Some concerned about liability
By Mike Hasten • email@example.com • October 23, 2008 2:00 am
BATON ROUGE — Louisiana continues to prosper from the film tax credit program, but state lawmakers are concerned about a potential $1.4 billion liability if applicants build all the film-related facilities that are in the planning stages.
Louisiana Economic Development Secretary Stephen Moret says it's "definitely not realistic" to think the $3.6 billion in proposed projects — studios, sound stages and pre- and post-production facilities — will be built. Instead of $1.4 billion, Moret believes "the maximum exposure would be in the hundreds of millions," he said.
The program offers a tax break of 40 percent of construction cost.
Members of legislative panels that oversee tax credits complained that proposed rules for implementing credits for building facilities are so strict that few projects could take advantage of the breaks.
An attorney general's opinion states any expenditure that qualifies for the tax break must be made within two years of application approval. Moret said that opinion agrees with the way the department interprets the law.
Robert Day, a Baton Rouge developer who received approval in December 2007 to build a $665 million project called Red Stick Studios, said "we can't build the entire project by the end of next year."
Tom Clark, Day's legal adviser, got Louisiana Economic Development to ask for another attorney general's opinion, which Moret said he "would consider" when drafting final rules to be presented to the committee in about two months. He would not commit to changing the two-year limit if Attorney General Buddy Caldwell issues a revised opinion allowing more time.
"The success of the film industry in Louisiana has little to do with infrastructure," he said. "As long as the state is investing 40 percent in the projects, we have to be careful."
If the rules stay as they are, "the unfortunate alternative is to litigate," Clark said.
Sen. Robert Adley, R-Benton, said the original legislation creating the break was clear and did not establish such a short timeline, but a conference committee version that was finally approved created confusion. "If you read the law, it can be interpreted either way," he said.
Adley said the Legislature wanted to "tighten up" the original version because it left room for studios to continue building and stretching the tax breaks for years. "It was not our intention to carry that 40 percent forever."
The legislation was structured so the Legislature would have to approve the rules, he said.
Moret said the state needs to keep a tight rein on the program because it is essentially paying 40 percent of the cost of studios. He said he's concerned about overbuilding studios that won't be utilized and the state not getting a return on its investment.
Sen. Rob Marionneaux, D-Livonia, told Moret "It seems that you're at odds with what we want to do" — build more studios.
Moret said he favors building more studios if they are needed.
Attorney Phyllis Simms, representing Shreveport's Robinson Film Center and Louisiana Wave Studio, as well as other studios, questioned a provision in the law and rules that state studios turned down for tax breaks can only appeal to Moret or his successor as Louisiana Economic Development secretary.
"It's nonsensical that your only appeal is to the body that denied your application," she said.
Adley said the committee has oversight on any rejections, but Simms pointed out that it cannot override the secretary's decisions.
Sherri McConnell, director of Film and Video under Louisiana Economic Development, said Louisiana was the first state to offer tax credits; however, 39 other states have implemented some form of credits to compete with the state.
"We're still the preferred place to shoot," she said, but other states are competing. And with credits for sound production, video games and soon infrastructure development and live music productions, "we're the only place that offers it all."
Rick Seaton, assistant to Shreveport Mayor Cedric Glover, agreed with McConnell and said, "We're the top dog."
He said that because of tax breaks totaling 25 percent on the amount of money spent filming in the state, Louisiana was selected as the site of 10 percent of all movies filmed in the United States in 2007 — third behind California and New York.
Seaton said Shreveport is a popular site for filming, but it has lost "a number of films because we don't have studios with adequate height."
Lampton Enochs, of Shreveport, head of Louisiana Production Service Consultants, told the panel "production incentives are key to continue growing the industry."
Enochs said his company has worked on 18 projects and three television series "because of the incentives."