By Vaughan Cordell
On any given day in New Orleans, you might find yourself confronted with a street closed off to the public, covered in white paneled moving trucks filled with wild arrays of lights and sound gear, and trailers dispensing makeup and wardrobes: all of the necessary components for making movie magic. However, in recent times the streets are found cordoned off less and less as the productions coming to what has been called the Hollywood South have all but dried up following changes to Louisiana’s film tax credit program. Sets are slowly being put away with mothballs while experienced crew and technicians struggle to find enough work to make a living. Other states have also amped up the benefits of their own programs to provide further competition. With the industry slowly sinking into a state of quiet panic, does this signal the death of the Hollywood South?
“I might as well be a property manager at this point. We haven’t had a project in any of our on-site stages for around six months now.” Patrick Mulhern is currently the Executive Director at Celtic Studios in Baton Rouge and a founding member of the Louisiana Film and Entertainment Association. The current state of affairs has caused no end of troubles for him and the entirety of the studio. When arriving at the studio proper, the lack of work becomes glaringly obvious. Rows and rows of white trailers sit side by side in the otherwise nearly empty parking lot, waiting to be used in productions that simply aren’t happening.
Originally implemented in 2002 by Governor Mike Foster, the tax incentive program was a success from the start. Foster announced that a major movie production was expected to come into Louisiana as early as September 30th of that year, shortly after signing the tax program into law. “We’re excited to have such a great film project coming our way,” Foster exclaimed. “This is great news economically and culturally. We’ve worked hard as a state to put ourselves on the map for big movie productions … it’s going to have a huge impact on the greater New Orleans region. The advantages of getting a movie production this big to Louisiana are going to be felt for a long time to come.” The coming years would prove the former Governor right.
“Before Hollywood South there was Hollywood North, when all of these shows in the 90’s were being filmed in Vancouver. Hollywood North put a huge hurt on Louisiana,” Mulhern exclaimed, pounding his fist on the table for emphasis, going on to explain: “We actually had started to grow a crew base here, of people who were working on films that were down here, maybe a game show or two, with New Orleans always starring as New Orleans. That started to dwindle, and I think that was the point where, around the turn of the century, where things almost completely blanked, where we had almost nobody left who was qualified.” Others in the state shared Mulhern’s view, prompting Governor Mike Foster to push the tax incentive program forward in 2002. The program was presented as a measure to help grow and expand the blossoming film and television scene in Louisiana, providing a catalyst to the creation of a local industry. “In response to Canada stealing all of this work, they [Louisiana lawmakers] decided ‘Okay, we need to give them something more appealing to bring this work back.’ Well, they did. They came up with this transferable tax credit, and it started a revolution.”
The program proved to be a success from the start. Foster announced that a major movie production was expected to come into Louisiana as early as September 30th of that year, shortly after signing the tax program into law. “We’re excited to have such a great film project coming our way,” Foster exclaimed. “This is great news economically and culturally. We’ve worked hard as a state to put ourselves on the map for big movie productions … it’s going to have a huge impact on the greater New Orleans region. The advantages of getting a movie production this big to Louisiana are going to be felt for a long time to come.” The coming years would prove the former Governor right. Soon after the law went into effect, the industry grew exponentially. Since 2006, over 300 films have been shot in Louisiana, and by 2011 the state’s skilled crew base grew by over 400%.
The downturn came after a change to the incentive program was approved by former Louisiana Governor Bobby Jindal, in the summer of 2015. The law put an upper limit on the total pool of money that the state would use to honor film credits each year, meaning that no more film tax credits could be cashed in that year once the pool was emptied. Previously, the program lured potential productions by offering a 30% reimbursement of all Louisiana-based costs with an additional 5% for having Louisiana residents on the payroll. The program included heavy costs such as the salaries of big-name stars, and there were no caps or ceilings to speak of until the change. “This cap really hurts the industry, and I’m not just talking about big projects,” Mulhern explained, easing further back into his chair. “Before the cap, smaller productions could go to a bank and tell them ‘Hey, we’re going to make this movie for two million dollars, and if you give us the money up front, you can have our tax credit.’”
Although the tax credits themselves have not been changed at all, the cap on redemption makes their worth questionable. “Think of the tax credits like a mail-in rebate. A production comes in, and they spend 100 million, and the state gives them this tax credit. And, if you have a liability here, you can use it dollar for dollar to reduce what you would normally pay the state. But the genius behind our program is that you may not have a liability here, but you can sell it to someone who does.” The ability to split the credit up and transfer ownership was a key part of the process for smaller productions, looking to scrape together the necessary funds to get the film rolling. “Before the cap, smaller productions could go to a bank and tell them ‘Hey, we’re going to make this movie for two million dollars, and if you give us the money up front, you can have our tax credit.’ And the banks used to happily take them up on the offer, because at worst that credit would be worth .85 cents on the dollar, and was as good as cash.”
After the changes, things became much less certain. The tax credits were only good as long as you got there first. And, without an upper limit cap on the total amount of credits that could be issued each year, there could potentially be an absurd amount of competition for the limited yearly payout pool. Jan Moller has kept a close watch on the film industry tax breaks since their inception, and reflected on the issue with frustration evident in his tone. “I worked as a journalist previously, and I wrote on the subject. This program has been misunderstood from the beginning.”
Moller, currently the head of the Louisiana Budget Project, looks at the program as a spending program rather than a credit program, calling it a direct subsidy to projects who come and work in Louisiana. “People hear the words tax credit and think that we are simply allowing movie producers to save on their state taxes, and if that was the case we probably wouldn’t have a problem with it at all. In reality, we are under riding about thirty cents of every dollar that is spent in Louisiana. That is money the state simply can’t afford to spend.”
Prior to the cap, the program was quite literally hemorrhaging money, with tax credits in the years 2013 and 2014 accounting for $851 million and $776 million in spending respectively, and although this did plenty of good for the film industry in Louisiana, it was anything but sustainable. If things are indeed as bleak as they sound, then what can be done to fix it? Patrick Mulhern and Jan Moller both agree that at least a partial solution to the issues at hand is an upper limit on the program, but not in the way the current legislature outlines.
With a fire in his words, Jan Moller outlined the situation from his point of view. “What we’ve always said is that there needs to be a cap, but the way they capped it last year was frankly the dumbest possible way to cap it. Instead of putting a cap on the amount of credits that can be issued, the legislature put a cap on the amount that can be claimed,” Moller paused, gathering himself. “This allows for an unlimited number of tax credits to be issued per year, which could leave the state of Louisiana, and therefore taxpayers, with a huge liability on their hands.”
“Things are already bad, and they’ll only get worse if we do nothing. Putting a cap on the amount issued instead of the amount claimed per year will at least stop the bleeding.” Mulhern sighed, placing one hand in the other. “The film industry is incredibly mobile, the talent goes where the projects go. Even now, the people who moved here and have invested their time and money are leaving for greener pastures, and that amount is growing exponentially as time goes on. The longer we wait, the worse it gets. Past a certain point, reviving the industry in Louisiana becomes almost impossible.”
Vaughan Cordell is a senior at Tulane University, pursuing degrees in Philosophy and Computer Science.