Is Hollywood exploiting New York?

A film crew in Manhattan's Chelsea neighborhood.
A film crew in Manhattan's Chelsea neighborhood.
rblfmr/Shutterstock
A film crew in Manhattan's Chelsea neighborhood.

Is Hollywood exploiting New York?

The Empire State is giving big incentives to producers to choose it over Toronto.
October 6, 2019

Fifteen years ago, before New Yorkers learned to “grumblebrag” about film shoots taking up sidewalks and parking spaces, and before the musical version of “The Producers” moved from a Broadway theater to a Brooklyn soundstage, New York state decided to try out a new tax credit to lure film and television shoots. Prior to 2004, some filmmakers and TV producers filmed in New York City for its iconic location and local talent, some even inextricably linking their work to the city – think Nora Ephron, Woody Allen and “Sesame Street.” At the time, film was a $5 billion industry that employed more than 100,000 people in New York City, according to then-Mayor Michael Bloomberg. But as many states began offering subsidies for filming – not to mention the generous Canadian incentive programs that made Vancouver and Toronto film hubs – studio executives said New York had to get into the arms race.

“The production heads that I grew up in the business with would tell me that they had stopped budgeting New York,” said Hal Rosenbluth, president and CEO at Kaufman Astoria Studios, a production facility in Queens that has been around since 1920. “We started to see a decline in the business.”

Then came a helping hand from Albany. In 2004, then-Gov. George Pataki and the state Legislature created a 10% tax credit for film and television productions in the state on “below-the-line” costs – essentially all costs other than salaries for actors, directors and writers. The credit was capped at $25 million annually, with New York City kicking in an additional 5% refundable tax credit capped at $12.5 million per year for productions in the city. It was a bipartisan initiative with widespread support among outer-borough state legislators. At the time, Republican state Sen. Martin Golden and Democratic Assemblymen Joseph Lentol and Michael Gianaris were among those championing the legislation.

The real push for the credit came, unsurprisingly, from the film industry – in particular, from real estate mogul Doug Steiner, who founded Brooklyn’s Steiner Studios. On an extensive tour of his sprawling 50-acre, 30-soundstage lot in the Brooklyn Navy Yard, Steiner said that without a tax credit, Steiner Studios could not have become a thriving business. “About six months before we opened, I went into a total panic, realizing we needed a tax credit in New York or it would be the most public colossal blunder of my career and sink me,” Steiner said. That New York got its film tax credit and Steiner Studios in the same year was no coincidence. “We opened in November in 2004, it was signed into law at our grand opening (with) Mel Brooks, Gov. Pataki and Bloomberg.” Brooks’ “The Producers” would be Steiner Studios’ first film in 2005.

In the past 15 years, the $25 million state credit has grown into a behemoth nominally capped at $420 million per year, bringing the state’s total spending on subsidizing the industry to about $6.5 billion. Feature films, TV films and TV series and pilots in New York City can receive a 30% credit on qualifying below-the-line costs, while upstate productions are eligible for an extra 10% credit on qualifying labor costs. If a New York City production has $10 million in below-the-line costs, they will receive a $3 million reimbursement after production ends. Productions apply for the credit through Empire State Development, the state’s economic development arm, and provide information about the number of people hired, shooting locations and ledgers. There is no minimum spending requirement, but some categories – including documentary films and instructional videos – don’t qualify. A portion of the funding is allocated to the state’s post-production tax credit, which offers a 30% reimbursement on post-production costs incurred in New York City, and 35% upstate.

While $420 million may seem like a big pot to draw from, the number of productions applying for the credit has shot up since 2004. To pay every qualifying production, the state has pulled funds allotted to future years. “Let’s say (the state has) run out of the 2019 allotment, they start to pull down the 2020 allotment, even though the movie is being filmed in 2019, and the costs are in 2019,” said David Friedfel, director of state studies at Citizens Budget Commission, a fiscal watchdog.

Wildly popular with the film industry and unions like the Theatrical Teamsters Local 817 or the International Alliance of Theatrical Stage Employees Local 52, whose members make up film and TV crews, the film tax credit program is also a hit with some lawmakers – including Gov. Andrew Cuomo and state Senate Deputy Majority Leader Michael Gianaris. Two of the city’s four major production facilities – Silvercup Studios and Kaufman Astoria Studios – are in Gianaris’ Queens district.

But tax policy experts and some upstate lawmakers call the credit a waste. “It’s definitely bad tax policy,” Friedfel said. “Economic development, particularly economic development that is targeted to a specific industry, should be done to help that industry get established in New York. Once it’s established, it should become self-sufficient.”

film-crew-nyc-Leonard-Zhukovsky-shutterstock.jpg

A film crew on location in New York City's Greenwich Village.
Alt Text: 
A film crew on location in New York City's Greenwich Village.
Title Text: 
A film crew on location in New York City's Greenwich Village.
Caption: 
A film crew on location in New York City's Greenwich Village.
Description: 
A film crew on location in New York City's Greenwich Village.
Image Credit: 
Leonard Zhukovsky/Shutterstock

Film, television and commercial production receives the largest industry-specific tax subsidy in New York. But despite New York City being a magnet for auteurs, home to a deep bench of theatrical talent and “like another character” in some of the highest-grossing and most critically acclaimed movies and TV shows of the past 20 years, there’s never been a guarantee that those productions would actually shoot in New York.

At the start of the millennium, the reasons to shoot a movie or TV show elsewhere were already piling up. New York City, with its high cost of living, high sales tax and so on, has always been an expensive place to shoot. But in the late 1990s, competing locations began offering incentives, with Canada, Louisiana and Georgia leading the way. The inherent attractions of New York may seem like enough to have continued drawing film and TV shoots, but a spate of productions demonstrated that studios were seldom willing to pay a high premium to shoot in one of the world’s great metropolises. New York had to watch as films aggressively promoting their New York setting, including 1995’s “Rumble in the Bronx,” 2003’s Rudy Giuliani biopic “Rudy” and 2004’s “New York Minute,” packed up and fled north to shoot in Vancouver, Montreal and Toronto, respectively.

But after the 2004 creation of the tax credit, the amount of film and television production in New York grew dramatically. Seventy-two TV shows applied for the credit in 2017, compared with 14 in 2010. New York City’s four major production facilities have all expanded since 2004, and new soundstages are in the works for Buffalo. The actor Robert De Niro recently announced plans to build a $400 million production facility in Queens, and Netflix will spend $100 million on soundstages in Brooklyn to meet demand for its streaming titles.

New York had to watch as films aggressively promoting their New York setting, including 1995’s “Rumble in the Bronx,” 2003’s Rudy Giuliani biopic “Rudy” and 2004’s “New York Minute,” packed up and fled north to shoot in Vancouver, Montreal and Toronto, respectively.

But just how much of the industry’s growth can be attributed to the credit is a source of disagreement among tax experts and those in the industry. The film tax credit law mandated a study of the credit’s impact on employment every two years, and the most recent report on 2017 and 2018 found that the credit directly supported more than 43,000 jobs per year, along with $7.6 billion in spending per year. Friedfel noted that the high job creation claims count roles that might only last a few weeks. “When it comes to employment numbers, they don’t look at full-time equivalent jobs,” Friedfel said. “Any job that’s created, by nature, on TV and film shoots, is temporary. So if you work for one day, that counts as a job (for that year).”

Some independent studies – like one by Michael Thom, an associate professor at the University of Southern California – have found that refundable tax credits like New York’s had no effect on employment. The study looked at employment changes in the industry, factoring in other reasons for those changes, including economic growth and general job growth. “I found no evidence that refundable tax credits increase employment,” Thom wrote in an email. “At best, a refundable tax credit might increase wages, but only a small amount, and only temporarily.”

There is, after all, a lot more TV being made these days. A record 495 original scripted streaming, cable and broadcast series were released in 2018, thanks in part to the rise of streaming platforms like Netflix, which in 2018 put out more than 1,500 hours of original programming. The number of productions in New York has continued to increase in the past few years, even as the size of the tax credit has plateaued.

The industry has also seen a stylistic shift since the groundbreaking HBO show “The Sopranos” – which aired from 1999 to 2007, and which critics said kicked off the “golden age” of television – was shot in New Jersey and New York City. Other scripted series have continued the realism trend, including HBO’s “Girls” and Netflix’s “Master of None,” as well as TV shows that started out as locally shot web series like Comedy Central’s “Broad City” and HBO’s “High Maintenance.” Today, the best-reviewed TV shows feature production values and visual aesthetics that were once found only in Oscar contenders, which are aided by the authenticity of shooting New York City scenes on New York City streets.

The tax credit’s few detractors in the state Legislature – mostly upstate Republicans – call it a corporate giveaway, adding that the benefits largely accrue downstate. Others have argued that the credit’s supporters are in the industry’s pocket. Previous reporting found that industry stakeholders have donated generously to Cuomo as well as to Gianaris and the state Democratic Senate Campaign Committee, which Gianaris controls. Since 2001, studios and production companies have donated a total of nearly $200,000 to Gianaris and the DSCC. Jason Conwall, a spokesman for the governor, denied that campaign contributions had any influence over Cuomo. “We’ve made clear from the beginning, anyone who can be influenced by a single dollar has no place in this business – period. Under this administration, the program has been extended – with broad legislative support – without adding a single penny to the overall funding level that was established in 2010,” Conwall wrote in an email. Gianaris declined to comment for this article.

As the state continues to dole out money to an industry that has spent $2 billion in the state so far this year, critics are asking whether we need to keep subsidizing the cost of filming in New York. The question came up most recently after progressive New York City politicians killed the deal to bring a new Amazon headquarters to Queens – partially because of the more than $3 billion in city and state tax incentives offered to the behemoth company. That those same politicians – including most prominently, Gianaris – haven’t called out the film tax credit for subsidizing one industry over others appears hypocritical to some, such as conservative commentator Seth Barron.

Gianaris has said that the two subsidies were not comparable because one was targeted at a specific company that didn’t support labor organizing, and the other is targeted at a whole industry that largely employs union members. “Incentives are smart and useful when created with appropriate oversight and targeted to industries that need them to succeed in New York, as the film industry did when the credit was established,” Gianaris wrote to Crain’s New York Business in April. “It’s also important that these incentives specifically target the creation of blue-collar union jobs.”

That defense – focusing on the benefits to local middle-class workers, rather than to Hollywood producers – is one repeated by the state government. “The New York State Film Tax Credit Program generates a positive return on investment for the state, attracting billions of dollars in spending and creating tens of thousands of hires every year in our communities,” Adam Kilduff, a spokesman for Empire State Development, wrote in an email. “This activity boosts small businesses and strengthens local economies throughout New York, while providing livelihoods for production workers, caterers, hospitality workers and many others.”

Some critics are less rankled by the existence of the credit than by its magnitude. Topping out at 40% puts New York’s credit on the more generous end of what states offer, but it isn’t unique: Louisiana offers credits up to 40% as well. Georgia, which has become a major hub for film and TV production, offers an extra 10% credit, on top of its 20% base credit, for productions that slap a “Filmed in Georgia” logo on the screen. And in Savannah specifically, crew members can get $2,000 in moving expenses for relocating to the city. “The film industry in New York is obviously very large and it’s an important employer, but this benefit is just overly generous,” Friedfel said.

Skeptics ask how a New York institution like “SNL” could open the show every week with Kenan Thompson or Kate McKinnon yelling into the camera lens, “Live from Toronto, it’s Saturday night!”

In 2017, the state extended the tax credit through 2022, and this spring, New York extended the credit for another two years as part of the state budget, and it is now funded through 2024. Still, the Amazon fallout has prompted renewed scrutiny of targeted tax breaks and subsidies – scrutiny that could continue to place the film credit in the spotlight.

This spring, state Sen. Liz Krueger said that she was convinced of the film tax credit’s effectiveness, saying that it has shown a documented value year after year. But Krueger recently told City & State that she has since dug into it more deeply and concluded that the state needs to evaluate all of its tax credits in order to determine if taxpayers are getting bang for their buck. “It’s in the win column,” Krueger said of the film tax credit. “What I’m saying is, is it worth it?”

Skeptics point to certain beneficiaries of the credit, like the long-running show “Saturday Night Live,” and ask how a New York institution like “SNL” could open the show every week with Kenan Thompson or Kate McKinnon yelling into the camera lens, “Live from Toronto, it’s Saturday night!”

"If your buddy is down in Atlanta, getting the same quality production with the same kind of star, and he or she is spending 30% or 40% less, don't you look stupid?”

“New York is an international location, and by that I mean, if you want to film a shot in a city that is recognizable all around the world, you would come to New York probably before you come anywhere, including Los Angeles,” said Ezra Sacks, chair of the undergraduate film and television program at New York University’s Tisch School of the Arts. “A lot of scripts are simply written with New York as a location. And the writer and director see that location as significant to the story they want to tell.”

Even so, film industry insiders say movies or TV shows set in New York City would be filmed elsewhere – whether that’s a backlot in Los Angeles or downtown Toronto – if the subsidy went away. For exteriors, they could bring production to New York for a week or two and film the rest somewhere else, or just use increasingly advanced computer-generated imagery. “If you take away the tax credit, you will lose the majority of your business,” Rosenbluth said. “You better have a really, really good reason to be in New York to spend that premium. And if your buddy is down in Atlanta, getting the same quality production with the same kind of star, and he or she is spending 30% or 40% less, don’t you look stupid?”

There may be some middle ground between a $420 million credit and no credit. Some lawmakers who criticize the program have suggested that as an alternative to scrapping it altogether, the credit could be gradually scaled back or focused on upstate, where production isn’t already strong. “The goal of the state should be to have the least possible subsidy, and not the biggest politically achievable subsidy, which is where we are now,” said John Kaehny, executive director of the good-government group Reinvent Albany. “The size of the subsidy right now is dictated completely by politics. It’s how big of a subsidy the Legislature and the public will accept before they start howling.”

broad-city-credit-Sarah-Shatz.jpg

A still from the series "Broad City," which was filmed in New York.
Alt Text: 
A still from the series "Broad City," which was filmed in New York.
Title Text: 
A still from the series "Broad City," which was filmed in New York.
Caption: 
A still from the series "Broad City," which was filmed in New York.
Description: 
A still from the series "Broad City," which was filmed in New York.
Image Credit: 
Sarah Shatz

The real howling will come from New York’s studio executives and unions if the state gets rid of, or even scales back, the credit. “This tax credit ended up really saving an existing industry, and then allowing it to grow,” Rosenbluth said. “The growth created many more jobs, putting the union jobs like Local 52 (Motion Picture Studio Mechanics) and the Teamsters at 100% – and more because they’re bringing people from the outside. And what it encouraged was for Kaufman and Silvercup and Steiner and Broadway Stages to spend private capital, private money, to grow the infrastructure in order to support the demands of the industry.”

Thomas O’Donnell, president of the Theatrical Teamsters Local 817, said that the group had between 300 and 400 members prior to the tax credit and now has over 2,000. And though many union jobs on sets – like grips, prop designers and gaffers – are temporary jobs, the nature of the industry is such that when one project wraps up, another comes along. “These guys are able to know that they’re working most of the year – very different than a typical freelance job,” Rosenbluth said.

Tim Clark, film commissioner at the Buffalo Niagara Film Office, said the extra 10% credit is not only boosting production in Buffalo, but bringing higher-profile films to the area. A sequel to 2018’s popular horror movie “A Quiet Place” recently wrapped filming in Buffalo. “Once you have that crew base here and you have a nice little bump to come upstate, you start to see the movie studios and bigger movies,” Clark said. “We’ve got some new soundstages that are being built, and we hope to attract some episodic television shows here.”

The film credit has even garnered the rare support of an upstate Republican, state Sen. Patrick Gallivan, whose district includes parts of Erie, Wyoming, Livingston and Monroe counties. Gallivan admitted that while his preference would be to make New York more attractive to production companies by reforming the state’s tax code overall, this tax credit is an appropriate way to attract those companies in the meantime. “(If we did) something about taxes and regulations, we would not need economic development incentives. So while you can try to work on that, on a parallel track, we still have to compete for business,” he said. “And because we have to compete for business, I’m supportive of this credit, because it’s one of the few credits or one of the few economic development programs that has proven to be successful.”

State Sen. Robert Ortt, a Republican from Niagara County who, this year and in the past, has called for an end to the tax credit, is open to just scaling back the program. “I’ve called for it to be scrapped, but if it was reduced, if it was focused on upstate New York, or places where the film industry is not as robust – that would be something that I could certainly look at, and maybe have a better appreciation for that kind of a program,” Ortt said.

Not every attempt to build a film industry in New York has worked out, though. The Central New York Film Hub was built in 2015 with $15 million from SUNY Polytechnic Institute – which managed the facility – but the project’s builder was caught up in lawsuits and a bid-rigging scandal, and the hub failed to attract productions.

Still, despite the moaning of city dwellers slowed down on their commutes by streets congested with trailers, cranes and bossy production assistants, increased film and TV production may bring with it fringe benefits – particularly as a source of cachet and tourism revenue. It’s not just the “Sex and the City” bus tour that tourists are showing up for these days. Locations used in “Broad City,” and “Gossip Girl” are tourist destinations. “If you’re turning on your TV, and the stories are taking place in New York City, and you go wow, ‘I really like that show, I really liked the scenes, God, I would really like to visit New York City’ – that’s got to be good for tourists,” Krueger said. “Maybe we should be factoring in the cross-fertilization of economic generation of tourists dollars … (and) the next generation of talented future artists and performers, saying, ‘I’ll kill myself if I can’t come to New York and try to make it,’” Krueger said.

Even if an unbiased evaluation found the credit to be excessive, the industry’s deep pockets and the political power of unions would make reducing it a tough fight. In 2017, when New York’s film tax credit needed to be renewed, Theatrical Teamsters Local 817 and the Motion Picture Association of America successfully lobbied Cuomo to extend the program through 2022, winning the governor praise from the MPAA, Directors Guild of America, SAG-AFTRA New York and local studio heads like Rosenbluth. In 2018, Cuomo received $150,000 in donations from the industry, and in the past he has been successful in collecting contributions from fundraising trips to Hollywood. “This is one of the sacred cows of Albany, the film and TV tax credit,” Kaehny said.

What would have to happen to change the credit, Kaehny said, is an alignment of other politically powerful groups, such as public sector unions and the progressive left – which might argue that tax dollars are better spent on their priorities like education.

Despite the fact that the credit was just renewed for another two years, Steiner said it’s something he continues to lose sleep over. “I ultimately hope it becomes permanent, uncapped, it doesn’t come up for votes or anything like that,” he said, driving around his massive facility in a golf cart a few days before the 2019 Emmy Awards, where shows like FX’s “Pose” and Amazon’s “The Marvelous Mrs. Maisel” – both of which have shot at Steiner – took home a few golden statues. “The faster it burns off, the more stressed out I become, and the harder it is to get through, because of the vagaries of politics. The more often we have to go, the more difficult it becomes, and the more it becomes a chip in a bigger game.”

Most policies are treated as chips in a larger political poker game, but it may be time for state lawmakers to decide whether or not the industry is bluffing when they say incentives are what’s keeping them in New York.

 

Correction: An earlier version of the story incorrectly described the extra 10% tax credit for upstate productions.

Annie McDonough
Annie McDonough
is a tech and policy reporter at City & State.
20191209