From Below The Line News by Leslie Lindeman

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The Louisiana Model

The First State to Implement Tax Incentives, Works to Perfect the System
September 21, 2011 | By Leslie Lindeman

From King Kong on the Empire State Building to Marilyn Monroe on the subway grate, New York will always attract filmmakers. From the green Pontiac Steve McQueen chased off the 19th floor of Marina Towers in The Hunter, to the baby carriage Brian DePalma pushed down the steps of Union Station in The Untouchables, filmmakers will always gravitate to Chicago.

But Louisiana?

When Louisiana became the first state to pass entertainment industry tax incentives in 2002, no one could have known that in less than a decade the state would be the third most popular film and television location in the U.S. Indeed, Louisiana has a chance to log a record 150 filming applications this year and to see local film and TV in-state spending for the first time top $1 billion.

The journey has not been without adversity. Hurricanes Katrina and Rita devastated southern portions of the state in 2005 and the Deepwater Horizon Oil Spill thoroughly disrupted the coastal economy in 2010. But Cajuns are nothing if not indomitable. “People would mention it (concerns that weather could disrupt filming),” said Chris Stelly, the interim director of the state’s Office of Entertainment Industry Development, “but time and education have soothed fears. The numbers of storms we’ve experienced and the amount of time people have to adjust when they do occur, has rendered them a non-issue,” he said.

Depending on the season, some productions choose to buy weather insurance, Stelly said, but the cost relative to the total budget and the weight of the state’s tax incentives, isn’t enough to undermine the overall cost effectiveness of shooting in Louisiana.

In contrast to the national jobs picture, Louisiana entertainment industry employment is up sharply. Hollywood generated more than 6,000 jobs in the Bayou State in 2007 (the last year for which statistics are available). IATSE membership has risen from fewer than 200 in 2002, to more than 1,000 today. The state is now 10 to 11 crews deep, Stelly said.

An oft-quoted independent analysis shows that film and TV productions spend $5.71 inside the state for every $1 in tax breaks they receive. Louisiana politicians are so confident in the incentives that they recently extended them beyond film and TV production. Stelly’s agency now governs incentive programs for three additional genres: sound recording, digital and interactive (such as computer games) and live performances. If you want to record “Big Whiskey and the Groogrux King,” in New Orleans as the Dave Matthews Band did in 2009, you get a 25 percent tax break; if you want to hire 20 software designers and set up shop creating games for smart phones as the French company Gameloft did in New Orleans last month, you get the tax credits; and if you want to stage a play, hold a concert or build a performing arts center in Shreveport, you qualify for the 25 percent break.

Film and television credits are even higher since 2009 when the legislature raised them to 30 percent. They also increased to 85 cents on the dollar the state’s commitment to buy back any tax credits that entertainment companies don’t need or can’t sell. The state also offers a 5 percent labor tax credit on payroll for Louisiana residents.

Meanwhile, since Louisiana instituted tax incentives nine years ago, 43 other states and more than a dozen foreign countries have followed suit; in many cases the packages are closely modeled on Louisiana’s original program.

But back in 2002 when Louisiana made its groundbreaking offer, the industry there had only fledgling status and no one could say for sure the plan would work. Canada had passed incentives in 1997 and lured production north, but relatively speaking, Louisiana had almost no infrastructure, crew or established locations.

The first big feature film to test the waters, Stelly said, came in 2003 courtesy of director Taylor Hackford and actor Jamie Foxx. “As the story goes, they were trying to get Ray made for maybe 15 years,” Stelly said, “and the director and producers have said since then, that our incentives were the difference. They (the tax credits) finally brought the amount needed to make that film within the limits of what they could afford – and that’s how Ray got made and Jamie Foxx got his Oscar.”

The same scenario is repeated with most of the productions that shoot in Louisiana today, Stelly says. “With the $30 to $80 million budget having disappeared from the landscape, the lower your budget, the more important the savings. An independent film will rely more on incentives because that money will go back into the product,” he said. “For those films, a 30 percent credit is often the difference between getting the project made or not. Our bread and butter has become the film in the $20 million range that comes in and spends about 80 percent of the entire budget in our state,” Stelly said.

Early on, Louisiana did not capture such large percentages of production budgets, but in the last few years the state has added significant amounts of stage space and postproduction facilities, and the efforts are paying off. The Celtic Media Centre in Baton Rouge, an hour from New Orleans, is managed by Raleigh Studios and recently expanded to 150,000 square feet of stage space and 81,000 square feet of office space. The studio owes its beginnings to a native Irishman named Brendan O’Connor who had run a transportation business in Baton Rouge for 30 years. In 2006 O’Connor began converting the shell of an abandoned recording studio into sound stages and three years later the studio hosted Sony’s Battle: Los Angeles. A year later it welcomed the two largest productions in the state’s history, NBC Universal’s Battleship, and Summit’s Twilight Saga: Breaking Dawn Parts 1 and 2.

Cineworks Louisiana, a full-service post facility with its Louisiana headquarters in New Orleans, opened a satellite location at Celtic Media last month as part of an ongoing strategy to have facilities throughout the state.

Unlike many states, Louisiana’s film business is not concentrated in one city. Productions set up in New Orleans, Baton Rouge, 100 miles to the north, and Shreveport, 340 miles north. Even Lafayette, a town of 120,000 west of Baton Rouge, is seeing action. The L.A.-based visual effects company, Pixel Magic, opened an office there in January, 2010 with a staff of 21, including 11 University of Louisiana graduates. One of the shop’s first assignments was 3-D conversion of 420 shots for, Harry Potter and the Deathly Hallows: Part 2.

“Most of the producers bringing projects to Louisiana this year have been here before,” Stelly said, “but not all of them. Producers call me all the time saying, ‘I’ve never been (to Louisiana), I don’t know if my project will work there.’

“I tell them, ‘Come here and see what we have going on. Look at the locations. Look at the facilities.’ It’s no different than someone who has never been to L.A. – you’ve heard what goes on there but until you see it, you don’t really know why it’s the motion picture capital of the world. So 99 times out of 100 they’ll call me back and say, ‘You were right. I don’t know what my concerns were, but they weren’t well founded.’

“A lot of people fall in love with this state,” Stelly said, “including a good number of people from L.A. who move in and make this their primary home.”

Meanwhile, one of the most gratifying things about the incentives program is the homegrown talent that is returning to the state. For instance, software-developer brothers Keith and Ken Hanson returned to Louisiana from the Bay Area to open Twin Engine Labs in Shreveport. Some of their work has been in conjunction with groundbreaking Louisiana author and publisher William Joyce, whose company, also in Shreveport, is called Moonbot Studios. Joyce’s first project is his digitally interactive and animated book, The Fantastic Flying Books of Morris Lessmore. The app of the same name is ranked #1 on iTunes.

Stelly and others have high hopes for the 25 percent tax incentives applied to music recording because the state has a strong historical tie to the music industry and a tradition of attracting top musicians. Grammy-winning drummer and producer Brady Blade, who has played on 50 records with Dave Matthews, Emmylou Harris, Indigo Girls, Jewel and Bob Dylan, recently opened Blade Studios in his native Shreveport. “Technology has made sound recording a lot simpler,” Stelly said. “Mixing boards that took up a room now fit in an iPad and a lot of recording can be done in home-type studios, but most musicians still like to get out.”

That’s where Louisiana’s rich musical history comes into play. For instance, in 1954 Elvis Presley got the first of what would eventually be innumerable rousing public responses when he played in Shreveport on the radio show, The Louisiana Hayride. At the time, he had not yet been received well at the Grand Ole Opry. “You hear anecdotes about Robert Plant walking around Shreveport, sort of in the shadow of Elvis, and Eric Clapton sitting on the stage,” of the municipal auditorium where Elvis played, he said. “Music means a lot in Louisiana and people like to come here to record.”

But film and TV are still posting the biggest numbers in Louisiana. As we head into the final quarter of 2011, Hollywood has spent nearly $800 million on production in the state and spending should easily surpass the record set last year of $898 million. Perhaps it will even top $1 billion.

Some final facts about Louisiana incentives:

• Fringes qualify

• Productions should allow 30-45 business days to receive initial certification.

• The minimum local budget is $300,000

• Finance fees qualify as long as the purchasers are from a Louisiana company.
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September 22, 2011