to Louisiana.”

The latest study only reinforces critics such as Jan Moller, director of the Louisiana Budget Project, a Baton Rouge-based nonprofit.

“Hopefully, the Legislature realizes this is a spending program that competes for resources with health care, education and all of the state’s other priorities,” Moller said. “We spend money to have the film industry come here. That’s what the program is. When you spend a dollar on the movie industry, you get some of it back because they pay taxes. The same is true for spending on education and Medicaid.”

LED is a strong supporter of the program, and that may explain why the department released the study at 6 p.m. Friday, a time when government agencies or politicians typically release news they want to bury.