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Louisiana perspective

“We don’t do these programs for the public fisc to have a net gain. It’s not possible. We’re doing it because we like this industry and we want to help it.’’

GREG ALBRECHT, chief economist in the Louisiana legislative fiscal office. The state offers some of the nation’s most generous entertainment industry incentives

Are film incentives worth the public cost?

  • Article by: Editorial Board
  • Star Tribune
  • January 17, 2014 - 7:13 PM

With little fanfare, Minnesota made a move this past year to go from bit player in the moviemaking industry to reclaiming a starring role — something the state enjoyed in the 1990s when crews here shot big-budget Hollywood pictures like “Grumpy Old Men” and “Jingle All the Way.”

Over the next two years, the state will make $5 million a year available for the state’s Snowbate program, which offers taxpayer-funded rebates of up to 25 percent on some production costs in hopes of attracting movies and TV shows to film here. That amount is a record — the maximum allocated annually before now was $2 million. Still, it’s a sum likely to be eclipsed, with influential legislative advocates such as Sen. Richard Cohen, DFL-St. Paul, telling an editorial writer this week that he’d ideally “look for something larger” eventually if money is available, such as a two-year incentive package totaling $20 million to $25 million.

But the new push for entertainment industry incentives, often sold as economic development, comes as other states are challenging or curtailing them because the subsidies fall short of being a cost-effective tool for growth and job creation. Serious concerns also were raised recently in a Star Tribune story about the management and governance structure of the Minnesota Film & TV Board, which oversees the production incentive program.

Given the questions swirling about the subsidy concept and the board, state lawmakers need to drill down into the private nonprofit board’s operations and ensure that purported economic benefits are based on reality rather than fantasy. Ideally, the Office of the Legislative Auditor would perform one of its trusted deep reviews of the board and program.

Short of a legislative audit, lawmakers can do their own analysis. The potential future expansion of the program is also an excellent reason to take a hard look at this use of public dollars and whether the film board would be more accountable or efficient if it were part of a state agency.

At a minimum, legislators should review two highly critical reports by the well-known Tax Foundation and the Center on Budget and Policy Priorities (CBPP). That Cohen, who led the push for increased Snowbate funding last session, wasn’t familiar with either is troubling.

The titles of the reports succinctly sum up their findings: “Movie Production Incentives: Blockbuster Support for a Lackluster Policy” and “State Film Subsidies: Not Much Bang for Too Many Bucks.” Both reports were done in 2010, at the end of a decade in which most states began offering production tax credits or rebates to lure the entertainment industry. During Minnesota’s 1990s turn in the moviemaking spotlight, few states offered these incentives.

Most do now, however, and many spend far more than Minnesota intends to. Louisiana’s entertainment industry incentives cost around $200 million a year, according to Greg Albrecht, chief economist with that state’s legislative fiscal office. Albrecht said during an interview this week that Louisiana spends $5 for every $1 gained from the program. The state has done multiple analyses of the program, he said, adding that outside reports cited by industry about economic benefits are often inflated and that the methodology often doesn’t hold up to scrutiny.

The Tax Foundation and the CBPP reports are especially direct in their criticism, with the CBPP author concluding that “state film subsidies are a wasteful, ineffective and unfair instrument of economic development.’’ Officials with the Minnesota film board said this week said that these reports are general analyses not specific to Minnesota. They also questioned whether the organizations’ point of view influenced their conclusions.

Minnesotans understandably have fond memories of the state’s 1990s moviemaking heyday. But the industry has changed in the past two decades. Competing for this business now requires a substantial amount of public money for incentives. New economic analyses and recent cautions voiced by other states raise serious questions about supposed economic benefits.

Minnesota lawmakers should be trying to answer the question posed by one of their colleagues, Sen. Sean Nienow, R-Cambridge, this week: “Are we spending the money because we want to do it, or because it really makes sense?’’

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