NC lawmakers spotlight films for better tax break

BY EMERY P. DALESIO , 06.18.09, 08:15 AM EDT

RALEIGH, N.C. –

Hollywood is now on stage in the Legislature’s regular debates about whether targeted tax breaks pay off with more and better jobs. Lights. Make-up. Incentives?

Legislators stung by the last-minute loss of a Miley Cyrus movie in April took the first step on Wednesday toward raising the state income tax break for production companies from 15 percent of qualified spending on a project to 25 percent. The Senate’s Finance Committee signed off on the measure, setting up a scheduled vote by the full Senate on Thursday.

The vote comes as lawmakers are in late-stage talks on cutting spending and raising taxes to produce a balanced budget for the year beginning in July.

Just as the state’s budget is the toughest in a generation, unemployment has been the highest in more than 30 years at 10.8 percent.

Advocates say tempting production companies back to North Carolina would attract productions and create jobs.

“This is just what we need to do to get this industry to flourish in North Carolina,” said Sen. Joe Sam Queen, D-Haywood.

The North Carolina Film Office said industry spending in the state reached $228 million in 2007 but is expected to dip below $90 million this year as 28 states offer sweeter incentives. Georgia and South Carolina offer incentives of up to 30 percent. Michigan has perhaps the most generous tax credits in the nation at 42 percent of production costs.

Most galling was the Walt Disney Co.’s decision in April to move a movie project starring 16-year-old “Hannah Montana” star Miley Cyrus to Georgia after Gov. Beverly Perdue scheduled a news conference to announce the movie would be filmed in Wilmington. The news conference ended up being canceled.

New Bern-based novelist Nicholas Sparks, who wrote the movie’s script, rewrote the story’s location from Wrightsville Beach and Wilmington to Tybee Island, Ga., and neighboring Savannah.

The project’s estimated $17 million budget included $11 million in wages for electricians, carpenters, caterers and others, Wilmington Mayor Bill Saffo told the committee. Wilmington has been home for 25 years to the studio now known as EUE Screen Gems, where the CW TV series “One Tree Hill” is made. Each of the show’s 23 episodes a year means about $1 million in local spending, Saffo said. That will amount to $160 million in spending after the seventh season, which resumed shooting this week, completes its seventh season, said state film office director Aaron Syrett.

But spending on movie and television isn’t confined to Wilmington, Syrett said. The Will Ferrell NASCAR comedy “Talladega Nights” spent $25 million in North Carolina while it was shot in six counties around Charlotte, he said. The George Clooney football comedy “Leatherheads” spent $11.2 million in the same region, $6.3 million of that in wages for local workers, he said.

But opponents said the expansion of tax breaks for Hollywood can’t be justified at a time public school teachers may be laid off and sales taxes may be raised.

“I just can’t hardly justify to people back home why I would give one little segment a tax break and raise taxes on everyone else,” said Sen. Don East, R-Surry.

The film tax credit North Carolina adopted in 2006 has been a moneymaker, returning $1.30 in additional tax revenue to state and local governments for every $1 credit, according to a new study by Ernst & Young commissioned by the state film office and film-related companies, unions and commissions. But raising the tax credit to 25 percent of spending, up to a maximum of $7.5 million, would return 92 cents for each $1 invested, the report said.

Syrett and Saffo contend failing to expand the incentives will see jobs dry up and the industry wither as producers get better deals elsewhere.

But Sen. Eddie Goodall said compete with other states by raising the film tax credit is a bad deal.

“I think this is a bad policy for the state. It’s a losing battle. We’ll never win this,” said Goodall, R-Union.

The CW is a joint venture between Time Warner Inc.’s Warner Bros. unit and CBS Corp.