And the incentive money goes to …

johnadamsagainWhen it comes to selecting filming locations, the movie industry takes a cue from Jerry Maguire: “Show me the money.”

Unfortunately for Virginia, there isn’t much to show. But that could change if plans to provide more incentives to studios take hold in the General Assembly.

Yesterday the state Senate passed a bill designed to boost the Virginia film industry.

Introduced by Sen. Louise Lucas (D-Portsmouth), Senate Bill 1421 would impose an additional 5 percent tax on movies and games purchased in hotel rooms to go toward the state’s film incentive program. Such purchases are already subject to the retail sales tax.

Mary Nelson, communication director for the Virginia Film Office, said that because of a lack of significant funding, Virginia loses films to states with stronger incentive packages.

“The industry is actually eroding,” Nelson said. “We didn’t have any major film projects last year, and that is unheard of in the 20 years we have been doing this.”

The bill will next go to the House of Delegates for approval before becoming law. An identical bill in the House failed to pass committee this week.

The revenue generated from the tax would go to the Governor’s Motion Picture Opportunity Fund, which is used by the Virginia Film Office to entice production companies to film in the state. The amount of money currently budgeted for the fund is $200,000.

That pales in comparison with the $75 million Pennsylvania has appropriated for its film incentive program.  Thirty-nine states have film incentive programs to help offset a portion of a movie’s budget. The amount a production company is offered by a state can be a deal maker when deciding where to locate.

In Virginia, producers do not receive incentive money until after filming is completed and the economic impact is realized. Virginia-based production companies are also eligible to receive funds.

Nelson said a film usually spends a third of its budget in the location chosen for production.

According to the Virginia Production Alliance,  a film and video trade group, the industry had an economic impact of $732 million dollars in the state in 2007, which generated $23.3 million in state and local taxes. But because many states have more competitive incentive programs, the film industry’s footprint is getting smaller. The economic contribution from out-of-state production companies has fallen 53 percent since 2005.

In 2007, the acclaimed HBO miniseries “John Adams” finished filming in the Richmond area. That Tom Hanks-produced series spent $81 million dollars here, with an economic impact of $148 million, Nelson said.  During production, cast and crew spent 4,500 room nights at area hotels, which generated $1.3 million for the local hotel industry, according to the film office.

The producers of “John Adams” received $1.25 million from the state, which was a key factor in deciding to locate in Virginia, Nelson said.

“We have a couple very big important projects in 2009 that really want to come to Virginia,” Nelson said. “But they are pretty much saying they have to look at places that want to invest in the industry.”

Virginia is competing with other states for several films that have combined budgets of more than $250 million, said Bud Oakey, a lobbyist for Richmond-based Advantus Strategies. The firm was hired by the VPA to develop and promote incentive legislation for this year’s General Assembly session.

Many of those films are set in Virginia but might not be filmed here if producers can find a better deal elsewhere. Films set in Virginia currently competing with other states include “Big Stone Gap,” “Secretariat,” “1776,” and “Lincoln.”

“‘John Adams’ had such a high price tag and, because of its historic significance, really caught the eyes of other markets,” Oakey said. “Massachusetts is one that really realized the potential this industry had from jobs prospective and invested greatly.”

As a result of Massachusetts’ incentive enhancement, they secured “The Box,” a film by Midlothian-born director Richard Kelley. The movie is set in Richmond, but primary filming took place in Boston as a result of a $4 million incentive package offered by the state of Massachusetts.

“We have to compete with attraction of movies just like the attraction of any bricks-and-mortar facility,” Oakey said. “The difference with a brick-and-mortar building, a $60 million facility, it is spread over up to 12 months, and a film company spends it all at once.”

According to Oakey, the proposed tax on hotel media purchases could generate between $750,000 and $2 million for the motion picture fund.

Last year the General Assembly rejected bills that would have added $4 million to the motion picture fund, opting instead to fund it to the $200,000 level.  The proposal to tax media purchased on hotel room TVs is part of a legislative package that was crafted by the VPA and Advantus.

Todd Raviotta, first vice president of the VPA, said the group hired Advantus to come up with funding approaches that might be more palatable to the General Assembly during difficult economic times.

“These bills create a revenue stream for the fund, rather than asking for money that needs to go to roads or other state projects,” Raviotta said.

Of course, that tax might provide less revenue if hotel occupancy rates fall.

Another bill advocated by the VPA is SB 1420, also introduced by Lucas, which would create a lottery raffle managed by the Virginia Lottery. Twenty percent of the proceeds would benefit the motion picture fund. The bill is identical to House Bill 2610, introduced by Del. Onzlee Ware (D-Roanoke). Both bills are awaiting committee votes.

According to a fiscal impact statement from the Department of Planning and Budget, the raffle could generate $2.6 million. The report expresses concern that because many Virginians are aware that the lottery funds public education, consumers might become confused if some of that money is diverted to benefit the film industry. It also states that adding a second raffle game to the lottery’s product mix could dilute consumer demand and cause a decline in profits.

Together, the funding proposals would generate between $4 million and $6 million for the motion picture fund if approved by the General Assembly, according to the VPA.

A third bill, HB 1786, would eliminate the sunset date of 2019 for a current incentive that eliminates sales and use tax for audio and video productions.

Al Harris is a BizSense staff reporter. He was also a film major – for a semester.

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david almeleh

Confused consumers? I never met anyone who played the lottery that said “Yippee! I’m playing the lottery to help fund schools!” They play to win money and that’s it.