Tax Credits Still Provide Big Financial Impact in Louisiana
Study confirms that every $1.00 generated yields $5.71 in additional benefits
A recent study conducted by BaxStarr Consulting Group for Louisiana Economic Development reveals that Louisiana’s tax credits have had the intended positive effect both on bringing more productions to the state and providing economic benefits to businesses and employees throughout the state. Not only has the number of productions increased dramatically, the amount of the total production budget spent in Louisiana has also increased in the period between 2008 and 2010.
Trends in the Motion Picture Industry
The study revealed several important trends regarding the Motion Picture Industry (MPI) in the state of Louisiana overall and when compared to national trends.
Some important facts the study revealed include:
- The economic impact of the film industry has increased. In 2008 and 2009, the average economic impact was $710 million. In 2010, this number increased to $1.08 billion, an increase of over 50%!
- While nationally wages in this industry have gone down, during this period in Louisiana, wages for employees in the motion picture industry have actually increased.
- More money as a whole has been spent in this industry in Louisiana, and more money as a percentage of each production’s total budget has been spent in the state as well.
- The average number of productions has increased 175% from approximately 33 productions per year from 2002 to 2007 to an average of 92 productions annually during 2008-2010.
Tax Incentives & Louisiana’s Motion Picture Incentives
- A production company is eligible to receive a 30% fully transferable tax credit for money spent within Louisiana
- They are also eligible for an additional 5% credit for labor costs related to employing Louisiana residents as long as the production company spends at least $300,000 within the state.
- The company may then either transfer the credits back to the state for $0.85 on each dollar or sell them in the open market.
- These incentives do not just benefit the production company; they also benefit Louisiana businesses and workers. For every one dollar of tax credits issues through these incentives, film production yields $5.71 in economic output.
These tax incentives encourage film and television companies to produce in Louisiana as opposed to other states or countries. While other locations also offer incentive packages, Louisiana’s is one of the most competitive. This is especially relevant currently, as the costs of both producing and marketing large budget feature films are increasing and companies are struggling to keep costs under control. An attractive incentive package can help the production company control the production budget and improve the film’s profitability.
Fiscal Impacts of Motion Picture Incentives
One of the reasons Louisiana is willing to offer these tax credits and incentives to this industry is that the fiscal impact is broad and far-reaching. There are six ways that film production positively impacts the state’s economy:
- By employing local workers
- Through purchases of materials and supplies from local vendors
- Taxes and fees
- Additional restaurant and retail spending
- Increased automobile and room rentals
- Utilizing services such as catering
Perhaps the best way to explore the impact of these tax credits on both local and state economies is to look at the budgets of three different productions in the state over the 2008 to 2010 period:
1. Battle: Los Angeles, a higher budget film production
- Total production budget of $68.8 million, $46.5 million of which was spent in Louisiana
- Over $12 million spent on labor alone
- $35,000 paid to local governments where filming took place
- $500,000 spent in location costs
- An additional $10 million paid in non-labor purchase and rentals to local businesses
2. Swamp Shark, a low-budget film
- $2.5 million total budget, $2.2 million of which was spent in Louisiana
- $33,000 spent on hotels and $30,000 spent on car rentals
- Additional rentals and purchases from local businesses: $150,000
- $250,000 in payroll expenses
- $84,000 on rental housing
- $14,000 spent on local film processing
3. Treme, a television series
- In the first year for which information is available, the production company spent $7.5 million total and 85% of that amount in Louisiana
- $325,000 spent on rentals of equipment and materials, $213,000 on site rental costs
- $91,000 for food and catering
- $76,000 for security
- $44,000 for police
- $28,000 paid for construction costs
- $176,000 on hotels in addition to $116,000 for production living costs
With this information, it is clear that the film industry is bringing important business and spending to Louisiana’s economy. These tax credits are a great way to draw production companies to the state.