How Georgia’s tax credits work
Production companies can earn a state tax credit of up to 30 percent of what they spend when they meet certain standards. What they can’t use to defer their own taxes — many aren’t based here and have little tax liability — they can sell for cash at upward of 90 cents on the dollar.
Other companies or individual taxpayers that buy the credits can then use them to reduce their Georgia tax bills while the production companies keep the cash, reducing what the state would have collected in tax revenue.
Another week, another proposed movie studio in metro Atlanta.
This time a group of metro area business executives hope to emulate the Pinewood Studios campus in Fayette County with a sprawling project in Covington, about 35 miles east of downtown Atlanta.
The Covington team, which has declined to be identified until land and other key details are final, is the latest group to bet that it can rent Georgia soundstages to big productions and woo technical work like editing and special effects.
Such plans haven’t always stayed on script, however. For all the success seen at campuses such as Pinewood or EUE/Screen Gems Studios, others have failed to launch or been delayed in what has become a hyper-competitive market.
A studio project billed as the nation’s biggest near Savannah fizzled out and an earlier project planned by a different company in Covington has been put on hold.
“Some might ask the question if we’re creating a bubble of studios that’s going to pop,” said Craig Miller, a past president of the Georgia Production Partnership. “The answer today is no. We don’t have enough studio space in Atlanta and the surrounding area … to keep up with the demand the industry is placing on us.”
A top Covington area economic development official also expressed confidence the new group will be successful.
David Bernd, vice president of economic development for Covington and Newton County, said the group includes Atlanta area business executives with experience in other sectors. He said they have financing and equity in place to build a campus “in the neighborhood of 165 acres.”
“The project is truly a one-of-a-kind, cradle-to-grave type of project that will encompass TV, movie, music and gaming,” he said.
Incentives drive growth
The state has made the film industry one of the tent poles of its economic development apparatus, investing heavily in university, technical college and other training programs for film workers and incentives for producers.
Gov. Nathan Deal’s office said last July that 248 television and movie projects shot in Georgia in fiscal year 2015, spending $1.7 billion in the state. That’s more than six times the film business spending in Georgia in 2008.
Georgia’s tax credit program, meanwhile, has become the state’s single largest corporate perk. The program directed $925 million to production companies from 2009 to 2014, according to a study by Georgia State University.
The Georgia State study said there were about 4,200 direct film jobs in 2014, citing U.S. Bureau of Labor Statistics data, but industry estimates say Hollywood supports 24,000 Georgia jobs.
The incentives, though championed by Deal and top lawmakers as job creators, remain controversial. Michigan, for instance, ended its program after judging them too costly, and other states like Louisiana and North Carolina have capped the value of their programs.
Critics say the jobs created locally are often low paying and easily moved if the credits were to ever dry up.
Wesley Tharpe, a researcher at the Georgia Budget and Policy Institute, said film campuses and crew members relocating to Georgia are anecdotal signs that the credits are working. But Tharpe said the state hasn’t analyzed credits to see if Georgia is actually recouping its investment in new income, sales and property taxes.
“Georgia should be able to answer that question, but we can’t currently,” Tharpe said.
State leaders show no sign of changing course, as the state has taken business from rivals pumping the brakes on their programs.
Miller, who also runs Craig Miller Productions, said Georgia is seeing the second generation of industry begin to blossom. As the state invests in training, a home-grown network of producers and other creative talents will begin to emerge, creating an industry not as dependent on Hollywood, New York and other creative capitals looking to film here simply for the tax credit discount.
“I think Georgia has put together a plan that is sustainable,” he said.
A top market
Georgia has grown to be the top U.S. market outside California and New York to shoot movies and TV shows.
Major studios including Pinewood, EUE/Screen Gems and Eagle Rock Studios in Gwinnett soon followed. Filmmaker Tyler Perry has started production at his new Fort McPherson campus, and projects at the former Shannon Mall in Union City and at the former General Motors factory in Doraville also are underway.
Content development and post-production work are seen as more permanent parts of the business and both are still new to Georgia.
Much of the on-screen, writing, directing and editing talent still live on the West Coast and often head home to put the finishing touches on projects or move elsewhere to the next gig after shoots.
Miller said the next step for Georgia is developing that talent. The Covington group plans to boost post-production and gaming business by offering such space in-house.
Covington has actually trademarked the phrase “Hollywood of the South,” and the project, if successful, could help cement that moniker, backers say. The area has played host to more than 70 projects over the past three decades, including “In the Heat of the Night” and “The Vampire Diaries.”
Bernd declined to say where the project will be located, though he said it is not an Alcovy Road tract once contemplated for a different movie campus a few years ago.
Construction is expected to start later this year, he said, with plans to begin filming there in 2017.
Karl Horstmann, the CEO of Triple Horse Studios, an independent film company in Covington, announced a major project there a few years ago that he ultimately decided to put on hold. He said his production business got too busy to also shoulder a real estate venture like a for-rent studio.
He said the new Covington deal could be a boon for the area.
“We always welcome new projects and would love to see this happen,” he said. “It would be good for Newton County and it would be good for our business potentially.”
Local incentives
Covington officials are working on a separate incentive package for the deal.
Production companies can earn tax credits up to 30 percent of what they spend when they meet certain standards, but studio campus operators don’t receive the incentive unless, like Tyler Perry, they also do productions.
Bernd said that Covington and Newton County officials are working on a local package of property tax breaks and other incentives to help pay for extensive infrastructure needs at the site, including water and sewer connections, roads and fiber optic cable.
John Raulet, a commercial real estate executive whose company also owns Mailing Avenue Stageworks, said he’s wary of local governments providing incentives to studio operators.
In Effingham County for instance, dreams of a studio fizzled out before they could get started, tying up county land and about $200,000 in taxpayer funds, according to local media, for a couple years with nothing to show for it.
“The film industry here is growing at a nice pace and I do not see much to get in the way of that at the present moment,” Raulet said. “However, I believe that if you are going to leverage the taxpayer to bring in a studio project, you owe it to them to explore every outcome, including the bad ones.
“This isn’t “Field of Dreams.” There is real risk and real consequences if it doesn’t work. I think it’s better left to people who understand the risk and are willing to take it.”
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