The country’s economic landscape has changed dramatically in recent months and Hollywood is feeling the squeeze. Many banks have already made a less than graceful exit from investment in tinsel town, and with credit tight and investors increasingly uneasy, debt financing for many projects has become an uphill battle. For production as a whole, this means radically cutting costs; for producers looking to secure funding, this means hard work. To survive, it is going to be crucial that producers be especially resourceful when leveraging funds.
Strong incentive packages will provide an effective means for producers to stay afloat amid the ongoing economic crisis, and location decisions will no doubt come to reflect a dramatic change of priorities in the year to come. The fall’s $700 billion financial rescue plan shows just how much the government values the domestic film and TV industry. The bill included a single year deduction in production costs ─ from $15 million to $20 million ─ that film and TV production can utilize for spending in areas categorized as economically depressed. The plan also widened the pool of companies eligible for a domestic production deduction.
Producer John Kelly (Into the Wild) observes that production has been eagerly moving back to the U.S. “We’re coming back home to shoot,” he says. “The incentives in the states are great. It’s getting more and more attractive to stay in the country.” John is shooting the feature film Gentlemen Broncos on set in Utah, a state that offers a fully refundable rebate of 15 percent for in-state expenditure.
Dama Claire is the production executive of The Incentives Office, a Santa Monica-based company that helps producers with the complete incentives process, from selecting the best state, filing the needed paperwork and finalizing the funding. She points out that, apart from incentive packages, there are plenty of other ways for locations to cut costs. A solid crew base, for example, and well-developed infrastructure play huge roles in shaping costs through increasing efficiency.
All in all, there are many reasons why domestic production looks a whole lot better these days. For productions that do require the use of foreign lands, some great options still exist. With favorable exchange rates, experienced crews and sturdy infrastructure, many international locations fit the bill.
Make no mistake about it. Now more than ever, producers face hard choices on locations. By taking full advantage of what some of the following locales have to offer, a production has real potential to flourish, despite the catastrophic financial storm.
“Connecticut’s incentive package includes above-the-line salaries of up to $15 million per person. There is no annual cap, no preproduction cap and no per production cap,” explains George Norfleet, director of Connecticut Commission on Culture and Tourism, Film Division. Further, the state’s 30 percent tax credit stipulates a low $50,000 spending threshold, and there is no minimum number of shoot days required, nor a compulsory percentage of the budget spent in-state.
The success of Connecticut’s 30 percent transferable production expense credit ─ introduced in 2006 ─ is perhaps nowhere better evident than in the dramatic increase in production throughout the state in recent years. During the first half of 2006 ─ before the introduction of the incentive ─ revenue from film production in the state was estimated at $700,000. The year, 2007 saw film production jump to over $350 million. In 2008, there has been $318 million worth of production to date. “The recent economic woes on Wall Street have only increased the importance of tax incentive packages in building the film industry in our state, as it is one of the cleanest and most recession-proof industries in the country,” Norfleet points out.
Connecticut is becoming an increasingly viable destination for producers looking to cut down on costs in a dynamic location with plenty of production history and highly regarded service from their Film Division. In 2007, the state saw as many as 10 feature films shooting at one time. This past year’s Indiana Jones and the Kingdom of the Crystal Skull shot in New Haven and Righteous Kill, starring Robert De Niro and Al Pacino, shot around Bridgeport. A number of other big productions, such as The Private Lives of Pippa Lee, starring Keanu Reaves and Rachel Getting Married, starring Anne Hathaway, have also come to the state.
In addition to its most popular credit, Connecticut offers a 10-20 percent transferable infrastructure project credit, a 30 percent digital animation credit and sales tax relief for productions. Currently, the state offers two true studios and three adapted warehouses. In 2009, the state will become the home of Fox's Animated Division and Blue Sky Studios (Ice Age, Horton Hears a Who), potentially bringing 300 full-time jobs to the state.Connecticut is taking production seriously and it’s paying off.
“Florida has the third largest crew base in the US with approximately 1100 IATSE members,” says Niki Welge of the Florida Governor’s Office of Film & Entertainment. For 2008, revenue from production has soared to well over $790 million.
The state’s incentive program offers up to a 22 percent rebate for production expenditures. The general rebate is set at 15 percent. Add to this five percent extra for off-season shooting, another two percent for “family-friendly” products, and the waiver of the state’s six percent sales tax, and its obvious that a production can save a lot of money in Florida.
In addition to a clear-cut incentive program and terrific production capacity, Florida has some incredible studios. “In the major production centers in Florida (South Florida, Tampa/St. Pete, Orlando and Jacksonville), we can accommodate multiple major projects at once,” adds Welge. Universal Studios, for example, has nine professional sound stages and impressive broadcast facilities. The sound stages ─ ranging from 9,980 to 22,000 square feet in size ─ are equipped with cutting-edge technology, like the trolley beam system. This system allows shooting capability for feature films or live-audience productions. The broadcast studios are especially impressive, featuring up to 16,500 square foot stages with state-of-the-art control rooms. Universal has also made a point to support independent filmmaking by offering Studio 20, a soundstage that is financially and technically tailored for independent production.
In 2008, the Georgia Entertainment Industry Investment Act established a flat 20 percent tax credit for qualified production and postproduction expenditures, with a required minimum spend of $500,000. On top of this, there is a 10 percent tax credit offered on the condition that a Georgia promotional logo is featured in opening titles or end credits (before full credit roll), as well as within all promotional trailers. The potential for a 30 percent tax credit is reason enough to check out the state. Its growing infrastructure and experienced crew base are good reasons to keep coming back.
“Georgia has over 4,800 film industry professionals,” says Bill Thompson, deputy commissioner of the Film, Music & Digital Entertainment Office at the Georgia Department of Economic Development. “We are six crews deep and growing. Five feature films are currently shooting in Georgia at one time.”
Georgia has more than 4,800 film industry professionals available in state with large studio complex, many medium sized stages and plenty of large warehouse spaces with production office space. Turner Studios is one of the state’s most notable studio complexes, containing large and small sound stages of up to 10,000 square feet, digital production control rooms, live graphics and audio capabilities, and plenty of state-of-the-art production equipment. The state’s experience and infrastructure has attracted an abundance of production. In 2007, production revenue totaled $346 million. So far in 2008, this number has already climbed to $415 million.
New York recently increased its below-the-line refundable credit to 30 percent of qualified expenditures, and its annual cap to $75 million for feature films and episodic television shows that shoot 75 percent in qualified state soundstages. Additionally, a film shot in any of the five boroughs of New York City is eligible for a five percent tax credit (with a $30 million cap), bringing the total to 35 percent—an impressive tax credit for a location that is already in high demand, particularly with television production. There are a variety of different regular productions throughout the area. NBC’s 30 Rock and Law & Order: Special Victims Unit, ABC’s Life on Mars, Comedy Central’s The Colbert Report and CW’s Stylista are only some of many television shows that shoot regularly.
In October, construction began on Stage K, a new $22 million film and television studio in Astoria, Queens. The new studio—expected to be finished by summer 2009—will be designed to house the “backlots” which typify west coast studio compounds. It will be joining an impressive collection of state-of-the-art production facilities like Steiner Studios, which now offers five brand new soundstage; Silvercup Studios, which houses 18 soundstages; Kaufman-Astoria, which offers a complete broadcast and production complex; NBC Universal, which has nine sound stages running up to 10,000 square feet and EUE Screen Gems Studios, a full-service complex that offers six studios ranging from 9,000 to 2,000 square feet, and features non-linear video/audio editing suites and over 40,000 square feet of office space.
Since 2002, film spending has increased dramatically in Louisiana. For 2007, direct in-state spending is estimated at around $350 million. “I think that U.S. filmmakers want to stay close to their family and investors genuinely want to keep their product stamped, ‘Made in the USA,’” says Christopher Stelly, director of Louisiana Film & Television.
Feature films like The Curious Case of Benjamin Button, My Own Love Song, Year One and Oliver Stone’s W., have all enjoyed production in the beautiful southern state. This has much to do with Louisiana’s reputable and skilled crew base (at eight to nine features deep, it has seen a 400 percent rise since 2002), its state-of-the-art soundstages, like the Celtic Media Center, Stageworks, and the NIMS Center or postproduction facilities like Louisiana Media Services and Digital FX in Baton Rouge.
“It is pretty obvious to line producers that Louisiana is a very economical place to shoot, compared to most states in the U.S,” says Stelly. Amid the current economic crisis, of course, the allure of the state also has a lot to do with Louisiana’s tempting incentive package. “With Louisiana's incentive, along with our deep crew base and our maturing infrastructure, there is no question that a producer will get a quality production value at a lower cost.”
The state offers a fully transferable income tax credit of 25 percent on in-state expenditures and an additional 10 percent employment credit on the first $1 million of each state resident’s payroll. Preproduction, production and postproduction expenses are all included. There is no per production or statewide cap and minimum qualifying expenditure is set at $300,000. Moreover, the state offers a 25 percent music/sound recording tax credit for sound recording and infrastructure development and a 20 percent tax credit for interactive digital media expenditures. Finally, no one can ignore the state’s weighty 40 percent infrastructure credits.
Louisiana’s appeal, however, owes to a lot more than just the great incentive. “Louisiana has a long history of films shooting here,” Stelly points out. “The state,” he says, “possesses a unique creative culture that productions can tap into and we have a unique joie de vivre that cannot be duplicated anywhere in the world.”
The increased popularity of Louisiana is a perfect example of the growing appeal that states hold for production. Stelly observes that he has been seeing a steady reversal of “Runaway Production.” A burgeoning number of productions are staying home, thanks to the financial benefits of doing so. According to Stelly, such a trend is something to celebrate. “I’m proud of what we have done to keep this industry in our country, but most of all, I’m proud that we have enabled many Louisianans to return to their homes and earn a great living working in an industry that they love.”
“In a time of unprecedented economic uncertainty, Massachusetts' biggest calling card is stability and predictability. Locked in until 2023, their film tax credit has no caps, no limits and no hidden restrictions,” reports Dama Claire of The Incentives Office. “Massachusetts is one of the safest ports to park your production dollars in an otherwise stormy economy.”
Massachusetts is definitely playing hard in the incentive game. With an income tax credit equal to 25 percent of total in-state spend, no production cap and a light $50,000 minimum spend requirement, the state has been able to attract productions big and small. The credit applies to all kinds of other projects as well: television, commercials, music videos, digitals and plenty more.
Nick Paleologos, director of the Massachusetts Film Office, reports that 2008 was a record year in production, with a dozen feature films shot up 50 percent over last year. Both Disney and Paramount adapted facilities in Woburn and Hyde Park this year for The Surrogates, starring Bruce Willis and Ashecliffe, starring Leonardo DiCaprio. Major sound stage initiatives are currently in the works for both Plymouth and Weymouth.
New Mexico offers three major programs to cut down on production costs: a 25 percent refundable tax rebate, a Film Investment Loan and a Film Crew Advancement Incentive. The rebate is a refund ─ not a credit ─ on the full amount of qualified expenditure — not simply the tax portion — and covers direct production expenditures, including resident labor; and in-state, taxable goods and services purchased for production. Feature films, television, national and regional commercials, documentaries and video games all qualify. This encompasses preproduction and postproduction as well. There is a collective $5 million for performing artists’ salaries and $20 million for salaries overall, but apart from this, there is no per production statewide cap or even a minimum spend requirement.
In addition to the tax credit, the state offers the Film Investment Loan, with backend participation in lieu of interest for up to $15 million per project. Projects must have a budget of at least $2 million and need to be fully collateralized.
Aside from New Mexico’s powerful incentives and impressive crew depth of over 2000 New Mexicans, it is reported that the state has even more plans for major sound stages, post facilities, and new VFX gaming labs in Santa Fe and Rio Rancho. Additionally, Sony Imageworks recently opened a facility in Albuquerque and has plans to expand in the coming year.
Screen Australia, the country’s new production support agency, replacing the Australia Film Commission, offers the generous Australia Screen Production Incentive. The package includes the Producer Offset and the Location and Visual (PDV) offsets, all of which are tax-based rebates. The Producer Offset offers a 40 percent rebate to qualifying feature films, and 20 percent for qualifying television productions and documentaries. The PDV Offset offers 15 percent of qualifying local spend (QAPE), related to post, digital and visual effects work, regardless of where the project was shot. Finally, the Location Offset is a 15 percent offset on QAPE for large budget films.
There is no project or annual funding cap for these offsets but reasonable QAPE thresholds apply. There is a minimum spend of A$1 million for feature films (including feature documentaries), TV series and made-for-TV movies. To qualify for the Producer Offset, the film must be judged to have significant Australia content (aptly referred to as “Australianess”). In addition ─ and here’s the small print ─ the applicant company must be an Australian company or a foreign company with an Australian permanent residency and Australia business number. This stipulation is meant to encourage co-production, albeit a little complicated, might be a good idea if you want to cut production costs and potentially increase production efficiency. To make the process as smooth as possible, Screen Australia operates this co-production program in addition to the offset.
Warner Roadshow Studios in Queensland, Fox Australia in Sydney and Melbourne Central City Studios at the Docklands in Melbourne are some of Australia’s best facilities. For productions looking to save some serious money, the country won’t disappoint. For feature film productions willing to strike up an Australian partnership, the deal couldn’t be sweeter.
Dama points out, “With the dropping dollar, and killer post houses in Vancouver and Toronto, Canada is still a top choice for big budget films looking to save big money.”
Canada's 16 percent Production Services Tax Credit (PSTC), which applies to eligible labor and services, is impressive in its own right. With competitive tax credits on labor and services, you can go to pretty much any province and get a good deal. Because this issue’s Eastern Canada spotlight provides a comprehensive assessment of each of those provinces, the following will offer only a brief overview of the eastern provinces.
Quebec offers a 25 percent no-cap production services tax credit of its own. Package this with the comparable federal credit, and a production can save 41 percent on labor and services. New Brunswick is even more competitive, providing a 40 percent credit on their local labor, provided that wages do not exceed 50 percent of total production costs. Newfoundland & Labrador also offers a noteworthy 40 percent tax credit labor. In Nova Scotia, a production can receive a 60 percent tax credit on labor or 30 percent of total production costs. Ontario offers a 25 percent refundable tax credit on eligible Ontario-based Canadian and foreign-controlled corporations on qualified Ontario labor expenditures for eligible film and television productions.
Further west, Saskatchewan's Film Employment Tax Credit Program still remains one of the strongest in Canada. SaskFilm's program offers a whopping 55 percent tax credit on eligible above-the-line and below-the-line eligible labor, with no per production cap. Eligible salaries cannot exceed 50 percent of a production's total eligible budget. Too often forgotten, is the province's additional five percent rural bonus from total production expenditures within the province. This add-on is reserved for projects filmed in rural areas throughout the province (at least 25 miles from the cities of Regina and Saskatoon).Recently, films such as Stephen King's Dolan's Cadillac did just that.
Manitoba is a prime example of Western Canada's unrelenting competitiveness. Carole Vivier, of Manitoba Film & Sound reports that films such as Chilled in Miami, The Lookout, The High Life and Capture of the Green River Killer recently shot in the area. The province offers up to 65 percent fully refundable credit on Manitoba labor expenses. Surprisingly, this is only the beginning. The credit is compatible with the 16 percent federal credit, bringing the total to 61 percent. The base credit starts at 45 percent; then take this number and add the five percent producer bonus for co-producing with a Manitoba producer, then another five percent for filming at least half of your Manitoba production days further than 35 km from central Winnipeg (another rural bonus), the 10 percent "frequent filming" bonus for your third film shot in two years and in the end, you can save up to 81 percent on labor costs. You can put down your calculator — it all checks out.
British Columbia offers a film and television tax credit totaling 35 percent of the production’s qualified BC labor expenditure. Additionally, the province offers a Regional Tax Credit of 12.5 percent of a production’s qualified BC labor expenditure, pro-rated by the number of days of principal photography done outside the designated Vancouver area, over the total days of principal photography within BC. Finally, there is an additional Distant Location Regional tax credit of six percent for principal photography done in a “distant location” within BC, applying a similar proration system. Despite these additional credits, a production may do well to stick to Vancouver, the province’s busy seaport, which is home to cutting-edge production facilities like Vancouver Film Studios, a complex that extends for nearly two city blocks and holds 13 sound stages —10 of which are purpose-built and Lions Gate Studios, which comprises eight sound stages that range from 11,000 to 20,500 square feet in size, and office space totaling 100,000 square feet.
New Zealand knows production. The country has around 2,000 freelance crewmembers and can accommodate around eight to 10 medium-size international productions at one time. There are 10 studios throughout the country — including purpose-built studios in Auckland and Wellington ranging from 5,000 to 25,000 square feet. In recent years, plenty of productions have taken full advantage of New Zealand’s hospitality and capacity. For 2006-2007, production sector revenue totaled NZ$1 billion.
“The country now offers two types of very enticing incentives,” explains Judith McCann, chief executive, Film New Zealand. New Zealand's production incentive for international features and television drama series is aimed at effectively reducing a production's costs. The Large Budget Screen Production (LBSP) & Post/Digital/Visual Effects Production (PDV) incentives are grants that cover 15 percent of qualified New Zealand production expenditure. There is a required minimum of NZ$15 million for the large budget screen productions or NZ$3 million in postproduction digital and visual effects work (for PDV). Both of these incentives are paid to qualifying productions as a grant and are, therefore, not tax based. “There is no cap and the grants are normally paid within three months of application filing,” says Judith, who adds, "Both incentives cover goods and services, not only labor costs." Further, if spending exceeds NZ$50 million, the production can apply for an interim grant.
McCann mentions that, according to exit surveys provided to Film New Zealand, production companies have been extremely satisfied with the grant's transparency and efficient administration. "Since its introduction in 2003, 13 major productions have employed the LBSP incentive and injected over NZ$900 million into the industry. Effects of the addition of the PDV incentive in July 2007 will be measured next year but is looking very positive as well."
The second incentive is the new Screen Production Incentive Fund (SPIF), introduced in July 2008 to boost domestic feature and television production with significant New Zealand content. Its relevance to international production teams is that official co-productions will qualify, and New Zealand has such arrangements with Australia, Canada, France, Germany, Ireland, Italy, Singapore, South Korea, Spain and the UK. The basic incentive is a grant of 40 percent of qualifying New Zealand expenditures for feature films and 20 percent for television up to a maximum per project of $6 million.
And plenty more
This was, by no means, a comprehensive list. We hardly have time to mention every great location out there, and due to differences among laws and regulations specific to each location, it is difficult to say that one location is necessarily “better” than another. A more exhaustive inventory would undoubtedly include places like Arizona, which offers transferable tax credits totaling up to 30 percent of pre-approved projects in-state expenditures. The state has a long history of production, its diversity of locations allows productions to double for countless locations and its proximity to Los Angeles makes it extremely viable for any production type. “Since the unveiling of our incentive program in 2006, we are noticing a dramatic rise in both productions and overall interest in the state as a principal location,” says Ken Chapa, program manager, Arizona Film Office.
There are also plenty of feasible locations outside the U.S. While Europe might seem like a long shot ─ considering the poor exchange rate ─ if a production demands it, Germany offers a terrific cash grant of 20 percent of qualifying local spend. Hungary gives a 20 percent tax credit for local spend, as does Ireland. For a very affordable international location, Singapore is also well worth considering. The country offers the Film in Singapore Scheme (FSS), a cash rebate of up to 50 percent of qualified production expenditure with no caps.
Arizona Film Office
British Columbia Film Commission
Celtic Studios, LLC
Connecticut Commission on Culture and Tourism, Film Division
Film New Zealand
Florida Governor’s Office of Film & Entertainment
Film, Music & Digital Entertainment Office at the Georgia Department of Economic Development
Louisiana Film & Television
Massachusetts Film Office
Manitoba Film & Sound
Newfoundland and Labrador Film Development Corporation
New Mexico Film Office
New York City Office of Film, Theatre & Broadcast
New York State Film Office
Nova Scotia Film Development Corp.
Quebec Film & Television Council
Screen Gem Studios
Singapore/Media Development Authority
StageWorks of Louisiana, LLC
Warner Roadshow Studios