West Virginia Bills Would Slash Film Subsidies

West Virginia Bills Would Slash Film Subsidies
April 2, 2013

West Virginia may become the next state to temper its love fest with Hollywood.

Two companion bills are winding their way through the Legislature. If they continue to garner bipartisan support, the West Virginia Film Office will have to slash by half the total amount in tax credits it can dole out annually to production companies that film in-state — from $10 million to $5 million.

As the state tries to tighten its fiscal belt, Gov. Earl Ray Tomblin, a Democrat, saw halving film incentives as a way to do that without further burdening taxpayers.

“He’s s trying to not raise tax rates in a tight budget time, so he’s closing some of the loopholes,” Republican Sen. Mike Hall, one of the bill’s sponsors, said.

Tomblin’s office did not return requests for comment.

Little Demand

But for West Virginia’s film tax-credit program, which is intended to stimulate the local economy through spending and job creation, it’s also an issue of demand.

The state over the past few years has not handed out more than $4.8 million in credits in any given year for film and television projects, said Pam Haynes, director of the West Virginia Film Office.

Hall said the governor is simply trying to control the program — “although obviously if there aren’t any films and nobody does anything then we don’t get any activity,” he added.

No Measures

It’s difficult to gauge the benefit of film industry-related activity in the Mountain State, as the state doesn’t track overall economic benefits or jobs created.

“We only have direct-spend numbers,” Haynes said. “We do not have a calculation of economic impact.”

Those direct expenditures vary, from $2.2 million in fiscal 2009 to $16.4 million in fiscal 2010, when Paramount Pictures’ “Super 8” filmed in West Virginia with direct expenditures of nearly $15 million, Haynes said.

And to make the West Virginia program even cloudier, the state’s Film Industry Investment Act prohibits the Film Office from disclosing the amounts of tax breaks given to individual projects.

Dubious Benefits

Critics of film industry tax incentives say it’s hard to gauge actual economic impact, even in states that do track ripple-effect data. In a 2010 study, the left-leaning think tank Center on Budget and Policy Priorities concluded that states often refer to “flawed studies” to overestimate the benefits of incentives.

In neighboring Virginia, where Republican Gov. Bob McDonnell (R) touted the production of “Lincoln” as an economy booster, the Richmond Times-Dispatch’s PolitiFact summarized, “It’s hard to pin down Hollywood’s benefit to Virginia.”

Skepticism of incentive programs, combined with tightening state budgets and cases of fraud and abuse by production companies, have led some states to suspend their programs or shut them down entirely.

In 2010, a record 40 states offered some version of tax incentives to production companies, according to the conservative Washington, D.C.-based Tax Foundation. Since then, states including Arizona, Iowa, Kansas and Washington have abandoned their programs.

Kathryn Watson (katie@watchdogvirginia.org) reports for Watchdogvirginia.org. Used with permission of Watchdog.org.