Tax incentives give Georgia entertainment industry a boost

Companies can get up to 30 percent of budget in credits if they meet terms

Metro Atlantans have spied Bill Murray, Woody Harrelson, Sandra Bullock and Ashton Kutcher trolling local watering holes in recent weeks.

No, this isn't some strange reality show concoction. It's a direct result of tax incentives the state of Georgia passed last May for film, TV and digital media production companies.

"Despite the economy, we're going gangbusters," said Ric Reitz, a local actor who helped fashion the tax incentive package. The Georgia Film, Music & Digital Entertainment office predicts this will be Georgia's biggest year ever for entertainment production.

Even though the new incentives didn't pass until mid-year 2008, the office said it helped boost the economic impact of the movie and TV industry in Georgia over the previous year from $413 million to an estimated $524 million.

This time last year, Georgia had only two major film productions. Now, just over four months into the year, the state already has exceeded last year's film output. At least a dozen major film and TV productions have wrapped or are currently filming, from a Lifetime TV series ("Drop Dead Diva") to a horror flick ("H2") to a historical drama ("Get Low").

The biggest coup for 2009? Disney will shoot "The Last Song," starring Miley Cyrus, in Savannah this summer. Because of stronger tax incentives, Georgia beat out North Carolina for the Nicolas Sparks film.

For doing business here, a production company that spends at least $500,000 in a calendar year can get up to 30 percent of its budget in tax credits as long as they display a special Georgia tourism logo prominently in the film credits. A company can sell its unused tax credits to other Georgia taxpayers to help them write down their tax obligations.

The tax incentive also helps Georgians already committed to the state. That includes the Food Network's Alton Brown and Paula Deen as well as Tyler Perry, who last fall opened a 200,000-square-foot studio in southwest Atlanta. Perry's studio, which films TBS sitcoms "House of Payne" and "Meet the Browns," employs 100 to 350 people at any time.

Race to attract films

Even before tax incentives, Georgia already had a business-friendly environment, a variety of vistas and an easily accessible airport. As a result, many popular films have been shot here through the years, including "Deliverance" and "Driving Miss Daisy."

But in the 1990s, Canada began offering financial incentives to attract American film and TV productions. It worked. Hundreds of films were shot up north, and Georgia began losing ground.

Things got worse in 2002 when Louisiana, and later New Mexico, started dangling tax credits and rebates to film companies. That's how the Oscar-winning drama "No Country For Old Men" landed in New Mexico, not its fictional home in Texas. That's also why the Louisiana Superdome substituted for the Georgia Dome in a Lifetime biopic about "American Idol" Fantasia Barrino.

Then in 2005, Georgia launched an incentive program of 9 to 17 percent in tax credits, drawing the ABC series "October Road" and the film "We Are Marshall."

But business dried up again as the incentives race heated up. That prompted Georgia to raise its maximum tax credit to 30 percent last year. While many states offer similar percentages, most have more strings attached (such as giving tax credits only for employing people from that state).

"Georgia makes the process so easy compared to most other states," said Yolanda T. Cochran, senior vice president of physical production for Los Angeles-based Alcon Entertainment. "They have great crews, great infrastructure, great support."

In 2006, Alcon shot the film "One Missed Call" in Georgia after the first incentive package but later skipped the state when other states offered better incentives.

Now with a bigger carrot, Alcon has returned to Georgia for Sandra Bullock's $30 million drama "The Blind Side," which started production in Atlanta last month. The film is employing 150 to 200 people, mostly Georgians.

"If you show the money," Alcon said, "people will come."

Incentives can be costly

California, the biggest state for film and TV production, has seen work there plummet. The Los Angeles Times reported last month that film and TV production has dropped to its lowest in decades.

Some states say tax incentives can become a net negative.

Stephen Moret, secretary of the Louisiana economic development office, told the New Orleans City Business newspaper last month that while film production generated $15 million in tax revenue in 2007, the state handed out $115 million in tax credits. (That doesn't take into consideration that movies create jobs and businesses that generate additional tax revenue.)

"We have to be careful about how far we privilege one industry over every other industry in the state," Moret told the publication.

Allen Buckley, an Atlanta tax attorney who ran for Senate as a Libertarian last November, said politicians have a tendency to succumb to the sexiness of entertainment-related entities such as sports stadiums and filmmaking.

"If you're in those industries, this is great," Buckley said. "You're getting work and a handout. But to the extent of the revenue lost, taxpayers as a whole in Georgia have to pay for it."

Some states have commissioned studies to find out if tax incentives are worth the dollars the state coffers are sacrificing. Bert Brantley, spokesman for Gov. Sonny Perdue, said Georgia will commission its study later this year.

"The hope is we can build our crew bases and reputation so long-term, we can reap the benefits," Brantley said.

Ted Morrow, managing partner of All About Props in Tucker, which specializes in historical period items not readily available at local stores, says the incentives have been a godsend.

In recent weeks, Morrow has provided props for "The Blind Side" and the Lifetime film "The Wronged Man."

"Without the incentives, I might not be here," Morrow said.

Ironically for Perry, the influx of business has "been a double-edged sword," said supervising producer Roger Bobb.

"The level of success in such a short time has been phenomenal, but we're actually now having to compete with other productions for crew," Bobb said.

Reitz, the actor who also runs a consulting company that helps producers sell their tax credits, said a 20 percent tax credit is considered a basic break-even proposition for the state. Still, he convinced the Legislature that the on-screen Georgia logo can more than compensate for the extra 10 percent because it is effectively advertising for the state.

"The state is getting promotional mentions worth millions," said Denise Elsbree, who runs TRIO Media Group. She flies to Los Angeles regularly to pitch the state as a place to shoot films and TV shows.

Reitz admits it's too early to say whether the logo will translate into direct tourism dollars, but films do boost a city's image. Savannah, for instance, has gotten plenty of mileage out of 1994's "Forrest Gump" and 1997's "Midnight in the Garden of Good and Evil."

"They keep Savannah in people's minds," said Jay Self, director of Savannah Tourism and Film Services. "I still walk down the streets and people will ask me, 'Is that the "Forrest Gump" bench?'"