Film industry grant program could boast positive ROI

Every year, bills aiming to bring film crews back to Florida face the same hurdles.

They’re maligned as “corporate welfare” or “government handouts.” The latest attempt, SB 526, sponsored by Sarasota Sen. Joe Gruters, hasn’t been spared those labels.

But the 2019 bill is substantially different from past efforts.

SB 526 and House companion, HB 1401, sponsored by Sarasota Rep. James Buchanan, does not offer studios “incentives” — a dirty word in economic development. Instead it would provide targeted grants. There is a world of difference between the two strategies.

Only projects with the best ROI, most high-paying jobs, best tourism benefits, and best impact on Florida workers are approved for the grants.

Rather than being handed out before the first day of filming, the targeted grants proposal would only pay out after production has wrapped.

Auditors wouldn’t have to take studios at their word, they could make certain a project has adhered to a stringent set of guidelines crafted to benefit Florida’s economy.

To be eligible for a grant, 70 percent of the production budget must be spent in Florida and 60 percent of the cast and crew must be state residents. Additionally, at least one Florida veteran would need to be on payroll.

If a studio sticks to all those guidelines, it can receive a grant for the lesser of $2 million or 20 percent of the production budget.

Studios can get a small bonus — 3 percent — if they film in an unutilized county or produce a family-friendly product, but the $2 million cap is set in stone.

Compare that to the bill put forward by Miami Democratic Sen. Annette Taddeo in the 2018 Legislative Session. Though an appropriation was never attached to the bill, it would have offered studios upfront funding via the “Florida Motion Picture Capital Corporation.” The measure made it through one committee before stalling out.

There’s also the 2010 program, which was funded at close to $300 million by the Republican-led legislature and operated on a “first come, first served” basis with a 30 percent tax credit. While the program resulted in $1.2 billion being in spent in Florida by projects receiving the tax credit, too much of the money was allocated far in advance, and the qualification requirements were much looser than those of the 2019 proposal.

Insurance premiums, bonding, legal fees and pay of up to $400,000 per Florida resident all made the qualified expenditures list in that program. It also allowed purchased goods — which could be used on multiple productions — to be tallied in full on one production’s tax credit application.

The qualified expenditures list in SB 526 includes three things: employee pay, equipment rentals and services.

On pay, only the first $200,000 in wages per Florida resident would count, so the cost reports can’t be inflated by massive payments to talent or executives.

Additionally, allowable equipment rentals and services must come from Sunshine State-based companies that employ Florida residents. If the contracted services staff includes non-Floridians, the portion of the work done by them wouldn’t qualify.

The tight requirements are by design.

Past studies have shown the old program provided a poor return-on-investment for the state. That doesn’t mean they didn’t bring major windfalls at the local level. It’s more of a framing issue.

The way the state calculates ROI is simple: It takes the tax money it received and divides it by the money it shelled out. It can be argued state economists should include secondary benefits, such as increased tourism spending, but that’s not baked into the formula.

Still, those benefits can be massive.

According to the Monroe County Tourist Development Council, a single season of Netflix’s “Bloodline” brought in $65 million in new travel spending, generated $9.4 million in state and local tax revenue and created 1,738 jobs that paid out $64 million in wages.

Ditto for HBO’s “Ballers.”

Each season filmed in South Florida brought 2,800-plus jobs and $20 million in spending, including 1,000 hotel room nights and 3,000 condo or short-term leases.

The ROI would certainly look more favorable if the massive local stimulus was factored in.

But it isn’t, and industry leaders understand ROI remains the most prevalent argument against programs to revive Florida’s film production industry, even as Georgia has embraced the “Hollywood of the South” moniker by turning its fledgling film industry into a nearly $10 billion economic engine in fiscal year 2018 while hosting 455 film and television projects.

In 2019, however, the ROI argument may be losing its luster.

SB 526 may not resemble the 2018 bill or the 2010 program, but it bears some similarities to a little remembered 2016 bill.

That proposal had two components — a revolving loan program and a targeted grant program. The grant portion was axed before the legislation was introduced, though it was analyzed by state economist Amy Baker.

The grant portion would have been posted an even-money return from year one.

In broad strokes, it was similar to the program being proposed today. It would have provided postproduction grants to projects primarily based in Florida, but those grants could have been up to $6 million and included a similar list of qualified expenditures.

If the same analysis were conducted today, all signs point to SB 526 scoring a significant positive ROI for Tallahassee and an even bigger one for local governments.

SB 526 is about as conservative as it can get, but film industry advocates say something needs to happen before the jobs and productions are fully siphoned away by Georgia or other states. Gruters agrees, and so do many of the state’s largest business groups.

“You can’t be so rigid that you pass on opportunities to showcase your state in different ways, there’s so many different reasons why it’s a sound investment,” he said.

Likewise, the Florida Chamber of Commerce, the Associated Industries of Florida and Florida TaxWatch have extolled the benefits of luring in more high-paying jobs and big-spending productions — the average Florida film professional makes $81,000 a year, two-thirds more than the statewide average.

“The Florida Chamber of Commerce supports diversifying the economy through high-wage jobs in the film, television and digital media industry,” the Chamber said. “A transparent and fiscally responsible effort will help ensure we secure Florida’s future by not losing those jobs to neighboring states.”

TaxWatch’s support stems from their own study, which found that since Florida’s last film production program lapsed in 2016, the state has lost out on over $1 billion and 87,000 cast and crew jobs that it didn’t need to.

“Florida’s business-friendly tax climate, good weather, and beaches have their advantages; however, state policymakers should strongly consider a sound, fiscally-responsible program to help grow targeted industries such as film and television production,” said Florida TaxWatch President and CEO Dominic M. Calabro.

“Maintaining the status quo is not a viable option. The competitive nature of today’s economy, and of the film and television industry in particular, requires the strategic and targeted use of packages that will help to create thousands of high paying jobs and permit Florida to compete with other states and countries for film and television production projects.”

Whether the fiscal conservatism of 2019 plan can move the needle compared to past bills — especially in the House — remains to be seen. But it’s clear the ROI argument, based on a now-defunct program, is specious at best.

SB 526 cleared its first committee with a unanimous vote and awaiting a hearing in the Senate Innovation, Industry, and Technology Committee. The House companion has not yet been heard in committee.