Film incentives drama in N.C. doesn’t affect Virginia

In the 1979 film “10,” Dudley Moore pursued an elusive Bo Derek after catching a glimpse of her on her wedding day.

Thirty-five years later, Gov. Terry McAuliffe is courting the actress, but he is not chasing after her on a Mexican beach. The governor and his wife, Dorothy, invited Derek to spend a night at the Executive Mansion in Richmond and be the guest of honor at a garden party.

Unlike Moore’s character in “10,” McAuliffe’s interest in Derek does not stem from how she looks with her hair in corn rows. She is developing a television series, and the governor wants it filmed in Virginia.

McAuliffe’s charm offensive is one example of the intense competition among the states to recruit movie and TV productions. Like 38 other states, Virginia provides incentives to production companies to film here. Just as in economic development fights to recruit a job-creating factory, some state is always raising the ante.

One of Virginia’s perennial rivals, however, has been debating whether the stakes have gotten too high.  The North Carolina General Assembly is trying to decide if it will let its film incentive program expire at the end of this year.

The program ranked No. 5 in the nation last year in annual film production revenue, trailing only California, New York, Georgia and Louisiana. More than 60 productions spent over $254 million in the state in 2013. The year before, the total was even higher, $376 million.

North Carolina’s incentives program began in 2005, but recruitment started to take off after changes were made in 2010. Refundable tax credits granted to film productions rose from 15 to 25 percent of qualified expenses with total limits per project increasing from $7.5 million to $20 million. (TV series, however, are not subject to the project cap.)

North Carolina nabbed some impressive projects in recent years, including the films “The Hunger Games” and “Iron Man 3,” which together received almost $34 million in tax credit refunds in 2012 while spending $136 million, according to The Associated Press.  Charlotte also is the production site for the award-winning television series “Homeland.”

A number of North Carolina legislators, however, have voiced their dissatisfaction with the film incentives program, which paid out $61 million last year. They believe the state is paying too much for projects that don’t produce many full-time jobs.

North Carolina’s debate over its film incentives likely is a product of its stubbornly slow recovery from the Great Recession. While Virginia’s unemployment rate has fallen from 7.3 to 4.9 percent since 2010, North Carolina’s jobless rate, now 6.2 percent, was above 8 percent a year ago.

To attract new employers, the Republican-controlled legislature cut corporate taxes from 6.9 percent last year to 6 percent this year and 5 percent next year. Critics have blamed the tax cuts for a $445 million revenue shortfall in the fiscal year that ended June 30. The situation has forced the legislators to make tough decisions, including the possibility of letting the film incentives program die.

In early June, the North Carolina Senate passed a bill that would replace tax credits with grants totaling no more than $20 million a year, but that was not expected to be the last word on the issue during the legislative session, which will end later this summer.

According to the Wall Street Journal, news of the possible expiration of the state’s film incentives program played a part in a decision by 21st Century Fox to film “Salem,” a new television series, in Louisiana instead of North Carolina. Louisiana offers a 30 percent tax credit plus an additional 5 percent labor credit for employing state residents.

In contrast to the legislative turmoil in North Carolina, the Virginia General Assembly increased the level of film incentives slightly in the fiscal year beginning July 1.  With the increase, however, the total annual appropriation amounts to $8.9 million, ($6.5 million for tax credits and $2.4 million for grants) less than half of the $20 million cap proposed by the North Carolina Senate.

“We try to operate a program here that is sustainable,” says Andy Edmunds, director of the Virginia Film Office.

Despite its modest outlays compared with many other states, Virginia has attracted some major film productions in recent years, including Steven Spielberg’s “Lincoln” starring Daniel Day-Lewis and “Captain Phillips” starring Tom Hanks. Television projects have included “Killing Lincoln,” “Killing Kennedy” and “Turn,” a series on AMC about spies during the Revolutionary War that is being filmed in the Richmond area.

According to a study released last September, 11 film productions shot in Virginia from 2011 through 2013 received a total of $11.8 million in incentives while spending $66.4 million in the state, creating an economic impact of $139.1 million. One benefit of the incentives, however, might not be reflected in those numbers.

The Blu-ray version of Spielberg’s “Lincoln” included a three-minute video about filming in Virginia. Likewise, every episode of “Turn” has a 15-second commercial for Virginia Tourism, produced at AMC’s expense, which encourages tourists to come to Virginia to explore colonial history.

“That is part of our arrangement if you received incentives,” Edmunds says. “We’re really the only state that has created that relationship with our production partner.”

The “Virginia Way” in recruiting film projects may not have captured Bo Derek yet, but  it has snared Meg Ryan. She will make her directorial debut filming “Ithaca,” a movie based on William Saroyan’s  novel ”The Human Comedy.” Production in the Old Dominion will begin this summer.