John Locke Update / Research Newsletter

Why the North Carolina film industry will continue

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North Carolina’s film tax incentives program has changed significantly. Formerly a refundable tax credit of 25 percent of qualifying production expenses capped at $20 million per production, the program now is a $10 million grant program.

In last year’s extensive lobbying and PR campaign over the incentives, legislators and voters were repeatedly told that the fate of the entire industry here hinged upon the program continuing unchanged. "No incentives, no film industry," was how Rep. Susi Hamilton (D-New Hanover) once put it. Aaron Syrett, former commissioner of the North Carolina Film Office, put it this way: "The incentive goes away, the industry goes away."

Johnny Griffin, Director of the Wilmington Regional Film Commission, even said merely introducing a bill to change the incentives was "enough of a sign to production companies to possibly not come here."

While the presence of generous, refundable tax credits certainly made filming in North Carolina more attractive, it seemed too much to think that they were the only thing that made film in North Carolina viable. This idea was discussed in my Carolina Cronyism report on the incentives:

If North Carolina were to drop its film incentives and lower taxes and regulations across the board, how would it affect North Carolina’s film industry? The industry would face competition for film production without targeted tax credits (or direct "rebate" payments). The other amenities that the state offers would still be active, however, and they would be heightened by the better overall business climate.

For example, the home page of the Wilmington Regional Film Council opens with the following sales pitch:

When your location is in the Wilmington, NC region, you will find exactly what you need: experienced crew, production equipment and services, competitive incentives, a great climate, and the largest soundstage east of Los Angeles!

The Wilmington region has been an active production hub since the early 1980s and has the production infrastructure and experience to support big-budget feature films, TV series, independent films, commercials, and more. The Wilmington region accommodates on-location filming, with a variety of locations available. Let us show you our bridges, barns, small-town scenes, riverfront, shopping centers, beaches, playhouses, ocean, modern and traditional schools, marshlands, downtown buildings, turn-of-the-century architecture, college campuses, Victorian houses, fields, harbors, modern architecture, farms/farmlands, and more. For almost any type of production, you will find that Wilmington will meet your location needs.

In the reforms discussed in this section, the only change necessary would be from "competitive incentives" to "a highly competitive tax and regulatory climate."

A recent article in Triangle Business Journal had good news for the film industry here. In "EUE/Screen Gems exec: Here’s why North Carolina’s film community will live – incentive or no incentive," reporter Lauren K. Ohnesorge writes of her chat with Bill Vassar, executive vice president of EUE/Screen Gems. She offers a brief history of the industry in North Carolina, its ups and downs, and its future. Here is a brief snippet:

What outsiders might not understand is that the studios themselves aren’t the draw to the state. It’s the workforce, they argued. And that workforce, over the years, had been building.

"People moved here from California to be a part of it," [Vassar] says. "People would come here to do productions and they would see what a great place it was."

It’s kept building, even as discussions to take away the tax credits got louder in Raleigh.

Six families moved after "Iron Man" introduced them to the state last year, he says.

"In this day and age, the industry is so transient that people know that if they’re good they’ll end up working anywhere," he says.

EUE/Screen Gems has been building its complex. Today, the studio has 10 stages with 150,000 square-feet of column-free shooting space. …

But, over the summer, North Carolina eliminated the film incentive. Vassar wasn’t surprised. Legislators have been publicly questioning the incentives for years.

But Vassar says it won’t mean the death of film in North Carolina.

"We have to accept now that any sort of tax incentive for the industry in this state is over and we have to work with the legislature," he says. "We’re getting encouraging signs from people in Raleigh that they want to work with the industry."

He’s getting encouraging signs, too, from productions. While "Homeland" left Charlotte, some television shows are staying in the state, such as "Sleepy Hollow" and "Under the Dome," both of which have plans to shoot at Screen Gems in 2015.

It is clear, again, that North Carolina has a lot to offer film production companies. We’re not just a pretty refund.

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Jon Sanders studies regulatory policy, a veritable kudzu of invasive government and unintended consequences. As Director of Regulatory Studies at the John Locke Foundation, Jon gets into the weeds in all kinds of policy areas, including electricity, occupational licensing, hydraulic… ...

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