CoastLine: Film Incentive Change Slowing 2015 Production

Jun 5, 2015

This broadcast of CoastLine originally aired on December 10, 2014.

The debate over film incentives in North Carolina erupted on the public stage last year when two state RepresentativesRick Catlin from New Hanover County and Chris Millis of Pender Countysponsored a bill that would fundamentally change the structure of the tax rebate.  

There was an immediate outcry from the film community.  If the film incentive changed, advocates said, producers would go elsewhere and the industry in the Tar Heel state would die on the vine. 

That bill died in committee, but it was just the beginning of a series of proposals to change what film industry insiders say was a competitive package helping to set film production and spending records in the state. 

After lengthy negotiations and some surprise twists during that process, the final verdict from the General Assembly:  a ten-million dollar grant fund to be administered by North Carolina’s Department of Commerce.

At the end of this year, Secretary of Commerce Sharon Decker is leaving her post for the private sector – and John Skvarla, the current head of the Department of Environment and Natural Resources will take the helm at Commerce. 

Earlier this week, I spoke with Secretary Decker, a vocal supporter of the film industry, about how the legislative conversation evolved and whether the scene in North Carolina has, in fact, faded to black.

Interview transcript:

SD:  Actually, the conversation about tax reform is the beginning of this conversation and that’s been – gosh – more than two years ago but certainly more focused in the last two years.  And I think this legislative effort has been to reduce the corporate and personal income tax statewide.  And they’ve been successful in doing that in the long session now two years ago.

So the approach that’s being taken is to reduce the tax burden statewide.  When this process began, North Carolina had the highest tax rates in the southeast for both corporate and personal income tax.  And so the decision was made to try to reduce that, which, I think, we all would agree is a good thing.

In doing so, it became necessary to evaluate all of the unique tax credits that existed in the law.  Because the way our tax codes were written, if you look at total tax burden and total tax revenue that’s available to the state, that includes both the taxes brought in as well as the credits that are given to specific industries.  So when you take a more across-the-board approach, you have to look at all the tax credits on the books. 

And the film credits were one of those.  So it’s not been an effort to single out a specific industry but to look at all the tax credits out there and say, as we reduce tax rates, can we continue to offer these?  And the decision was made very early on that the tax credits would not be extended beyond the sunset.  Now, there were a lot of efforts made to do that, but ultimately the decision was made in this last legislative period, not to extend those credits. 

But what was offered was a grants program for this industry to continue to encourage larger and longer-term investment in film development in the state.  You might remember that the Governor’s budget included a grants program.  It was a bit more robust than what was ultimately passed and it was funded at a higher level than what was passed. 

But the Governor wanted to include a grants program for the industry because we felt like we did need a tooleven with reducing overall tax rates and cost of doing business in North Carolina, we would need an additional tool. 

And so ultimately what was passed was a grants program, which you know, we have just put the guidelines out, but not with a great amount of funding.  Just $10 million – that’s a lot of money – but compared to what has been invested in the industry – a much smaller amount… 

RLH:   Secretary Decker, if I may… you were actually very vocal in your support of the film industry early on, and there was a report that came out, The Road Map for Jobs [a publication of the NC Economic Development Board], that identified film as one of the target industries for growth in the state. 

SD:  Yes, indeed.

RLH:  And with this current $10 million grant fund, people have been doing the math and it’s not so difficult to figure out that a couple of major projects coming in will eat up most of that grant fund. 

SD:  That’s right.  My hope is that in this legislative session that that fund will be appropriated in a larger amount.  I do think that one of the reasons that we didn’t get a larger sum was that the legislators wanted us to get the guidelines in place.  They wanted to understand what the impacts would be. 

And my hope would be that we could encourage the increasing of that funding as we move forward.  But you’re right.  It’s a significant change in the funding amount comparatively, and I think it’s something we’ve got to stay focused on. 

RLH:  So you’re saying that once this program gains some traction among legislators that it's possible it could be funded more robustly? 

SD:  I think that is a possibility.  That would be my hope.  Of course all of funding for these types of things depends on state revenues and how we’re doing.  The good news is the economy’s growing again and job creation numbers are up and that all points in a positive direction.  So, I am hopeful.

RLH:  You also alluded to Governor McCrory’s plan.  He put forth his own re-vamped version initially.  Why do you think that didn’t garner any serious traction in the General Assembly?

SD:  Well, I think it all came down to state revenues and making choices about what could be funded and what wouldn’t be funded and I just think, in the end, there had to be some really hard decisions made – with – you know, having to make cuts in lots of places.

RLH:  Some people have suggested that the reason the tax rebate version of the incentive did not get renewed is because this area and the western part of the state, which is also heavily impacted by the film industry, didn’t do a very good job of selling the economic story to the rest of the state.  Is that true?  Or is there a deeper resistance to the industry in the state?

SD:  I don’t – I don’t think that’s true.  I think there is a shift in the approach to tax reform to try to reduce tax rates statewide as opposed to a strategy of having higher tax rates and then offering tax credits to specific industries or types of businesses.  I think that is a strategic shift that has taken [place].  And so it – in my conversations with legislators it wasn’t a focus so much on a specific industry.  It’s just a shift in strategy around tax reform in the state. 

Quite honestly, if you look at film, it is statewide.  I just left an event in Winston-Salem which has had a tremendous amount of film activity in the state.  Certainly, the Wilmington area, your area, is one of the most significant because of the invested capital in film in your region. 

I live in the western part of the state where film has been a very important part of that economy. 

I think that one thing that we’ve got to continue to stay focused on for the industry is capital infrastructure in the state.  And we have other tools that can help us with that like the Job Development Investment Grant which we hope to be re-funded in this session.

As studios want to build in the state, we can use that grant fund as a tool, also. 

So I would say don’t be discouraged.  We must stay the course.  This is an industry that’s really important to North Carolina.  We’re growing great filmmakers in the state, and we want them to stay in the state.  And that means we’re going to have to continue to do some work.

RLH:  As you know, there is quite a crew base here in Wilmington. 

SD:  There is.

RLH:  And you may also know that since the incentive changed, there’s been a palpable sort of mourning period going on here.  People are looking at Atlanta.  They’re looking at New Orleans.  Aside from leaving North Carolina, what advice would you give to a film worker who lives here and has this highly-specialized set of skills?

SD:  I think that the important thing is to stay engaged.  We’re pleased that Under the Dome is going to be staying.  We know that the grants program can be used for a lot of projects and we’re getting a lot of interest in the grants program. 

And, as you say, there will be a limited number that will qualify because of the sheer sum that we have there to work with, but to stay connected and to stay engaged in these projects that are here.  And I would say stay engaged in the political process.  Talk with your legislators about the importance of this in your economy.  Make your voice heard, and do it in positive and constructive ways because a part of it is education. And a part of it is being open to a different way to go about this – because I do think that the grants approach will be the one better received. 

But I do think it is a viable tool if appropriately funded.  So, two things:  stay positive.  Stay constructively involved.  Engage with your legislators to be sure they understand and then communicate statewide with legislators so that they have the facts and understand the importance of this industry. 

I personally will be leaving this job at the end of the year but this is an issue that I particularly and personally want to stay involved in.  I think it’s important to North Carolina.

RLH:  You’re actually going to a media company, aren’t you?

SD:  I am.  Actually going to a firm – Nuray Media – that’s involved in preservation of film, restoration of film, both for the film industry as well as television news stations, as well.  So I’m choosing to engage in this industry.  I always say North Carolina’s a manufacturing state but we need a diversity of industries and having plenty of work in the arts is incredibly important to us. 

RLH:  Do you think that film people will find a friend to the industry in John Skvarla?

SD:  Indeed they will.  I think John understands the importance of the industry to the state and the importance of staying engaged in it.  So I think John is already aware of the work that has gone on in North Carolina and the importance of it. 

RLH:  Well, Secretary Decker, we thank you so much for your time.

SD:  Thank you.  Thanks for covering it. 

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In-studio guest for Segments 2 & 3:  Johnny Griffin, Director, Wilmington Regional Film Commission