Hollywood’s Long Con on New Mexico Taxpayers

The following op-ed ran in the Las Vegas Optic on August 24.

Enjoying the new season of “Better Call Saul”? If not, you should be — you’re paying for it.

Annually, New Mexico’s taxpayers spend $50 million to “incentivize” film and television production in their state. Unfortunately, after shoveling more than half a billion dollars Hollywood’s way over the years, the Land of Enchantment has little to show for its generosity.

The payoff from “investment” in the entertainment industry is dismal. Dozens of studies have been undertaken to determine the ratio of subsidization to tax-revenue generation. The Rio Grande Foundation has distilled the best research down to 14 analyses, conducted in states as varied as Pennsylvania, Louisiana, Oklahoma, North Carolina, and Massachusetts. All were performed by either legislative auditors or tax departments, and not one was issued by Hollywood consultants, economic-development/film bureaucracies, or ideological think tanks of any perspective. When taken as a whole, the 14 studies found the average “return” for a taxpayer dollar to be an appalling 23.6 cents.

The film-and-television lobby claims that the relationship between money spent and revenue raised is a bean-counting irrelevancy. It asserts that the economic impact of production is what matters. But once again, the data tell a depressing story.

In 2016, Michael Thom, a public-finance professor at the University of Southern California, explored incentivization programs, examining “job growth, wage growth, states’ share of the motion picture industry, and the industry’s output in each state.” He found that “the only benefits were short-term wage gains, mostly to people who already work in the industry. Job growth was almost non-existent. Market share and industry output didn’t budge.”

As Virginia’s Joint Legislative Audit and Review Commission recently noted, “The percentage of nationwide film production employment located in California and New York (67 percent) in 2016 has barely changed since 2001 (69 percent).” Some states have managed to attract “runaway” productions from time to time, but at tremendous cost. That’s why several — including Michigan, Alaska, and Florida — have scrapped their subsidies altogether.

More could follow. In January, West Virginia’s Legislative Auditor recommended “terminating the Film Tax Credit Program.” In March, Rhode Island’s Department of Revenue concluded that the performance of the “Motion Picture Production Tax Credits” program, when “measured against statutory objectives,” was “relatively poor,” and that it “has not achieved a lasting, stable motion picture industry.”

Ditto for the Land of Enchantment. At the start of the new century, jobs in motion-picture and video production here numbered just a few hundred. That figure rose dramatically, once the subsidies began to flow. By 2008, 2,389 men and women worked in the industry. But that was the high point — a decade later, it has yet to be surpassed. And “below-the-line” gigs continue to dominate. Highly paid “key creatives,” such as producers and writers, don’t live and work in the state. And post-production employment is essentially nonexistent. (For example, “Better Call Saul” “post” services are handled by Keep Me Posted, a firm based in Burbank, Calif.).

Perhaps the most pernicious aspect of New Mexico’s giveaway to film and television is its diversion of taxpayer dollars for politics. It is difficult to discern where the New Mexico Film Office (NMFO) stops and the militantly political Local 480 of the International Alliance of Theatrical Stage Employees begins. At the start of the NMFO’s February “Education Summit,” an office employee brought in a case of water bottles that each bore the union’s logo. That’s correct — she was literally carrying the union’s water.

The Rio Grande Foundation has attended most of the presentations sponsored by the NMFO’s “Educational Speaker Series” this year. IATSE-approved political content has been frequent. In July, Bobbie Shelton, founder of the “Casting Coffee Group,” a networking community for extras, charged — in a taxpayer-funded building — that while Democratic gubernatorial candidate Michelle Lujan Grisham is “pro-film,” her Republican opponent, Steve Pearce, “says he is, but he’s not.”

New Mexico has lavished a disturbing amount of largesse on an industry that comes to the Land of Enchantment for one reason only: free cash. How much longer should the state’s hardworking citizens pay for the failed dream of “Chilewood”?

D. Dowd Muska is research director for the Rio Grande Foundation, an independent, non-partisan, tax-exempt research and educational organization.

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7 Replies to “Hollywood’s Long Con on New Mexico Taxpayers”

  1. What’s the secondary impact of film production on lodging, restaurants and other services, and how does that figure into the calculations?

    Who owns the film studio buildings in ABQ and Santa Fe? Were they privately financed or taxpayer-subsidized?

    1. James, the “research” on “film induced tourism” (FIT) is deeply problematic. The only NM-specific work I am aware of was conduced a decade ago, by interviewing people at visitor centers and emailing people who had requested a vacation guide online. We need much more recent FIT analysis. (And better methodology.) In addition, we need to consider the NEGATIVE impacts of actors badmouthing the state:

      Jessica Alba: “In Albuquerque there’s really only one restaurant that’s pretty good. You can only take Applebee’s and Chili’s so much. Our big day was hanging out at Wal-Mart for five hours. It was like, ‘Yea, Wal-Mart!'” (Her agent later claimed she was talking about Alamogordo, but damage done.)

      Josh Brolin: “I rented a house and I wanted to make sure it had a pool … because in Albuquerque you can’t really do anything but meth.”

      Margot Robbie: “Lots of missing teeth.”

      While I can’t find a record of taxpayer dollars being devoted to Albuquerque Studios or I-25 Studios, Santa Fe Studios received substantial subsidies. And down in Las Cruces, there is a pot of public funds — almost $4 million, I believe — that pols are planning to spend on a large studio. These monies, as well as film/TV expenditures at government colleges/universities, need to be added to the $50 million annual sum to get a complete picture of how much taxpayers are being made to give to Hollywood.

  2. Not much longer……that is for sure!! I could count on one hand the number of projects that add up to about 2 billion dollars in negative ROI made by the State of New Mexico in the last decade. Maybe more! Ouch!

    1. Here’s the statement from his website:

      New Mexico has some of the most scenic vistas in the country that are natural attractors to the film industry. The state should actively pursue these high-quality jobs. Keeping our creative genius at home will benefit the entire state.

  3. There is actually a number of different levels of economic impact one can measure:

    1. Direct impact (jobs created directly in the film industry)
    2. Non-film direct impact (jobs and revenues produced through goods and services purchased by film companies working in the state).
    3. Indirect economic impact (jobs and revenues induced by the economic activities of those directly impacted – a multiplier effect usually analysed through input-output models).
    4. Impact of film related infrastructure spending.
    5. Film induced tourism (FIT)

    Categories 2. and 3. are what I think James was referring to. The accuracy of economic impact estimates usually sink as one goes down through these categories, but the first four are pretty typical of economic impact analysis with fairly well established and accepted methodologies for estimation. The last one (which often produces the biggest numbers) is extremely dubious and probably would be ignored in any private sector setting.

    1. The issue with film subsidies is that New Mexico tax dollars (taxes paid by other businesses in our state) are collected and being used to fund film. We can measure what the direct impact of the direct spend of the film industry is here in NM and the best estimate is 43 cents on the dollar is paid in taxes by film and related businesses. We can argue that point, but that is a reasonable number. If you add in multipliers and other info and fail to factor in the multipliers from leaving that money with the businesses that are paying the taxes, I don’t really think you get much. I understand the use of multipliers in SOME economic calculations, but it really makes no sense with regard to film subsidies.

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