Hollywood Boonddoggle

 

Crain's New York

New York’s newly expanded tax credit for film productions is a “net negative” that fails to give taxpayers a return on their investment, even as state leaders have continued pushing to expand it, according to a new study commissioned by the state itself.

New York’s Film Production Credit was grown in last year’s state budget to cover as much as $700 million in costs annually for film and television productions that opt to locate in the state, forgiving 30% of eligible costs for each movie and show. Lawmakers, at the urging of Gov. Kathy Hochul, also extended the program through 2034 — despite longstanding complaints from watchdogs that the incentive may not achieve its stated goal of spurring economic activity and attracting more well-paying jobs.

Those claims are bolstered by the new study by the financial advisory firm PFM Group, which was commissioned by the state’s Department of Taxation and Finance to look into each of New York’s economic development tax credits. The study was required by a 2022 state budget provision and was put together over the course of 2023.

All told, New York gets back just 31 cents for every $1 it invests in film productions through tax breaks, the study concludes after considering the program’s pros and cons. The program has cost the state some $5 billion in the last decade, making it the largest of New York’s many tax incentives.

“Based on an objective weighing of the costs and benefits, the film production credit is at best a break-even proposition and more likely a net cost to NYS,” the authors wrote.

As critics have long argued, the study found that much of the filming activity funded by the credit would have happened in New York regardless, given its existing workforce and infrastructure. And although the productions do attract high-paying jobs, the tax credit’s unlimited duration means it functions more as an “ongoing subsidy” rather than a one-time incentive that could wind down after establishing a steady film industry in the state.

Indeed, many of the productions that continue receiving annual tax credits are long-running television series filmed in New York for years — undercutting the program’s stated goal of attracting new investments. And even the job-creation claim is “inconclusive at best,” the study found. After New York launched the credit in 2004, film industry employment remained stagnant for years until increasing in 2010, and its share relative to the nationwide market has since dropped.

A spokesman for Gov. Kathy Hochul said the office is reviewing the report but pushed back on its conclusions, pointing to other studies that found better results. Among them was a study commissioned by the Empire State Development Corp. which found that New York’s state and local governments reaped a combined $1.70 for every dollar spent on the film tax credit in 2021 and 2022 — although the state by itself (omitting local governments like New York City) still lost out overall, the report found.

“New York's tax credits and incentive programs are critical to growing the state's economy, boosting innovation, and creating good jobs, which is why the Legislature approved them in the first place, and Governor Hochul will continue working with members to improve the programs to maximize benefits for New Yorkers,” spokesman Justin Henry said.

Hochul’s office pointed to the high wages available in film and TV jobs, which often employ people without college degrees. New York has also lost productions to other states that boosted their incentives, such as the 2022 film “White Noise,” which filmed in Cleveland after “extensively scouting New York state,” Hochul’s office said.

The PFM study found that other “qualitative” factors cited by boosters of the tax break are similarly murky, like the exposure that New York state and city might enjoy as a result of all the films and shows set here. Many of those productions, like “Law & Order,” hardly portray New York in a fully positive light, the authors note.

The state’s expansions to the program last year also expanded the credit to cover “above-the-line” salaries for actors, directors, producers and writers, in addition to the “below-the-line” jobs, such as hairdressers and set builders, that had been covered before. Hochul, who pushed for the expansions, argued it would lure more productions to the state and boost an industry that serves as a major union employer.

In the end, the study concludes, the strongest argument for the tax credit may be that it works as a “defense mechanism” — deterring productions from choosing rival states like California and Georgia that offer their own incentives.