Lights, Camera, Tax Credit: Massachusetts Lures Filmmakers With Generous Rebate

New York Times
June 5, 2008

Angela Peri was shepherding the more than 200 extras she had sent to the set of a new movie, “Paul Blart: Mall Cop,” being filmed in an upscale mall near Boston. So Ms. Peri, who runs a small casting agency, Boston Casting, hardly had a moment to talk about the impact of the new tax credits going to filmmakers in Massachusetts.

“It’s nuts,” she said. After nearly two decades of eking out a living with industrial films, commercials and the rare feature film, her business has doubled in the last year. “We’re working 12 to 15 hour days.”

Since last July, when Gov. Deval L. Patrick signed into law a 25 percent film tax credit, a wave of major film projects has landed in Massachusetts. The legislation was part of a fierce competition among a growing number of states to entice Hollywood to make films within their borders.

In April, both New York and Michigan raised the ante with generous rebate plans, with Michigan raising its tax credit to 42 percent. And in May, California’s governor, Arnold Schwarzenegger, urged legislators in his state to enhance its tax credit in hopes of keeping Hollywood in Hollywood. Nearly all 50 states have instituted film tax credits in recent years.

Still, the tax credits are not universally supported. A few Massachusetts legislators have recently criticized them, arguing that taxpayers are being fooled by the glamour and that much of the money generated by the films will end up leaving the state in the pockets of wealthy directors and movie stars.

Advocates of the tax credits disagree, of course. They insist that the economic payoff for welcoming big feature films with multimillion dollar budgets is huge, particularly for the small businesses in the places where the movies are being made.

Massachusetts, with its aggressive push to lure film projects, is already seeing a big payback. According to Nick Paleologos, executive director of the Massachusetts Film Office in Boston, the tax credit has breathed life into a once-moribund local industry.

Since 2006, when a more limited tax credit was first offered, Massachusetts has realized $545 million in direct new film-based revenue compared with just $6 million the year before the tax credit was approved, according to the state’s Department of Revenue.

“In January and February last year, hotels in Boston were empty,” Mr. Paleologos said. “This year they were full. The movie company comes in and takes 200 rooms for two months. The jobs connected to those rooms has a ripple effect. Instead of collecting unemployment, workers are collecting paychecks and paying state income taxes. They go out and spend that money and other businesses make money and pay more taxes.”

In 2005, for example, just one feature film was made in the state and only two the next year. In 2007, with the new tax credit, the number jumped to eight, and this year, there are already seven being made before July with five in the wings.

Since January, multiple productions were shooting simultaneously in and around the Boston area. Besides “Paul Blart: Mall Cop,” starring the comic actor Kevin James, Martin Scorsese was directing Leonardo DiCaprio in “Ashecliffe”; Ricky Gervais, the British comic actor, was directing and starring in his first feature film, “This Side of the Truth,” on the streets of Lowell. Sandra Bullock was filming “The Proposal” in Rockport and Gloucester; and Matthew McConaughey was filming “The Ghosts of Girlfriends Past” in Boston. Because of the weak dollar, foreign filmmakers are also heading to Massachusetts to take advantage of what could amount to a 50 cent rebate on every dollar spent.

Hotels, restaurants and bars are reaping the economic rewards along with small businesses that provide film equipment, production crews, security, construction, catering, hairstyling, makeup and extras. The local film union has seen membership rise by nearly 50 percent and wages double as the film work pours in. The Massachusetts Department of Labor is sponsoring programs to refine the skills of trades people for film work because the demand for labor is so high.
“We chose Massachusetts due to the rebate,” said Lynda Obst, producer of “This Side of the Truth.” Ms. Obst said the tax credit will save the production more than $3 million, which is a huge advantage for a film with an $18 million budget.

The city of Lowell, 45 minutes northwest of Boston, has welcomed Mr. Gervais and his film crew with open arms. The former mill town and birthplace of Jack Kerouac is reaping an estimated $2 million from the production for the local economy.

Sean Harmon, owner of Harmon’s Paint and Wallpaper, said he has done about $20,000 in business with the film production already. “This is all found business,” Mr. Harmon said. “It’s been a boon to the whole city.”

With a large cast and crew descending on the city for more than two months of shooting, local restaurants, hotels, laundries, bars and other businesses are cashing in. “All these small businesses are getting the traffic of 160 crew members with a per-diem to spend,” Ms. Obst said.

Mr. Gervais, who created and starred in the original British version of “The Office” and later “Extras,” said he looked at nearly a dozen communities in New England before settling on Lowell. “I do like the idea that this generates income for small businesses,” he said. “It’s important to put something back. And we end up with an extra $3 million doing it here rather than New York or elsewhere.”

In fact, it was a coalition of small business owners like Ms. Peri that persuaded the commonwealth to pass the aggressive tax credit. In late 2004, the group, lead by Joe Maiella, senior vice president of CrewStar, a small firm that offers payroll services and other crew-related services for film productions, made the case that Massachusetts was missing a lucrative opportunity.
With its pristine shoreline, diverse geographies, and historic cities and towns, the state had natural appeal. Tourism is a major economic driver, and a starring role in a feature film means millions of dollars worth of free advertising for the state.

“Massachusetts was not even on the radar map in attracting this level of film production,” Mr. Maiella said. “We recognized that we had to coalesce the industry here to achieve a number of initiatives. We used models from other states, particularly Louisiana, to draft a bill that we knew would work.”

The initial bill put a $7 million limit on the tax credit, which effectively kept big film projects away. Under the coalition’s prodding, Governor Patrick removed the cap last July, increased the credit to 25 percent from 20 percent and offered motion picture producers flexibility in how they took advantage of the credit. “Some states give you credit only below the line, with all sorts of restrictions and permutations,” Mr. Paleologos said. “Here, you know what your credit is worth.”
The embarrassment of riches comes with a price. The local support businesses are scrambling to keep up with demand. Production crews are snapped up and kept busy for months, forcing new productions to import crews from Los Angeles or New York.

“You have to be able to provide the infrastructure,” Mr. Paleologos said. “Studios want to hire locally and avoid paying airfare and hotels and per-diems for outside crews.”

Thus far, Massachusetts has not lost a motion picture project for lack of support crews but it is in a race to keep pace. In addition to the state Labor Department’s retraining efforts, the state is promoting education programs tied to the numerous local colleges and universities to train students in the film production business. Many actors and production people who left the state are returning.

In addition, three groups of private investors are seeking to spend up to $400 million to build state of the art soundstages in Plymouth, Weymouth or Boston that will not only create thousands of new jobs but make production in Massachusetts even more viable.

With all that, those in the local film community are well aware of the heated battle to take some of the work away. “It’s about the money,” Ms. Peri acknowledges. “If they can get 42 percent rebate in Michigan, they’ll just pack up and find a way to make Michigan look like Paris.”

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