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Southwest states’ tug of war with film subsidies

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Ken Chapa can still remember his first trip to Grand Canyon National Park. Gazing over the majestic vista, he said he immediately connected it to one of his favorite Chevy Chase movies, “National Lampoon’s Vacation.”

Not only was the place awe-inspiring, it was in leaving the canyon that the Griswold family discovered crotchety Aunt Edna was no longer among the living.

“When you’re younger, you don’t make that connection,” said Chapa, director of the Arizona Film Office. “Then you grow up and start to realize it’s kind of cool and you really see it for what it is.”

Chapa, 34, said one-of-a-kind landmarks like the Grand Canyon help keep states beyond California and New York competitive in recruiting the film industry. And it is why, Chapa said, the film commissions in many states continue to lobby state lawmakers to continue providing offering film subsidies.

But at a time when most states face budget crisis, politicians are taking the time to re-examine the effectiveness of offering film tax credits. The results have been mixed.

New Mexico Gov. Susana Martinez insists that states “cannot continue to subsidize Hollywood on the back of our children and the most vulnerable.” New Mexico capped film tax rebates at $50 million this year, compared to $65 million last year, when the production of 11 films helped contribute $113.1 million in state revenue.

In Utah, lawmakers passed a bill to increase their tax credits by 5 percent to 25 percent. A proposal in Arizona is on its last legs. Rep. Jack Harper, chairman of the House Committee on Ways and Means, pulled the bill from the agenda, and House Speaker Kirk Adams has said he has no intention to reassign it to another committee.

The bill proposed a 20 percent tax credit for film makers that spent at least $250,000 in qualified expenses. It’s a variation of a 2006 statute that expired in December. The state said the previous subsidy law lost money because it didn’t establish required minimum expenditures by film companies to earn the tax credits.

Utah, film rebates totaled $11.5 million, with 19 films in the mix, contributing $59 million in revenue. In Nevada, where no film incentives exist, 21 films were produced and contributed an estimated $8 million in revenue.

Proponents of the film industry say the film subsidies pay for themselves in the long run by helping establish a local work force and favorable publicity.

But some economists say the subsidies are a bad idea because the credits create “a tug of war over a fixed number of film productions” that often exaggerate the film incentives overall economic impact.

According to 2010 report by the conservative, Washington, D.C. based Tax Foundation, “Movie production offers little economic bang for the taxpayer’s buck” because film projects bring in a few cents per dollar invested by the state.

“The real winners are the film companies themselves who can pit the states against each other in a bidding war of subsidies,” said the Tax Foundation’s Mark Robyn.

Jennifer Weiner, a policy analyst for the New England Public Policy Center at the Federal Reserve Bank of Boston, said the credits do not pay for themselves, since the key to state fiscal success is a balanced budget and any resulting revenue loss must end with spending cuts or higher taxes. Weiner added that any benefits are difficult to study partly because the projects are temporary.

Marshall Moore, director of the Utah Film Commission, said though many of the film jobs are temporary, the workers’ earned wages during the production period often equal to what an annual salary would be, and the productions helped build a local work force for future films.

Actor and director Michael Flynn, who last year wrapped up “Midway to Heaven” and is working on the pre-production of another film, said Utah is pretty film friendly.

Vans Stevenson, of the Motion Picture Association of America, said he is gratified states like New Mexico reached a compromise to continue the film tax credits, but thinks some lawmakers don’t appreciate the overall impact the film industry brings to states, which have included permanent film studios.

“These are challenging times for many states and we certainly understand that,” Stevenson said.

Arizona’s Chapa said it is frustrating to lose film projects to neighboring states but that, overall, it’s a healthy competition among state film commissioners.

“Weird things happen during the session,” Chapa said about the future of the bill. “I’m always optimistic.”

The proposed Arizona bill projected to bring the state 8 cents per every dollar invested and would cap production rebates at $60 million a year.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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