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Location, Location, Location

Alabama’s incentives for moviemakers have been so successful the $15 million cap on them will probably be reached in the first quarter, gobbled up by two big productions.

Actor Nicolas Cage (center) on the streets of Mobile during filming of “Tokarev” in 2013.

Actor Nicolas Cage (center) on the streets of Mobile during filming of “Tokarev” in 2013.

Photo by Dan Anderson

Of all of Alabama’s business-luring incentive programs, one of its newest, the film incentive, is perhaps the most successful in terms of providing an economic bang for the buck.

The state Film Office estimates the incentives brought in $33 million in new business in 2012 and provided 3,000 jobs. While the figures for 2013 haven’t been reported yet, the budgets for productions based out of Mobile alone totaled more than $30 million for the year, according to Eva Golson, with the Mobile Film Office. Productions shot in Mobile since 2010 had a combined budget of $72 million, most of which funneled into the state’s economy.

Golson lobbied state legislators to enact an incentive program to help Alabama compete with other states trying to attract Hollywood money. Golson saw what a production could do for a local economy as early as the 1970s, when Steven Spielberg shot much of the sci-fi classic “Close Encounters of the Third Kind” in the city.

But for more than 20 years, her pleas fell on deaf ears.

“Every state around us had their incentive legislation passed by 2001 and we didn’t have it. So we didn’t have a lot of production. I would try to attract productions and while they loved the locations we had to offer, they’d say, ‘Don’t call us until you have incentives,’” Golson says.

“We didn’t get ours passed until 2009 and I tell everyone the reason they finally passed it was they wanted to shut that old woman in Mobile up. I just kept saying to them, ‘What is it you don’t understand?’ You don’t give them the incentive money until after they’ve spent their money here, then you give them a percentage of it back. We can’t lose.”

The Alabama film incentive, passed by the state Legislature in 2009, provides tax credits and other rebates of up to $15 million a year to qualifying productions. The credit is available to any production with a budget in excess of $500,000, including television series, music videos, documentaries and major Hollywood movies. In addition to exemptions for various sales, use and lodging taxes, productions also are entitled to a rebate on 25 percent of production costs, plus 35 percent of payroll paid to Alabama residents.

The incentives are credited with attracting the blockbuster Jackie Robinson biopic “42” to Birmingham in 2012. In 2013, Mobile hosted productions for the Bruce Willis vehicle “The Prince,” Kate Bosworth horror flick “Somnia,” the Nicolas Cage movie “Tokarev” and a thriller called “Convergence.” In addition, the incentives attracted the “Sweet Home Alabama” reality show crew back to the Eastern Shore of Mobile Bay for a fourth season.

Eva Golson, of Mobile’s Film Office, championed an incentive plan to attract film production. 

“The Sweet Home Alabama people, they spent a lot of money here. A lot,” Golson says. So did the other productions. For instance, “Tokarev” producers paid for a total of 2,335 nights in downtown Mobile hotels, according to Golson.

“They wanted everyone within walking distance of the set, so they put everyone up during shooting in our downtown hotels,” Golson says. “The other productions did that as well.” 

Other local businesses felt an economic bump, as well. For instance, Pete Blohme, owner of Panini Pete’s in Fairhope and downtown Mobile, catered some movie functions and fed a lot of celebrities and crew during their off time, which amounted to invaluable advertising.

“The indirect benefit of having some of the celebrities in town tweeting about us was just great. We got some great tweeting from Kate Bosworth. John Cusack was tweeting about Moe’s Barbeque. You know, that puts butts in the seats big time. And any of the days they were filming nearby, that would draw a big crowd to the area, and we’d have a full restaurant,” Blohme says. “More than that, I saw a lot of my former employees getting jobs on the sets, doing something they loved. They’d tell the crew, ‘Oh you’ve got to go to Panini Pete’s’ or wherever, and that indirect impact for the whole community is just fantastic.”

But that kind of boost may be a little more rare this year. While the incentive cap was increased from $10 million to $15 million annually in 2013, the industry has grown so quickly in the state that officials predict the entire 2014 incentive package will be used up in the first three months of the year. What’s more, officials say, the whole $15 million may go to just two productions set to film in the early part of the year.

“We’re just insanely busy now. What’s happened, they’ve fallen in love with Mobile,” says Kathy Faulk, head of the Alabama Film Office. “‘Tokarev’ had two executive producers, and now both of them want to bring projects. The same thing has happened with the producers of the ‘Prince.’ They love our process, our locations, our people. Some crew members are actually relocating to Mobile because there is so much work there. That’s what happened in Louisiana, in New Orleans. They see Mobile as a little New Orleans.”

The state’s incentive package will grow to $20 million annually under the amendment passed by the Legislature in 2011. But for 2014, Faulk says, it looks like the state will be unable to accommodate all of the productions that want to shoot here.

“They’ve discovered us now, and they love shooting in Alabama,” Golson says. “It’s friendly, the weather is great. They’re competing to work here, so much that we’re going to run out of incentives.”

Golson says a lot of states have been forced to abandon their incentive programs because they didn’t ensure they had enough funds to pay promised rebates.

“You must have a pool of money for payback. A lot of states didn’t think about that ahead of time, and they’ve had to close up. That’s good for us, as we have a pool,” Golson says. “However, with the cap on it, I’m afraid the money for the whole state will be completely gone in the first three months of the year. We’re talking to three big productions, and I think two of them are going to take the whole incentive cap.”

The 35 percent rebate for using Alabama residents in the cast and crew has resulted in thousands of high-paying jobs, with locals handling everything from special effects to location scouting and even speaking roles.

“What I do, a production contacts me, I take them to locations where they might like to film,” says Andi Sowers, a longtime Mobilian and location manager for “The Prince” and “Tokarev.” “If its film-friendly, then we make a deal with the owners, set up time and location and get it ready.”

Getting a location ready involves set decoration, art direction, electrical work, coordinating with city officials and police, handling traffic and parking and a host of other challenges. And almost all of the work ends up being done by area residents, not to mention fees paid to the location owners.

“Pretty much everyone I know in the industry in the Mobile area, they were all working on these productions this year,” Sowers says. “They bring a few people in from other states, but they are trying to hire everyone else locally, which is nice because it trains us up to work on these bigger productions that are coming. We’re building a strong local crew.”

Sowers says the incentives play a crucial role in helping keep the production jobs in Alabama, because local crew members cost the production 35 percent less than out-of-state crew thanks to rebates. And, she says, the producers and production managers just seem to love working in Alabama. 

“I’ve heard nothing but 100 percent positive from everyone I’ve talked to,” Sowers says. “My personal experience watching crews come in, they always want the local restaurants to feed everyone. They always spend the money where they are. They stay in the local hotels, eat at the restaurants, hire the local security companies, the trash companies, they use the local vendors for everything. It really shows up. I can see that money getting recycled around into our community.”

Faulk echoes that sentiment and says her agency plans an economic impact study.

“Several hundred people converge on a community. They are renting things, they are going out to eat, they go buy clothes, they go to the drugstores. They spend a lot of money when they are in town, and Mobile has definitely felt that,” says Faulk. “We just don’t have any numbers yet.”

Ben Raines is a freelance writer for Business Alabama. He lives in Fairhope.

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Feb 14, 2014 04:23 pm
 Posted by  adrian

Is this supposed to be actual reporting or free publicity for the film office? In case facts and substantive reporting (and balanced) matters to anyone, there are a few things that should be mentioned:

1. Consider Golson's (naturally unbiased) quote:

"I just kept saying to them, ‘What is it you don’t understand?’ You don’t give them the incentive money until after they’ve spent their money here, then you give them a percentage of it back. We can’t lose.”

Yes, you can--and do--lose. Alabama has been facing ongoing budget shortfalls over $270 million annually. Should anyone or state with that kind of cash flow problem really be spending money to subsidize 25% or more of every Hollywood movie or show that rolls into town?? Rather than cut such extravagance in a time of massive debt, the state decided to increase spending by 25%, so $20 million could finance the very rich studios in California.

Worse yet, Alabama shoots itself in the foot by waiving all sales, use and lodging taxes for Hollywood, so the state is effectively unable to offset the cost of the subsidy with some needed tax revenue. Insanity.

2. If so many locals are getting all the jobs and only a few out of state crew members are needed, then why are thousands of hotel room nights being booked by every major production? Those hotel rooms are not for locals.

3. Alabama residents are not 35% cheaper. True, their wages are subsidized by the state taxpayers to the tune of 35%. But out of state workers wages are also subsidized at 25%. The money to fly in and house these non-residents is also subsidized by 25%.

4. Any money paid to a star like Kate Bosworth is also subsidized by 25%. If the producer pays her $4 million in Alabama, the taxpayers cover $1 million of her high pay, which she takes home to California and spends it.

5. Alabama is making cash handouts to out-of-state filmmakers that cover 25% more of their budget spent in the state.

Feb 15, 2014 05:22 pm
 Posted by  Filmguy

Adrian-
If indeed Alabama is short $270million/year; why would you not want to bring in a source of revenue into the state? Yes, you will need to return .25 on each dollar; but you/Alabama is gaining .75 per dollar spent. You are also putting people in seats of restaurants and beds in hotels. Plus, you are putting locals to work too. So, you are gaining additional revenue by bringing these "Rich Hollywood Studios" to Alabama to spend their money.
If you think your math is so correct; go look at Louisiana. Just as poor as Alabama; if not more; but gaining so much in "Hollywood" revenue, they are looking at for every $1dollar spent; $6 dollars added to the local economy.
Check it out. Call Chris Stelly in Baton Rouge and he can explain it in simple economic impact dialogue for you.
One of those "Rich Hollywood Types" spending money in the South.

Feb 15, 2014 05:41 pm
 Posted by  Filmguy

Florida Gets 5-to-1 Return on TV, Film Incentive Program Dollars, Study FindsMovies | By Todd Cunningham on February 10, 2014 @ 2:39 pm Follow @toddcnnnghm 959 122 7
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Film, TV Shoots Surge in 2013, but Hollywood Production is HemorrhagingThe numbers provide fuel for California’s production community, which is hoping to bolster the state’s tax credits plan

Monday’s news out of Florida – that the state saw a five-to-one return on its film and TV incentives spending – can be seen as good and bad news for California’s struggling production community.

The bad news is that much of the business that produced those returns – charted in a study commissioned by the Motion Picture Assn. of America – very well might have come from Hollywood.

The good news is that the positive results provide more firepower for the coalition of studios, guilds, vendors and local politicians that are pressing California legislators to help stop the ongoing exodus of movie and TV production. Pointing to this kind of return can only help this spring, when California lawmakers will decide whether to extend and expand the state’s tax incentive program, currently capped at $100 million.

It’s also a critical time for the industry in Florida, where the $296 million pot of production incentives is essentially out of money. Launched in 2010, the program reimburses productions up to 30 percent of their in-state expenditures. Florida’s film industry is lobbying for a new $1 billion subsidy fund that would expire in 2020.

Also read: Film, TV Shoots Surge in 2013, but Hollywood Production is Hemorrhaging
The Florida study found that the state’s Film and Entertainment Industry Financial Incentive Program supported 87,870 jobs, $2.3 billion in labor income, and $7.2 billion in economic spending across the state, both through production spending and induced tourism.

The study was independently prepared by accounting firm MNP for the Florida Departm

Feb 15, 2014 05:44 pm
 Posted by  Filmguy

Adrian-
As a simple exercise, read the above post...Florida is only next door and look why they allow "Rich Hollywood Types" into their State too.
I'm sure you will dispute their math; but show Alabama Citizens your new math and why you feel it doesn't compute. Would love to see your version.

Feb 21, 2014 05:21 pm
 Posted by  adrian

Filmguy,

That .75 cents of "revenue" you mention is not tax revenue for the Alabama taxpayers. It's .75 cents spent in the private economy. Unless the sales or income tax is 25% in Alabama, then the cash-strapped taxpayers won't even come remotely close to just breaking even. I don't "think" my math is correct. Empirically, I already KNOW it is. You can sell the program however you want, but a revenue generator for the strapped state coffers it is not. Jobs yes. Spending at hotels and such, yes. Making more than it costs for the coffers? No.

I know Stelly and the folks at DED in Louisiana, who are always helpful with providing me with industry data. I love them because they tell the truth. Stelly and many DED officials have been on the record multiple times and, with candor, freely admit the program does not generate more in new tax revenue than the incentive costs the state. DED's own reports have consistently shown Louisiana recoups only around 15-cents for each $1 spent. I love Stelly and his team because they don't lie about the program making money for the coffers.

Feb 21, 2014 05:50 pm
 Posted by  adrian

As for the Florida report? Yeah, I read that one too. The MNP reports are always fantastic...the MPAA has paid them for several. They paid for this one as well. How you can claim it was "independently prepared" is beyond me. Were you laughing when you typed that? Was it opposite day? I digress. So, the "study"...I can't tell you how entertaining it was for me. I loved it. More on that in a moment.

Because I also read the annual report for the actual Florida Film Office. Granted, they might have a slight bias to report favorable numbers, but probably not as biased as the MPAA. According to the objective study prepared by the state and funded by the taxpayers, for every $5 Florida spends on the incentive, the coffers only get $2 back. The film office folks in Florida, like Louisiana, don't lie either. Maybe you should follow their lead. And since they actually administer the program and have the audits, I'd say their study is more likely to be accurate than any other.

Which brings us back to that knee slapper paid for by the MPAA. Having read the actual study (instead a trade article about it), the ridiculous claims about revenue and jobs is based on the results of an online poll and the whopping 61 people who said a film or show was either important or extremely important in influencing their visit. And those 61 people were in the minority, representing just 23% of total respondents. Who in their right mind would say with a straight face that Florida gets $20 in tax revenue for every $1 paid out in film incentives based on 61 people replying to an online poll???? It's a work of fiction, and should not be referred to as a "study".

That's my "version". It comes from the actual reports and relies on things like "facts". My "version" is better known as the truth.

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