FILM AND TELEVISION PRODUCTION spending in Massachusetts rebounded in 2011 and is starting to experience rapid growth, but most of the money is continuing to flow to out-of-state residents and businesses, according to a new report on the state’s film tax credit.
The state Revenue Department says the Massachusetts film tax credit attracted 77 productions in 2011 that spent $176 million, up sharply from the $71.6 million they spent in 2010. The agency is forecasting that spending will rise to more than $300 million in 2012.
Although the film industry is starting to build more local infrastructure, including a film studio in Devens, 65 percent of the money coming into the state during 2011 for movies and commercials flowed back out to nonresidents and nonresident businesses. Of the $113.3 million spent on wages, 76 percent was paid to nonresidents and 24 percent to residents. The reverse was true for spending on items such as lighting, set construction, and costumes; 55 percent of that money went to Massachusetts-based businesses and 45 percent to firms outside the state.
Hollywood stars are the big reason why so much of the wages went to nonresidents. The report said $54.3 million in wages, about 48 percent of the total, was paid out in increments greater than $1 million, nearly all of which went to a handful of stars and directors from out of state. For example, R.I.P.D., one of 13 feature films shot in Massachusetts during 2011, featured the big-name and highly-paid actors Ryan Reynolds, Jeff Bridges, Kevin Bacon, and Mary-Louise Parker.
The report is expected to accelerate discussions on Beacon Hill about whether to cap or tweak the film tax credit. Gov. Deval Patrick has proposed capping outlays under the tax credit at $40 million a year; legislation is also pending that would shave the size of the tax credit for producers who fail to steer half of their payroll budget to local residents.
Both proposals are controversial. The mere hint of a cap several years ago scared away Hollywood production firms and sent film spending in Massachusetts to its lowest level ever in 2010. Pennsylvania capped its film tax credit at $60 million during the fiscal 2012-2013 fiscal year and the money was gone in four weeks. Two productions are currently shooting in Massachusetts because of the cap in Pennsylvania. One is a movie about the 1970s Abscam scandal starring Bradley Cooper and Jennifer Lawrence and the other a TV pilot for NBC about modern-day version of the Hatfields & McCoys.
Massachusetts currently offers producers of movies, TV shows, and commercials a credit equal to 25 percent of whatever they spend in Massachusetts. So the $176 million spent by productions in 2011 generated tax credits of $44 million, $4 million above Patrick’s proposed cap. Most production companies lack any tax exposure in Massachusetts, so they either sell the tax credits at a roughly 10 percent discount to businesses looking to reduce their tax bills or back to the state. Either way, the tax credits, once redeemed, reduce how much money the state can devote to other spending areas such as education, transportation, and public health.
The Revenue Department report said the film tax credit led to the creation of 1,236 full-time equivalent jobs, at a cost of nearly $36,000 per job. The report claims the actual cost is much higher, about $69,000 per job. The Revenue Department estimate is much higher because it assumes the $44 million handed out in film tax credits results in a reduction of spending and employees elsewhere in state government. Thus, the Revenue Department says only 864 net new jobs were created in 2011, of which 497 were in-state and 367 were out of state.
Overall, according to the report, the average monthly employment in the motion picture and video industry in Massachusetts fell to 5,084 in 2011, down from 5,228 in 2010 and well off the peak of 6,059 in 2008.
The average annualized wage of Massachusetts film production employees was $70,657, according to the report. But the Revenue Department said that number if squishy. “These annualized wage calculations are considerably higher than the amounts actually paid to employees on film productions, as those employees were generally employed for periods of three months or less,” the report said. “In many cases, workers on film productions are employed only for a few weeks, or even days.”
As it has in the past, the Revenue Department said it collected no taxes on income earned by stars or directors after a film’s release. Industry officials say it is not uncommon for a star to take at least part of his pay in the form of payments tied to how much the film earns after release. But the Revenue Department has never pursued taxes on that post-production income, in part because it would take considerable manpower.