State officials worried about proposed film rebate cuts

By Brice Wallace 

Utah’s film industry could be hampered in the future if the state Legislature makes significant changes to the state incentive program designed to boost the number of productions in the state and the money they spend in Utah.

Currently, film and TV productions can get either a tax credit or cash rebate on money they spend in the state. The tax credit program has a $6.79 million annual allocation and the cash rebate program — generally for smaller-budget films — has $1.5 million.{mprestriction ids="1,3"}

But a proposal in the Legislature would cut the rebate program to $700,000 annually. And that has officials at the Governor’s Office of Economic Development (GOED), which administers the program through the Utah Film Commission, worried. They also are concerned about lawmakers’ misunderstanding of the value of the film incentives overall.

Virginia Pearce, director of the film commission, told the GOED board at its February meeting that while the tax credit incentives generally help big-budget productions, the rebate program helps those that spend anywhere from $20,000 to $500,000 in Utah.

“But there’s still a need to support those projects because of the way it encourages the pipeline, the workforce, and for all the same reasons we want to support ‘local’ across the board,” she said, adding that she would like for GOED to have the flexibility to award the cash rebate incentive for productions spending more than $500,000 in the state.

SB81, sponsored by Sen. Daniel Thatcher, R-West Valley City, would do just that. As of last week, it had just started its path through the legislative process.

Utah’s film incentive program is relatively small when compared to its closest competitors for film and TV productions: New Mexico, which has a $100 million annual film incentive program, and Vancouver, British Columbia, which can offer $400 million in tax credits, she said.

“We are able to compete with (them) because we have locations, we have a studio, we have really fantastic crew that know what they’re doing [and] been in the industry a long time,” she said. “But it does come a point where, as we are right now, where demand exceeds supply. So, we’re in a lull right now because we don’t have the funds to support [them]. We’re turning away business more than we’d like right now.”

Pearce pointed to updated figures from a Kem C. Gardner Policy Institute study demonstrating the success of the film incentives. In fiscal year 2015, a total of $4.15 million in incentives were awarded, leading to those productions spending $19.4 million in Utah. In fiscal 2018, $14.16 million in incentives led to in-state spending of $78.4 million. The number of jobs tied to incentivized productions grew from 448 to 2,554 during that time. New state GDP rose from $29.8 million to $201 million.

Complicating matters is the gauge used to measure the effectiveness of the film incentive program. Most other GOED incentives are tied to a return on investment, in the form of new state tax revenue that an incentivized project generates. By statute, that’s not the case with film incentives, which instead use the amount of money that productions spend in Utah as its measurement.

“The program is not set up to make money for the state” in taxes, she said. “The program is set up to allow us to compete in the film production industry.”

“The legislators I’ve talked to, what’s really discouraging is that they’re basically saying that all the incentive programs, including films, should be based upon a return on investment, which means new state [tax] revenue,” said Jerry Oldroyd, GOED board chairman. “This program was never designed that way. It was never intended to generate new state revenue. It does have a significant economic impact, as the policy institute shows. But I don’t know that they ever understand that. If this is reduced to new state revenue, there will be no film incentive in Utah.”

Changes to the film incentive program could have severe and long-standing effects, GOED officials and board members said. The impacts could be acute in rural Utah, Pearce said.

“It’s hust not a program that helps the state income tax coffers. In 2018, over half of the money was spent in rural Utah,” she said. “So that money is getting out in the community, it’s paying for businesses and supporting businesses that are all over this state. Local legislators do understand that because they see the impact. When you spend a million dollars in Moab in two months, you see it. You see it automatically.”

Val Hale, GOED’s executive director, noted that a film shown at the Sundance Film Festival this year was shot in Kanosh in Millard County. “What bigger economic impact is Kanosh going to have this year than producing a big film?” Hale asked.

Oldroyd worried about potential cutbacks hurting Utah’s tourism industry. GOED officials for years have pointed out the benefits to tourism springing from films being shot in the state but also have acknowledged the difficulty in measuring those benefits.

“You look at what’s happened in Moab because of the film industry and other things. It has a dramatic impact,” Oldroyd said. “One of the best examples is East High School became a tourist attraction” after the “High School Musical” productions were shot there, he added.

Mel Lavitt, chairman of the GOED board’s incentives committee, said Utah is “at a crossroads,” with any legislative changes potentially hurting the state’s film industry and the Utah Film Studios in Park City.

“It took a long time to get where we got, with major projects here,” he said. “If we don’t get not only the money we used to get, but more, we’re out of business, and the film studio is out of business.”

Utah also could lose talent to other locations with stronger incentive programs, Oldroyd said. Utah’s film incentives have helped “to train them, help them, develop them, and keep them in work,” he said. “We’re beyond that now. But what happens to that same group of people if we don’t have the film incentive? They start going to California, New Mexico and Vancouver. That’s the problem. We lose a good portion of that industry.”{/mprestriction}