Lights, Camera, But No Action

Tax incentives may be a devil’s bargain. But if Nevada wants to lure film production, it doesn’t have much choice.

Silver State Production services founder Chris Ramirez invited me to take a seat in his office to discuss Nevada Senate Bill 165, the Motion Picture Jobs Creation Act. So I shook his hand, squeezed sideways past a desk just large enough for a laptop piled high with paper, and settled into the narrow, windowless cell that serves as the only private workspace in Silver State’s small studio in the creative warren of Fremont Street’s Emergency Arts. Ramirez’s lanky dog, Downtown Abby, opened one lid, stretched her toes and went back to sleep.

Passage of SB165 would certainly be good news for Silver State Productions. Not only would Ramirez get an adult-size office and maybe a couch for Abby, but he could also safely increase his current staff. “I am taking a gamble with 15 full-time employees right now. If the bill passes, I can keep those 15 people employed, and then I could see our company growing to 40 to 70 full-timers and building a bigger studio.”

SB165 offers qualifying film productions (which specifically do no not include pornography, most live programming and student projects) with budgets greater than $100,000 a tax credit for up to 27 percent of the money they spend in Nevada.

It may seem obvious that a guy who makes his living in film would be all in favor of a tax break for the industry. But Ramirez hasn’t always believed incentives were necessary. A couple of years ago when Silver State Productions was working in Reno on The Motel Life, he was able to convince the producers to shift production from New Mexico to Nevada. “[At that time] I thought, ‘We don’t need tax incentives. Nevada is such a beautiful state.’ But I was so naïve. [Other states were] giving away so much money and making it so attractive.” He predicted there would “come a point when people will build their own Las Vegas. Sure enough that’s what they did; they built their own Fremont Street in New Mexico to shoot [the CBS TV show] Vegas.”

Producers are eager to shoot in Nevada, but it just doesn’t make sense for them when so many other states offer incentives. “Everybody I met at the Sundance Film Festival was talking about Nevada working on a tax incentive,” Ramirez says. “Everybody I bring it up to thinks Nevada and Las Vegas would be an amazing place to film. We have the hotel rooms, we have the rental cars, it’s five hours from L.A.”

To help illustrate, Ramirez explains that Jason Statham is shooting a remake of Burt Reynolds’ Heat, but the outcome for Nevada is opposite of what happened with The Motel Life. “One-hundred percent of the script takes place in Las Vegas, so they came out over Christmas [to shoot some exteriors], and we showed them such cool shit. They loved it. So I said, ‘OK, so can we do this here?’ They said no, absolutely not. Why? Because the decision is up to the financiers. All their money is tied now to incentives. Now movies won’t even get made without them.”

Similar bills have been floated in Nevada before—most recently in the 2011 session—but none have passed. Senator Aaron Ford, D-Las Vegas, the bill’s primary sponsor, seems confident it will make it through this time around. “This bill came out of the chute with bipartisan support. I am a Democrat, and the Senate minority leader, Republican Michael Roberson, is a co-sponsor. It also came out with bicameral support and, for a lack of a better term, bi-industrial support in the sense that I have the chambers of commerce as well as labor on board.

The governor’s office has already indicated, although I don’t want to speak for the governor, that they are enamored of the idea and as long as the numbers can pencil out, we’re good to go.”

But some are far less enthusiastic and argue that, sure, while it’s great for guys like Ramirez, it ultimately screws the rest of us. The Nevada Policy Research Institute, which identifies itself as a “free-market think tank,” says the bill is “a loser for taxpayers.”

“Every dollar that is awarded through a special tax credit is a dollar that is unavailable to finance public services,” NPRI Deputy Policy Director Geoffrey Lawrence says.

Lawrence cites data from the Louisiana Legislative Fiscal Office, which concludes that “the program creates a net loss for the state’s budget even after accounting for all multiplier effects and additional employment created by the film industry. The fiscal effect was an annual net loss for the state budget of more than $48 million annually in every year between 2006 and 2011.”

On the other hand, in a Nevada Film Incentive Task Force comparative study published in May 2012, authors Josh Cohen and JR Reid, both players in Nevada’s film industry, cited numbers from the Louisiana Economic Development office showing the state’s film-production revenue increasing 6,600 percent between 2002 and 2006 after passage of a 25 percent film-production tax incentive.

They argue that with careful structuring, incentive measures can work to engender growth, concluding that “Nevada’s primary competitors have found that 25 percent is the sweet spot for attracting medium-size productions, long-term jobs and infrastructure, while still keeping the program fiscally positive and beneficial to feeder industries.”

Selecting statistics to fit desired conclusions isn’t exactly new. And to further confuse things, it seems that states may not be doing a great job of tracking incentive data.

A Pew Center on the States meta-study published in April 2012 titled “Evidence Counts” concludes that “no state regularly and rigorously tests whether [incentives] are working and ensures lawmakers consider this information when deciding whether to use them, how much to spend and who should get them.”

The Pew study includes a particularly telling example. New Mexico—cited repeatedly by proponents of SB165 since producers of Vegas chose it over the actual Las Vegas—has had difficulty pinning down whether or not its incentive is fiscally advantageous.

Pew also notes that a 2008 study “conducted by New Mexico State University researchers, found that the state’s investment generated just 14 cents per dollar in new revenue,” but that another study conducted a year later by Ernst and Young for the State Film Office “found that every dollar spent on the film tax credit generated 94 cents in new state revenue.”

Ramirez understands the concerns of those who are worried the Motion Picture Jobs Creation Act will end up costing the state more than it brings in. He believes we don’t have to give away everything; we just have to offer something to give producers the excuse they need to come to Nevada. And he’s willing to back down if it doesn’t work. “Don’t get me wrong, I don’t want to take money from anywhere,” he says. “[But] I firmly believe tax incentives will help. I’d love for the state to put up hurdles and say, ‘Listen, we have reservations about this, but if you do X, Y and Z [you can] prove to us [the incentives are worth it].’ I think the whole industry would jump through those hoops.”

Ford agrees. “The decline in the number of dollars we have been able to bring into the film industry tells the whole story,” he says. “It is just overwhelming. Film production income in Nevada has declined 43 percent in the last decade from $155 million to $89 million. Other states’ film incentives are the reasons why the industry comes here and only does a couple days of shooting. They get what they need from Nevada and then they go to New Mexico. Why would they tell the Ralph Lamb story in New Mexico? Because they have a tax incentive.”

The Tax Foundation—a Washington, D.C.-based think tank whose analyses NPRI uses to bolster its argument against SB165—admits that film tax incentives are an “arms race.” The solution? A moratorium on them, either voluntary or unilateral. But the foundation concedes that getting the states to lay down their incentives and make peace will be extremely difficult.

In the meantime, if Nevada wants to attract film production, it doesn’t have much choice. One certainty about tax incentives is that they always have unforeseen consequences. Another is that if we don’t have them, production will head for states that do.

Should tax breaks subsidize filming in Vegas?



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