Will new tax credits, Hollywood changes boost Georgia film spending?

Georgia’s lucrative and controversial tax incentives for television and movies helped make the state a star among Hollywood producers. Now industry watchers say they hope an expansion of the state’s tax credits and the hunger by consumers for more original programming will stimulate further growth.

Total film and television spending in Georgia hit a record of $2.7 billion in the fiscal year that ended in July 2017, up about one-third over the prior year, and about a tenfold increase from 2008, according to figures from the state Department of Economic Development.

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State lawmakers approved a change in law that went into effect Monday that extends tax credits for post-production expenses by Georgia companies that meet certain thresholds. But even more than that, a ramp up in production spending by Netflix and other major studios could bode well for the future, backers say.

“I don’t see any lessening of production here,” said Kris Bagwell, an executive vice president with EUE/Screen Gems, who runs the company’s studio campus in south Atlanta.

The Peach State is often listed as the No. 3 overall production center for film and TV in the U.S. behind California and New York. A Film L.A. report found Georgia ranked first in the world in 2016 in total feature film productions with 17 major movies. Recent credits include the upcoming The Avengers: Infinity War and last year's Guardians of the Galaxy Vol. 2.

But it’s come at a cost. Georgia’s tax credit program provided $925 million in incentives to production companies from 2009 to 2014, the most given to any industry, according to a study by Georgia State University.

And Georgia is expected to provide another $1.1 billion in subsidies to Hollywood from fiscal years 2016 to 2018, a Georgia State analysis showed.

Critics say the jobs created locally are often low paying and easily moved if the credits were to ever dry up.

The Pew Charitable Trusts and the Georgia Budget and Policy Institute are among the groups that have criticized the state's lack of analysis to see if the tax breaks really bring an economic bang for all those public dollars.

Production companies can earn a tax credit for up to 30 percent of what they spend in Georgia on qualifying projects. They can use this to defer their own taxes.

But because many aren’t based here and have little state tax liability, Georgia allows the companies can sell the tax credits for cash. The credits tend to trade at about 90 cents on the dollar.

The buyers of these credits can use them to reduce their own Georgia tax burdens.

The latest tax credit expansion allows for Georgia post-production companies to earn a 20 percent tax credit for specialty work such as editing and visual effects performed in Georgia for projects shot outside the state.

Eligible post-production companies have to have a payroll of at least $250,000 in Georgia, helping to ensure jobs are created locally, supporters say.

The new incentive has a $10 million cap per year and is scheduled to expire in 2023.

“We want to get more of that post here in Georgia,” said Lee Thomas, deputy commissioner of the Georgia Film, Music & Digital Entertainment Office. “We want to be able to compete with the Vancouvers and the Los Angeleses of the world.”

Visual effects jobs aren’t as mobile as jobs on sound stages, supporters say, and they’re also highly paid.

The changes to the incentive also extended eligibility for tax credits to video games in the testing phase, to support game and gaming company development.

The entertainment tax credits have served their purpose to bring Hollywood business here, said Malenka Warner, who chairs the industry and community relations committee of the Georgia Production Partnership, an industry advocate.

Now homegrown content companies are beginning to develop.

“That’s the next frontier that folks hope will develop here in Georgia,” she said. “It’s already happening.”

Backers of the industry, meanwhile, point filming campuses, such as EUE/Screen Gems and Pinewood Atlanta Studios, that are being built as signs of permanence for the industry.

Changing landscape

But that doesn’t mean the state’s industry isn’t without some potential headwinds.

The debate in 2016 over so-called religious liberty legislation, which critics say could allow for discrimination against members of the LGBT community, ignited a firestorm in Hollywood and the broader business community. The expected return of that debate in this year’s session could rattle producers and industry talent, and passage of a bill would cause Georgia’s film business to evaporate, Bagwell said.

Gov. Nathan Deal vetoed the legislation two years ago, and he and House Speaker David Ralston remain opposed. Four of the top Republican candidates in the race this year to succeed the term-limited Deal pledged to sign such legislation if they win.

The production spending in Georgia has grown amid substantial change in the media landscape.

Web productions and “over-the-top” streaming services such as Netflix and Hulu and have altered the way major media companies invest in new programming.

Thomas said streaming and digital entertainment are two promising growth segments for the state’s industry. The Netflix hit Stranger Things is among several projects from streaming services that have shot projects in Georgia.

In November, Netflix announced plans to up its production spending.

It's unclear how the planned merger of Disney and 21st Century Fox might affect Georgia. The $66 billion deal, which could take 18 months to complete, may not immediately impact production budgets, as these are often set a year or more in advance.

Fox has shot projects including X-Men: First Class and Alvin and the Chipmunks 4 in Georgia, while Disney's Marvel Studios unit has shot several comic adaptations in the state. The Disney-Fox tie up would give Disney control of the X-Men franchise within the Marvel universe

A Disney representative did not immediate return a request for comment.

“I think unlike mergers in other industries this is about acquiring massive content,” Bagwell, the EUE/Screen Gems executive said, adding that that could lead to more spending in Georgia by Disney. “There’s a race to have more original content.”

Michael Nathanson, a senior analyst for media and the internet at MoffettNathanson, said he doesn’t expect much to change in terms of production plans as a result of the merger.


AJC Business reporter J. Scott Trubey keeps you updated on the latest news about economic development and commercial real estate in metro Atlanta and beyond. You'll find more on myAJC.com, including these stories:

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