City’s film boom may be at state’s expense

The film and television industries, which spent a whopping $7.1 billion in New York City last year, are giving the city a crucial economic boost, Mayor Michael Bloomberg said on Tuesday at a press conference at the Saturday Night Live studio at 30 Rockefeller Center.

But since much of the growth was spurred by generous state tax incentives, which reduce taxes by 30 percent on designated production projects, the joke may actually be on taxpayers

The tax credits don’t directly take money out of the state budget, but they cost a few hundred million dollars a year in foregone tax revenue. The value of the tax credits in 2012-13 is expected to be $342 million. Last year, they totaled $297 million.

Some incentives go to some productions that might have been filmed in the city anyway, which would mean less tax revenue for the state, said Robert Tannenwald, an adjust lecturer on public finance at Brandeis University.

“The key is, what would New York State’s employment and income have looked like had the money spent over several years on film tax credits been used instead to keep teachers in classrooms, firefighters in our firehouses, cops on the street and clinics open,” said Tannenwald, who analyzed such credits in a 2010 Center on Budget and Policy Priorities report. “What would the bottom line have been if that had been the case?”

Mayor Bloomberg, who released a study laying out the latest figures on film and TV job and spending growth since 2002, touted the results as a sign of his administration’s success in diversifying the local economy.

“With this flood of new business has come tens of thousands of new jobs that have put New Yorkers to work in these tough economic times,” Bloomberg said. “Without a doubt, our booming media and entertainment industry is one of the main reasons why we have weathered the national recession better than most of the rest of the country.”

The study, conducted pro bono by the Boston Consulting Group, also found improvement in the city’s advertising and publishing industries and its digital media sector, which has grown to account for over $8 billion in revenue and now employs 25,000 people.

But the highlight of the report was filmed entertainment, which has seen tax incentives rise in tandem with its growing spending, thanks to shows like Boardwalk Empire and Gossip Girl.

TV and film production companies spent nearly $7 billion in the city in 2005 and 2006, the report shows, after combined tax incentives from the city and the state were boosted to reduce taxes on productions by 15 percent.

Then in 2008, as Massachusetts, Pennsylvania and Connecticut raised their own production credits to between 25 and 30 percent, New York City saw its film and TV production spending plummet.

New York State raised its incentives to 30 percent in 2009, and while the city’s incentive program expired, additional state funding lured some of those companies back to the city and set off another boom, the report concluded.

“Our interviews with industry leaders consistently cited the strong support of the city and the state of New York as an important driver of growth, including the New York State tax incentive, improved permitting, and access to premier locations, to name just a few,” said Kate Sayre, the study’s author.

Asked about the competition among states, which have competed to attract film and TV shows over the years, Bloomberg said it’s a better strategy to invest in schools and to fight crime to attract qualified workers to the city instead of subsidizing certain industries, which can “just get into an arms race and it’s a race to the bottom.”

“Having said all that, the city did for a while have a subsidy, and the state still does,” he continued. “I think it’s fair to say from the state’s point of view, they want to encourage not just filming in New York City, but filming in other parts of the state. I’m just glad they’re doing it, because it makes our job a little bit easier.”

Of the 683 productions that applied to be in the incentive program since 2004, 435 have been completed, and the value of those incentives so far is $938 million. To put that in perspective, the state expects $10.4 billion in spending from all of the productions that receive incentives.

“The billions of dollars in economic activity and thousands of jobs created are a clear demonstration of the overwhelming success of the state’s program,” said Jason Conwall, a spokesman for the state’s Empire State Development Corporation.

Kathy Wylde, president of the Partnership for New York City, which has launched a loan program to encourage more post-production film work here, said she’s not concerned about an arms race, since other states like Iowa and Michigan are dropping or scaling back their programs.

“These states that tried to use subsidies to create an industry failed,” she said. “You have to have the basic talent and infrastructure for the industry. We were basically competing against California and Canada, and the other ones were kind of also-rans. But the bottom line is the economic impact of the tax credit is that New York gains net tax revenues.”

Tannenwald agreed that it makes more sense to have incentives in New York, which already has an established film industry, but he said that the question that has not been answered is where employment and income levels would have been in New York without the tax incentives.

“It doesn’t matter how much nationwide the media sector has lost, and how New York has gained over the last decade,” he said. “It’s an enormous subsidy. It’s enormously generous. I wonder if the money could have been spent in other ways for New Yorkers as a whole.”