Despite calls for boycott, total up from $2.7 billion each in 2017 and 2018

Originally posted Saturday, September 14, 2019 by RODNEY HO/[email protected] on his AJC Radio & TV Talk blog

Direct spending from Georgia film and TV production hit another record this past year: a whopping $2.9 billion, up from $2.7 billion a year earlier.

That’s almost $800,000 a day. On any given day, about 40 active film and TV productions are happening in the state, largely in metro Atlanta.

There were calls for a boycott of the state by some actors and producers earlier this year after Gov. Brian Kemp signed a restrictive abortion bill. Several big names – such as Alec Baldwin, Rosie O’Donnell, Kerry Washington and Gabrielle Union – vowed not to work here and a handful of productions pulled out.

But the ACLU in June filed a lawsuit to stop the bill from becoming law in January, 2020 and TV shows and films continue to flow into the state unabated. (Many movies and TV shows had already committed to Georgia by the time the bill passed and many producers such as Ron Howard and Jordan Peele promised to donate money to ACLU and other groups fighting the bill.)

Covering July 1, 2018 through June 30, 2019, the state tracked 399 productions ranging from Netflix’s “Ozark” and “Stranger Things” to AMC’s “The Walking Dead” to upcoming films such as Will Smith’s “Bad Boys for Life,” Dwayne Johnson’s “Jungle Cruise” and Melissa McCarthy’s “Superintelligence.”

“The Peach State remains the Hollywood of the South,” said Kemp in a press release, “and companies across the globe have Georgia on their minds as a great place to invest, expand, and relocate. I applaud our economic development team for their tireless efforts to ensure Georgia remains a leader in job growth and the standard for a pro-business environment.”

The estimated amount of tax credits handed out was about $870 million, up from about $800 million each the past two years. This is by far the largest tax credit in the state and it’s the biggest one to Hollywood production companies in North America, exceeding the money handed out in Canada, California and New York. It is also equal to about 3 percent of the entire budget for the state of Georgia.

Most states cap their tax credits per year. Georgia does not, which has encouraged many big-budget films to shoot here, like the various Marvel films and current productions such as “Coming 2 American” and “Suicide Squad 2.” Overall, Georgia now the third busiest state in the nation for film and TV, behind only California and New York.

Despite the generous give away, the state of Georgia has had budget surpluses in recent years and has built a record $3 billion reserve fund in case the economy takes a tumble.

Lee Thomas, deputy commissioner of the Georgia Film, Music & Digital Entertainment Office, said most film and TV studios in the state are full and the slate of productions scheduled for the rest of the year and early next year looks solid.

“TV and film production in Georgia remains strong and should continue to grow as long as we remain a welcoming place to do business and respect everyone’s human rights,” said Kris Bagwell, who runs EUE Screen Gems, home to “Stranger Things” production and past “Hunger Games” films.

In past years, the state has touted the bigger economic impact of the tax program using what is called a “multiplier.” That means a “direct” spend by a film company creates a ripple effect. A crew member, using their salary from working on a movie, buys a car and that salesman then uses the commission to buy furniture. That would be considered a “multiplier” effect.

The state for a long time has used 3.57, which some economists consider too high, meaning for every $1 of direct spending, $3.57 in economic value is created.

Last year, the state said the industry created $9.5 billion in total economic impact. Bruce Seaman, an associate economics professor at Georgia State University who has worked on economic impact studies, told me last year that he thinks a 1.87 multiplier is more reasonable and a $6 billion total economic impact closer to reality.

Still, direct spending – even with the multiplier effect – excludes many things, such as the employee salaries at film and TV studios or tourism derived from super popular shows like “Stranger Things.” And more crew, writers, producers, actors and post-production experts are moving to Atlanta, buying homes and setting roots here.

Thomas said the state decided not to use the multiplier number this year because it is working on a comprehensive economic impact study to come up with a better multiplier figure. The state has never done one before. The Pew Institute in 2017 criticized Georgia for that lack of accountability.

The Department of Economic Development last year hired Kennesaw State University economics professor Roger Tutterow to do a study but he got too busy, Thomas said. Georgia Tech’s Alfie Meek is working on one now.

Meek is the director of the Center for Economic Development Research (CEDR) with Georgia Tech’s Enterprise Innovation Institute and has done similar studies in the past, such as looking at the financial impact of SunTrust Park and the Battery to Cobb County.

Aware of a lack of such a study to date, Kennesaw State University economics professor J.C. Bradbury last month released his own study looking at the tax credit programs in North Carolina and Georgia. While he saw some positive economic impact in Georgia from the program, he said Georgia’s overall economy did not improve as much as if it never instituted the credits at all.

Over 11 years, more than $4 billion in taxes were diverted to these Hollywood production companies. That money could have been used for other programs that might have been a more effective way to grow the state’s economy, Bradbury said. In a July policy brief, he also said that $2.9 billion in direct spending represents just half of 1 percent of the state’s entire economy’s GDP (Gross Domestic Product).

As for full-time equivalent employees, based on Georgia Office of Planning and Budget estimated culled from production companies seeking tax credit redemptions, Bradbury calculated the number to have grown from 1,277 in 2010 to 16,790 in 2018. And even if a realistic multiplier is used, he thinks at most about 32,000 full-time-equivalent jobs related to TV and film are in the state of Georgia. That is far below the estimate of 92,000 the Motion Picture Association of America trotted out a couple of years ago, he noted. He thinks that figure was based on very shaky analysis.

Bradbury also noted that objective studies in other states regarding film and TV tax credit programs have almost universally shown them to reveal a negative or negligible return on investment. In years past, those studies have often been led states with budgetary issues to cap, trim or eliminate tax credit programs. Examples include Florida, North Carolina and Louisiana.

Thomas is confident the agency-funded study will show the tax credit program has been a net positive for Georgia, given how many full-time jobs have been created and the fact more than 100 camera-ready sound stages are now available in the state. Production companies are also more apt now to sign longer-term leases at local studios.

Most Georgia production studios are independently owned. Only a handful are owned by major content producers. Tyler Perry, of course, owns his own Atlanta studio and creates all of his own content there but also leases space to others. AMC purchased Riverwood Studios in Senoia in 2017 and continues to shoot “The Walking Dead” there.

Thomas isn’t sure when the study will be ready for release to the public.

The film and TV tax credit program, passed in 2008, provides production companies up to 30 percent of the value of the expenditures as credits to reduce tax liability. So if a company spends $100 million and follows all the rules (including adding that promotional peach at the end of the film or TV show), they receive $30 million in tax credits. If the company had a $30 million tax bill in the state of Georgia, it could reduce that to nothing.

If the company does not generate that much in the way of taxes in Georgia, it can sell the credits to others who do need them. A local company or wealthy individual could purchase those credits at a discount, usually at about 90 cents on the dollar, thereby reducing their tax burdens. Any production that generates at least $500,000 in business qualifies for the credit. (I wrote a deeper explanation in 2017 here.)

Read the full article on AJC here.