McDonnell signs Film Tax Credits

Gov. Bob McDonnell signed Virginia’s first tax credit incentives for film production this week, a milestone for economic development in a year where revenues are tight. But McDonnell cited the 14 to 1 return on investment that incentives like this generate as more than attractive.

McDonnell and Bolling both referred to the program as a “first step” to making film production a key component of the Virginia economy. To be sure, this is a measured first step. Credits won’t be available until 2011 and are capped in total at 2.5 million a year.

But with 41 other states offering similar packages, we’re at least competing for those dollars that film production brings to an economy.

I think the program could be improved. While big Hollywood productions grab the headlines, in truth those are “quick hit” projects that do spend a lot of money in a matter of days, and then leave.

Sustaining Virginia production companies who employ people week after week, pay taxes, and build film careers locally are in the long run a better target for nurturing. And with a cap of 2.5 million in total tax credits per year, how many blockbusters can we really expect.

I’d like a tiered system worked in that focuses more on Virginia film production companies and growing our own.

Tim Reid, founder of New Millennium Studios in Virginia and better known as Venus Fly Trap on WKRP in Cincinnati, seemed to appreciate the point of my question when I asked about nurturing Virginia filmmakers.

I think there is much more to be gained in growing a Virginia film industry than attracting flybys from California.

Still, we’re in the game now, and that’s more than we’ve ever been before.

And to all my film/arts/acting friends, Democrats Mark Warner and Tim Kaine never did so much as say hello to you. Republican Bob McDonnell gave your industry the tax incentives that Marky Mark and Timmy! never could.

  • Emile Husson

    I like the immediate effect of bringing more dollars in from out of state, rather than sending them out the door. As for the goal of nurturing in-state talent, I think it will help with that as well by getting locals involved with the larger market and helping to build skills, contacts, and credentials.

    This is a win all the way around, and beats throwing tax dollars at anything that moves no matter how poor the return.

  • Mike Barrett

    Wow, there is a surprise. Our author is an actor, and applauds his Governor for a corporate tax give away for companies that employ actors. Brian tries to return to his journalistic role to applaud the Governor for the 14 to 1 rate of return, but of course, the documentation for this give away is sadly missing. Frankly Brian, could not have someone else on your staff, without such a glaring conflict of interest, written this piece? And rather than simply take your facts from the press release, would it be possible to provide just a modicum of fact checking in order to justify this corporate give away? Frankly, since our competitors basically give back more in tax breaks than the companies spend, I find that figure to be ridiculous on its face. Try acting like a journalist and actually check it out, even if you are just acting.

  • It should be noted that Creigh Deeds would have also considered a Film Tax Credit. It’s a good idea, whether you’re a Republican or Democrat.

  • Creigh who?

  • Mike, I’ll bring that up next time you push for light rail to pass by one of your companies’ commercial properties.

  • Mike Barrett

    Well Brian, of course you have said the same thing about roads. Of course, every one of our commercial properties, and those of every commercial property owner is actually on a road. I guess that is why you oppose state support of transportation. I thought republicans believed in private economic development? My, times have really changed.

  • Jessica Sandlin

    Finally!

  • Nice dodge about light rail, Mike.

    Of course, what you’ve written is untrue, but facts have always troubled your political goals, haven’t they?

  • Mike Barrett

    Dodge? Heck no. Certainly one of the main advantages for business is the increased sales brought to them by light rail, and as you know, expected increases in property value near light rail stops will be measured in the billions of dollars. Of course, I guess you are expressing the opinion of this page that transit oriented development is bad, which really completes the cycle that republicans used to actually understand and appreciate private economic development, but now oppose it. I would have expected to read such drivel in a left wing pamphlet, not on a web site that purports to support republicans. Things have really changed.

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  • Mike, you’ll have to tell me where you get those left wing pamphlets.

  • Turbo

    With all of the rich heritage and history in Virginia that goes along with the variety of resources we have here it has long made sense to break our dependence on hollywood unions for producing the lions share of jobs for making movies. Same is true for autos.. the manufacturing center was Detroit and nobody in their right mind will build a new auto plant there now.

    +1 for the gov

  • Clairese Lippincott

    This means that Virginians can now at least ACT like they have jobs.

  • steve vaughan

    The incentives for film companies to come here are a good thing. The real problem with them, due to budget constraints is that they are very small. We have already lost one production — which would have been a perfect fit for filming at Colonial Williamsburg — to Mass. because they put up millions in incentives that we couldn’t match. The current program won’t do much. But at least it’s there and can be expanded as the state’s finances allow.

  • Mike Barrett

    Well yes, that’s the problem. Once you start playing the incentive game, you not only damage the businesses that are already here, but you start attracting companies that essentially make their decisiions based on the quantity of the incentives. In many cases, unless the clawback provisions are really well crafted, that money is wasted. My view of incentives is that they should be targeted, infrequent, limited, based on specific criteria, and that if the firm does not perform as promised, the award should be clawed back.

  • Kathy Mateer

    The film industry will go where the incentives are. With friends and a son in LA in the film business, they will go wherever they can make a movie and make the most profit. What Governor McDonnell has done is to open up the possibility of more jobs and money for Virginia. Maybe my son in LA will move back home if Virginia becomes a state that has a film industry. I hope so, I miss him.

  • Mike Barrett

    Well yes Kathy, they will; that’s the point. Some states pay back so much that any income they derive from their presence is paid to the company in incentives. What is wrong with this picture? On this forum, where condemnation of government spending is the norm, you are supporting incentives that exceed the public value of the enterprise and benefit one form of entertainment over local forms here already. Please, some restraint is necessary.

  • Mike, if you can’t see the difference between “tax credits” which I favor and “tax increases” which you favor, you’re hopelessly lost.

  • Mike Barrett

    Brian, I am talking about corporate give aways and you know it. As I said, I support tax breaks or incentives under the terms outlined above, but in this discussion, I have referred to the escalating use of incentives that exceed the tax value of the enterprise. That makes no sense, and it is a slippery slope.

  • Turbo

    Mike, the difference between Tax Credits and Tax increases is as obvious as the difference between chicken salad and chicken droppings. Speaking of chicken vs egg.. Credits for a period of years lure tax positive manufacturers sometimes even when they did not intend to relocate. If they operate somewhere like uh.. california :), they have plenty of incentives to find tax relief and credits to facilitate uprooting, moving operations and rehiring.

    Another round of hoorah for governor McDonnell. Credits are a bargain at twice the price. If we had the right leadership at the time with forward looking vision we would not have lost our auto manufacturing plant. The consolidation went to another plant location where the tax policy was better.. its all about the buck Mike.

  • Mike Barrett

    It is difficult to have an intelligent discussion with those who don’t understand that if you give away more in tax credits than the grantee pays in taxes, that results in a tax increase for the rest of us.

  • Brian Kirwin

    Mike, since when has a “tax increase for the rest of us” ever bothered you?

    Mike gets 6-figures from the city as an “incentive” for a project he already built – that’s fine.

    A tax credit based on spending lots of money in the Commonwealth (all of which is taxed), and Mike has a problem, probably because film production don’t need to rent Mike’s commercial properties.

  • Mike Barrett

    Well actually Brian, we have rented temporary space to film productions a number of times. We look forward to doing so again. The point is that the award for which we qualified reimbursed us for the relocation of public utilities in the public right of way that allowed our project to move forward. We paid back the incentive in real estate propertey taxes in the first year. This award meets the criteria I proposed in an earlier post. Here is an interesting proposal; let film companies produce films wherever it is best to do so instead of in the state which pays them our tax money to do so. Given your ideology, it seems that you could support this practice.

  • Turbo

    Mike, Tax credits facilitated the growth in the solar and geothermal heat pump trends. When the tax credits were axed, the solar installation business dried up overnight and the geothermal business was stunted for 25 years. Geothermal works for me quite well but everyone should be able to afford it and that is why tax credits are needed.. MFG’s need to offset the costs of ramping up so economies of scale can see daylight.

    I heat and cool 6400 square feet of space for $200 per month. Tell Al Gore to Stuff it.. W Bush does it even better.. he uses wind to power his geothermal and his electric bill is less than mine.. in texas.

  • Mike Barrett

    Yes, I my view on incentives is that they should be targeted, infrequent, limited, based on specific criteria, and that if the firm does not perform as promised, the award should be clawed back. Another way to stimulate alternative energy production is to make energy producers pay the full cost of their products, which includes the negative effects of carbon and of course the clean up of their mess. The free market can sort this out if the existing subsidies for the use of carbon is fairly distributed.

  • Turbo

    Mike, your intentions seem good.. Try to explain how an industry benefitting the public and the nation at large but lacking capital from revenues can finance alt energy startups? I been there done that a few times on a much smaller scale with natural gas, LP and hydrogen and it emptied my pockets every time but once… same is ture for several of my relatives on a larger scale.

    Buyers pay for the end product but unless there is a co-op, the customer is not an owner. Billpayers pay for the products in the long haul but in the near haul in order to overcome the cost obstacle, tax credits can be an enormous enabler. The money saved by the utility company that received the break in the long haul is paid back in tax revenues many times over after clearing the hurdles to market entry. This has been proven in Denmark and California utility projects in some cases but not all..

    As for the subsidies for the use of carbon argument, that is a part the greatest hoax ever perpetrated by executive leadership in this country ever. I welcome you to define your statement “The free market can sort this out if the existing subsidies for the use of carbon is fairly distributed.”

  • Mike Barrett

    Capital will flow to alternative energy companies if the subsidy to oil, gas, and coal is removed. That is, if the public costs of the use of carbon are charged to the producers of those products, then alternative energy is competitive and the market will sort it out.

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