Movie Executive Praises Louisiana Film Tax Credits

Endgame Entertainment President James Stern meets with FBT Film President Lenny Alsfeld and LDEC Director Lonny Kaufmann to discuss the benefits of Louisiana’s film tax credit program.

Wednesday March 05, 2003

By Stewart Yerton
Business writer , The Times Picayune

Marking the latest in a growing list of show-business executives who have endorsed Louisiana’s film business incentive program, a co-producer of such Broadway hits as “Stomp,” “Rent” and “The Producers,” and the IMAX feature film “Michael Jordan to the Max” said he is considering Louisiana as a site for an upcoming film.

James Stern, the president of End Game Entertainment of Los Angeles, declined to discuss any projects in detail, but he said Louisiana’s incentive program, which includes a 15 percent tax credit for investors in films produced in Louisiana, is significant enough to lure moviemakers from Hollywood.

“In broad strokes, the film industry is always trying to mitigate against risk,” Stern said. “One of the ways to mitigate risk is through soft monies” such as tax credits.

“Louisiana has a tremendous lead over other states,” he added. “There’s no question that this will spur production.”

Stern, who was in New Orleans recently to discuss entertainment industry investment opportunities with Louisiana money managers, has demonstrated a knack for choosing lucrative entertainment ventures. During his presentation, Stern laid out a few of the projects he’s helped produce alongside the performance of a hypothetical $1 investment. One dollar invested in “Stomp” when it opened in 1994, for example, would have produced a return of $56, while $1 invested in “Rent” would have returned $11.

“The Producers,” meanwhile, is grossing $1 million a week on Broadway and on a national tour, Stern said. When all is said and done, Stern reckons, “The Producers” will become a “$1 billion industry.”

Beyond the theater, there’s basketball. Stern and his family bought a two-thirds stake in the National Basketball Association’s Chicago Bulls franchise for about $16 million in the early 1980s, he said. Since then, he said, they have reaped 10 times that amount in dividends alone and the value of the franchise has risen exponentially. Team owners now also have partial ownership of the United Center, where the Bulls play.

Stern’s latest projects include a documentary he is directing about 7-foot-5-inch Chinese basketball star Yao Ming and his first season in the NBA. With a population four times that of the United States, the Chinese market for a film about the former star center for the Shanghai Sharks is huge, Stern said.

Stern said he thinks the entertainment business is one industry that remains strong during tough economic times. With the nation facing war in the Middle East and the threat of terrorism at home, and with investors watching their money stagnate at best in the stock market, Stern predicted people will continue to go to movies and plays for diversion. To take advantage of this opportunity, Stern is setting up a private equity fund to invest in early-, middle- and late-stage entertainment projects.

To be sure, Stern has had failures. Projects such as 1997’s “Sound of Music” on Broadway and the film “35 Miles From Normal” were bombs. In these cases, Stern’s hypothetical $1 investment would have amounted to a $1 loss for the investor.

Notwithstanding the occasional dud, Stern has attracted big fans in high places in Louisiana. Lonny Kaufman, director of the Louisiana Department of Economic Development’s entertainment cluster, and Lenny Alsfeld, president and chief executive of First Bank & Trust’s subsidiary FBT Investments Inc., met with Stern during his trip to New Orleans to discuss the state’s incentive program.

Adopted by the Legislature and approved by Gov. Foster in the spring, the incentives went into effect in July. One grants a sales tax exemption to productions with more than $250,000 in expenses. Another provides a 10 percent tax credit on local wages for movies with production costs between $300,000 and $1 million, and a 20 percent tax credit on projects with production costs of $1 million or more. A third, and perhaps most important, gives a 10 percent tax credit to investors in movies that cost between $300,000 and $1 million to make and a 15 percent tax credit on movies that cost $1 million or more.

The program has attracted considerable interest from Hollywood. In August, the Louisiana Institute of Film Technology LLC, a New Orleans startup, announced a deal with HSI Productions Inc. of Los Angeles to bring $100 million in production to Louisiana over five years based on the incentive program.

Late last month, Crusader Entertainment of Los Angeles announced it would relocate “Unchain My Heart,” a Ray Charles biography feature, from Georgia to Louisiana because of the incentive program. Shooting is scheduled to begin this month.

Others, including studios such as RKO Pictures, also have expressed interest in making movies in Louisiana in order to take advantage of the credits. At least one other major studio reportedly has been scouting locations, according to state and local film officials.

Despite the incentive program’s attractiveness, there has been a glitch. In order to be able to turn the tax credits into cash, Hollywood producers must find investors with Louisiana tax liabilities. Otherwise, the credit does the producer no good. This has proven a key sticking point that has derailed at least one project that was considering Louisiana but could not close quickly enough.

Low-budget, independent films can provide huge returns, particularly when A-list actors agree to take a lower-paying gig for the sake of artistic interest. The problem, Stern said, is that low-budget, independent films are often hard to find financing for, and if the picture can’t be done quickly, the big stars sometimes have to go off and do the blockbuster that pays the bills.

“The talent has their day-job waiting; the talent can’t wait,” Stern said. “Therefore, money has to be put together quickly.”

Alsfeld and Kaufman are trying to address that challenge by finding public and private sources of money that can be tapped to help put together deals. Stern said such work, combined with the incentives, show Louisiana’s program involves more than hype.

“The two L’s here — Lonny and Lenny — are hungry, and that goes a long way toward piquing peoples’ interest in Hollywood,” Stern said.

Although Stern’s endorsement was short on details — he wouldn’t say whether he had a specific movie in mind to shoot here — Louisiana Film Commissioner Mark Smith said it was a sign that Louisiana officials and business leaders are connecting with the right people in the entertainment industry.

Stern “is a player, another decision-maker we have at the table,” he said. “We’re really dealing with the right people who can bring projects here.”

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