Bob Sparks
For years Florida governors and legislators stressed the need to diversify Florida’s economy. A state’s financial well-being so heavily dependent upon tourism and agriculture is a disaster or recession away from economic calamity, they said.
They, and their successors who toe the same line, are right. Resorts, parks and Fresh From Florida are great for our economy in so many ways, but our menu needs more entrees.
Television, film and entertainment production will not drive an economy, but it pedals fast enough to add another element historically capable of producing well-paying jobs. Florida is home to thousands of entertainment-related businesses that employ more than 100,000 individuals.
This industry involves more than movies and television. Video games, educational films, infomercials, commercials, and music videos are all created and produced in Florida overwhelmingly by Floridians.
The average wage for these jobs is $70,000, a staggering 62 percent higher than the state average of nearly $44,000. Floridians involved in motion picture and video distribution earn, on average, nearly $100,000.
Fortunately, a bipartisan majority of the Legislature shares the goal of expanding the number of these types of jobs. The competition for them among other states is rather fierce.
Hindering Florida’s effort is an outdated and inefficient structure and incentive package. While it gets complicated, the bottom line is Florida easily runs out of authorized tax credits, leaving worthy projects, and their jobs, no choice but to seek better deals in other states.
A January report from the Legislature’s Office of Program Policy Analysis and Government Accountability (OPPAGA) revealed Florida is falling behind states like Georgia and Louisiana. Combined with aggressive tactics used by the other states and Florida’s inefficient system, this state’s position is clearly lagging from where it was a few short years ago.
This year, the Legislature seeks to make the necessary changes to bolster’s Florida’s climate advantage with business incentives without writing checks to producers as an enticement. House Bill 451, sponsored by Winter Park Republican Mike Miller, and Senate Bill 1046, sponsored by Venice Republican Nancy Detert, are making steady progress through committees.
The basic message is simple. Those with projects are asked to bring your already funded projects to Florida, spend money on Florida businesses, hire Floridians and pay them well, and then we will give you 20 percent of that money back in tax credits.” While the small numbers of critics decry “giving taxpayer money to Hollywood,” there is no direct negative fiscal impact on the state.
In other words, no money goes out until five times the amount of any tax credit comes into our economy, certified by an independent audit. The payback begins with sales tax revenue from local purchases made by those paid by the entertainment industry. Enhanced tourism to movie locations and Florida in general keeps it going.
While some fun and mischief surfaced in committee hearings, the “Film Bill” seems headed toward passage. A minority of Republicans has a problem with incentives on principle, but each of the three House committees hearing the bill reported it favorably by at least a two-to-one margin.
Loudly offering lonely public opposition to the bill is the Americans for Prosperity (AFP) group. That group, like some of the Republicans, oppose tax incentives.
The lead AFP lobbyist on the issue, Skylar Zander, took some heat at last week’s committee hearings, but was back for more at this week’s House Economic Affairs Committee. There were no fireworks this week.
Opponents claim the incentives prevent Florida from investing in other more important areas, but face strong blowback from people such as House Finance and Tax Chairman Matt Gaetz, who correctly points to the lack of an appropriation in the bill.
Detert, a long-time supporter of the Florida film industry, and Miller make a strong case for Florida film school graduates who need a vibrant industry for employment after graduation. Why not make it more likely they will find work and stay (and pay taxes) in their home state? Did I mention 100,000 jobs?
While these bills have multiple components, the tax credits receive the most scrutiny. A less discussed component involves additional opportunities for recent college graduates, military veterans and the developmentally disabled.
As Gaetz said at the end of his committee’s discussion, this bill is “not about Hollywood.” It is about diversifying the economy. He finished by saying “there is no defense for the status quo.”
The House bill is now headed for the floor while the Senate bill has reached its last committee stop. Miller, Detert, their co-sponsors and colleagues deserve credit for creating and improving worthy legislation.
It makes “cents” to have the entertainment industry as a featured item on our economic menu.
Bob Sparks is a business and political consultant based in Tallahassee. Column courtesy of Context Florida.
2 comments
Gideon PT Fensterbush
April 12, 2015 at 7:48 pm
Folks keep repeating “100,000 jobs.” To be clear, that’s not the number of jobs created each year, rather that’s the total estimated workers in ALL the industries reasonably enough related to film and entertainment to count. It’s not like they all disappear in the absence of the tax credits and sales tax exemptions.
But let’s talk about numbers. During a presentation on January 20 to a Senate Committee over which Senator Detert presides as chair, careful listeners read and heard this:
1. Productions receiving tax credits employed 29,023 Florida residents; most employees were extras and stand-ins.
2. Available hourly employment data indicates most employees were part-time.
3. Less than 20% of total jobs reported by sales tax exemption applicants were full-time.
Also in January of this year, Florida’s Office of Economic & Demographic Research released its report, “Return on Investment for the Entertainment Industry Incentive Programs.” One can only hope the Senate committee read it. Under what analysts deemed “Scenario 1,” the estimated number of jobs created by projects receiving tax incentives hit 878 and the calculated return on investment (ROI) calculated was 0.43 to one. Ouch! Not even a one-to-one return. But hold on: another run of the data under more conservative assumptions (Scenario 2) projected 751 jobs created and a total ROI at 0.25 to one. In plain language, the state got back between twenty-five cents to forty-three cents for every dollar of revenue it swapped for film and entertainment incentives.
The Sales Tax Exemption element of the program consisted of $44.2 million in sales tax revenue forgone (but associated with much bigger numbers which proponents should be expected to banter about soon, such as $3.15 billion in total expenditures). Wow! Big number. Problem? The sales tax exemption program had an estimated ROI of 0.54 to one. Yes, “for every dollar of foregone sales tax collections the program returned fifty-four cents in other state revenue collections.” It gets worse.
Among the key assumptions of calculating this ROI was that “much of this activity is new to the state.” That is, it wasn’t already going to happen. This is called the “but for” assumption. The activity is assumed NOT to be happening in Florida without (“but for”) the incentives. However, we can see from repeat/ongoing awards to EA Sports for its video game production that there is evidence that this assumption is unrealistic. What’s that mean? The ROI is likely much less. Quoting again from the report: “if 25% of the activity was assumed NOT to meet the ‘but for’ assumption, the ROI [for the tax credit program] dropped from 0.25 to 0.17 to one. Turning to the sales tax evaluation, if the new activity is adjusted down by 40% (saying reasonably that 40% of the activity leading to sales tax exemption would have happened with or without incentives), “the ROI turned negative–the exemption actually cost more than the static amount of foregone sales tax collections.”
Do these programs create jobs? Of course, recall that the film tax credits create 751 – 878 more jobs each year. At what cost? The state awarded $67.3 million in tax credits for up to 878 jobs. That’s a per job bounty of $76,651 per job. Get the picture?
Fred Ziffel
April 13, 2015 at 8:34 pm
Test. Test. Is this thing on?
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