Zurik: Hollywood South or Hollywood Hustle?

Zurik: Hollywood South or Hollywood Hustle?

NEW ORLEANS (WVUE) - When Miley Cyrus made the move from music to movies, one of her first releases was shot in Louisiana, back in 2011. "So Undercover" had a budget of nearly $14 million.

"It received a straight-to-DVD release in 2013," says media critic Matt Brennan. "It barely made a splash and I hadn't heard of it until I looked at it for this interview."

But Louisiana taxpayers helped plug the movie's budget gap by writing a $3 million check - taxpayer money, handed over directly to this flop, as part of the state's film incentive program.

"It's an unaffordable program," says Jan Moller, who leads the nonprofit Louisiana Budget Project in Baton Rouge.

Moller says the Motion Picture Investor Tax Credit program is sucking money from higher education and healthcare. "This is an open-ended entitlement program that is costing the state more than $200 million a year," Moller says, "at a time when we have a $1.4 billion shortfall."

Louisiana taxpayers gave $33,608,897 to the producers of "GI Joe: Retaliation," $33,154,211 to "Twilight Saga: Breaking Dawn" and $17,856,375 to "Ender's Game," which starred Harrison Ford.

Some critically acclaimed films have also been produced in Louisiana and received tax credits. Many of these also did well at the box office. "Django Unchained" received $18,997,459. It was considered a critical and commercial success. "12 Years a Slave" won three Academy Awards. It received $5,397,244 in tax credits. You can view our searchable database to see all of the movies produced.

"We would not exist without the tax credits," says Susan Brennan, whose company Second Line Stages is one of the economic byproducts of the credits.

"I was actually going to build a condo building here," she tells us. Instead, in 2009, she shelved those condos and built massive soundstages on an acre and a half of land in New Orleans' Irish Channel neighborhood.

"They're building a two-story house in here which will be the set for a show that will be out this fall," says Brennan, who is not related to the aforementioned film critic.

A wall at Second Line shows off the movies and shows that have been produced on her soundstages. She says everything inside the facility, from the workers to the building materials, helps support the local economy.

"When we have a show going, we could have up to 300 employees," she says. "They're all working."

Louisiana has the most lucrative film tax credits in the country. For every dollar spent in Louisiana, the state credits 30 percent of those costs, with no cap. So if you made a movie and spent $1 million in Louisiana, the state would credit you more than $300,000. And for every Louisiana resident you employed, you would receive an additional 5 percent credit on their salaries.

Economists say that simply makes it a loss for the state; there's no way for taxpayers to recoup that money.

"Every economist that's taken an independent look at this program has found that it only returns pennies to the dollar to the state taxpayers," Moller warns.

The most recent study we found on the topic was completed late last year by legislative analysts in Maryland, surveying several states that have such film tax credits. It found that Louisiana gets back as little as 23 cents in return on investment for each dollar in state incentives to the motion picture industry.

"I think that the film credits probably… that's the one tax credit program that really is working well and creating a good result and bringing in more business and creating a whole new industry," counters Will French, the president of the Louisiana Film and Entertainment Association.

The LFEA is in the middle of its own study, one that French says should show the industry is not a loss to taxpayers.

"All of the studies that have been done to date, they only factor in the amount of money that's being spent by the actual productions and the taxes that they're paying," French says. "They leave out the impact on tourism."

French says, when films that entice tourists to Louisiana are factored in, the overall economic picture will be drastically different. "If we're not already bringing in as much as the program costs in terms of tax credits, in new tax revenue, then we're getting very close," French claims.

The problem is, according to such economists as LSU's Loren Scott, the balance really isn't close to even.

"They haven't studied all of the impacts, though," French insists. "They've only studied a very small portion of the impacts."

Whether a film is a flop or not, it is still spending money in Louisiana and still creating jobs. But if the film industry says their study will show an impact on tourism, those flops are relevant to Louisiana's bottom line. If people aren't seeing movies made in Louisiana, they won't increase tourism numbers.

The Film Association says it supports tweaking the program. But to keep it competitive, French says, the tax credits have to remain the same: 30 percent credit for all Louisiana expenditures, and 5 percent for Louisiana residents' pay.

The head of the state's economic development department agrees.

"When you think about all the families here that now count on that program," says Economic Development Secretary Stephen Moret, "and honestly all the positive things that it's brought to the state, I think what we should be looking to do is try to preserve at least the level of activity that we have today in the film program, but do it in a way that allows the state to manage its fiscal exposure."

Right now, the state pays out tax credits based on audit reports submitted by the movie industry. The state would like a different structure.

In the past we've seen several people indicted, including Wayne Read, for selling bad tax credits to members of the Saints.

Moret acknowledges, "We have seen some individuals who have tried to use multiple entities that essentially sell things to each other at inflated values much greater than the actual value of the transaction. And in those situations, it results in the state giving more credits than a project is actually due."

When a movie receives tax credits, most either sell those credits to a third party or sell them directly back to the state, receiving 85 percent of their value. In 2012, taxpayers wrote checks back to movie companies totaling $109 million.

The producers of Green Lantern sold their credits back to the state. That movie, another flop, earned $34,974,051.60 in tax credits.

There's also a series of Nicolas Cage movies to consider: five filmed in Louisiana, all box office bombs, but still earning $44,895,572 in tax credits.

"There's a sense that maybe he's just cashing a paycheck," Matt Brennan says, "long removed from his days in, say, "Leaving Las Vegas," which won him an Oscar."

Louisiana has handed out as much as $250 million in one year in tax credits.

Moller calls it out of control. "That's a lot of money," he tells us. "That could pay for a lot of higher education, a lot of road paving."

At those levels, Louisiana's movie industry clearly is bigger than ever.

"I've seen it go from every once in a while - you know, seeing Hollywood Trucks out on the streets – to now, not just in New Orleans but statewide, there's almost a constant flow," Matt Brennan says.

The movie industry hopes to convince Louisiana lawmakers not to mess with the credits, since everyone will agree that Hollywood South is on a roll, attracting bigger budget films and employing more Louisiana residents than ever before.

"We don't want to undo what we've invested in for the last 10 years," French warns, "when we're on verge of really reaping the benefits of the positive return on investment."


Copyright 2015 WVUE. All rights reserved.