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An Industry Is Born: Closeup Of 5 Years of Film Tax Credits


Dan Haar

8:13 PM EST, November 17, 2012

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David Duchovny, Timothy Hutton and Hope Davis have been filming a movie for the past month in Greenwich, the real-life story of a family that built a children's hospital after their daughter died of rabies.

It is not the spectacle it might have been five years ago.

Compared with the stir caused by Harrison Ford filming an Indiana Jones movie in New Haven or Leonardo DiCaprio and Kate Winslet traipsing through Fairfield County a few years back, "After the Fall" hasn't created much buzz.

Maybe its status as a smaller-budget, independent film, the blasé attitude in Greenwich and the fact that the project hasn't taken over downtown are factors.

But beyond that, perhaps we've come to the point where Hollywood doing business in the Land of Steady Habits is just that — another day at the office.

Chalk that up as a success for the state's film, TV and digital media tax credit. Five years after the program offered its first bounties, a detailed look at the $364 million in payouts shows that a sports and entertainment media industry is now firmly ensconced here, proving early skeptics wrong. In the first nine months of 2012 alone, production companies earned $85 million worth of the credits.

Is it worth the cost to taxpayers? Is there even a cost to taxpayers at all? The short answers are "probably," and "sometimes," but we don't know for sure because there's no public study of the numbers.

What is apparent is that movie stars are just a sideshow at this party. Three companies — Blue Sky Studios, ESPN and World Wrestling Entertainment — snagged $155 million, or 43 percent, of the entire program from the first payout in August 2007 through September of this year.

At least 23 feature films have tucked into $1 million or more in state tax credits, with the award for biggest outlay to a feature film going to — the envelope please — Robert DeNiro and Al Pacino in "Righteous Kill" (2008), for $12.5 million. (Applause.)

"Righteous Kill" comes in at No. 7 overall. After Blue Sky, ESPN and WWE, a trio of TV studios garnered a total of $45 million for shows such as Jerry Springer, Maury Povich and "Are We There Yet?"

When we see one project lead to another, that's the sign of a real industry. The best example of that was the 2009 move of "The Jerry Springer Show," "Maury" and then "The Steve Wilkos Show" to the Stamford Media Center & Productions studio. Because of connections to NBC, the success of that venture led to NBC Sports moving its headquarters and studio operations to Stamford.

"That's the kind of thing that the tax credits are helping us to do," said George Norfleet, head of the state's Office of Film, TV and Digital Media, which manages the tax credits and works with production firms eyeing the state.

The remainder of the list is a smaller mix of projects, many locally based, and that's the whole point. Put it all into a package, and there's a powerful cluster of activity. It's all the more distinct since this engine has a specialty, sports and entertainment on TV and digital platforms. And it's largely based in Fairfield County.

"There is no doubt that the program is creating a bona fide, novel industry … that wasn't here before," Norfleet said.

'TV Is Our Bread And Butter'

So we've bought ourselves an industry. The $364 million in credits, which companies can sell if the credits exceed their state tax bills, rewarded $1.3 billion worth of activity.

Like biotech, another industry the state is spending heavily to woo, the entertainment media industry doesn't come cheap. Between the two, the entertainment play is less costly, considering that we're paying more than $1 billion for the medical research complex in Farmington alone.

But the economic benefits of entertainment media are less clear, because many of the people working in the business are transient — starting with movie stars and directors — and because every eligible project spending more than $1 million requires a 30 percent payoff in tax credits.

From the start, the goal was to develop a "bricks and mortar" industry, because, clearly, the payoff for the state is higher if permanent jobs are here. A Hollywood film production parachuting in, complete with caterers from New York, doesn't cut it. That's been one of the main criticisms of this and similar programs across the country as states put out the red carpet with green fringe.

Among other problems, if a production doesn't create local jobs, the only gains we have are the taxes that it pays and the goods and services it buys — all nice, but it's hard to make it balance the millions of dollars some of these big-screen cavalcades are costing us.

"Taxpayers aren't getting as big a bang for the buck as the studies that the states release show," said Thomas Cafcas, a researcher at the Washington, D.C., advocacy group Good Jobs First. "It's really a free-for-all. You had some states subsidizing work that was done out of state. … There have been some very troubling instances of fraud and abuse of film tax credits that have emerged."

Norfleet and other backers of the credit say Connecticut has more stringent rules than, say, Louisiana. For example, all productions here must do at least some of their work in a permanent studio — a rule that was added in 2011.

"We would love to have as many feature films come here as possible, but we recognize that television is our bread and butter; television and sports entertainment media," Norfleet said. "The dollars are shifting from feature films to TV."

And to digital. Blue Sky Studios, the animation firm that made the "Ice Age" series and "Rio," collected $61 million in tax credits after moving just a few feet into Greenwich from White Plains, N.Y., in 2008.

Blue Sky officials didn't return calls seeking comment for this column. With a California-style culture that combines L.A. movie glitz with Silicon Valley tech, this firm is a tough one to measure when it comes to boosting the Connecticut economy. The firm has more than 500 people paid an average of more than $100,000 a year, so it's great for the tax base, but it's closer to Armonk, N.Y., than any town center in Connecticut, including Greenwich — so its benefit to Connecticut commerce is less than that of a business in, say, Bristol.

Speaking of ESPN, the sports network juggernaut was long established when the tax credits started, of course. ESPN claimed $56 million in credits, a figure that will jump dramatically with the network's futuristic, $190 million Digital Center 2 — the largest building on the campus, set to open in 2014. That total included $6.2 million in 2007 for the miniseries "The Bronx is Burning," but the rest of the credits, an ESPN spokesman said, were for buildouts at the Bristol campus.

"It's been a big factor as we've expanded our facilities," said Mike Soltys at ESPN. "We have other options. … Every single visitor who comes here says, 'I can't believe how much this place has grown since I was last here.'"

ESPN and Blue Sky have both received other state aid connected with adding jobs.

And World Wrestling Entertainment, a Stamford stalwart, put a headlock around $37 million in credits, mostly for post-production work, turning tapes of live events into TV shows. The company, which is publicly traded, has grown from about 575 employees at the start of 2011 to more than 700 as it prepares to launch its own network.

The credits are a factor in WWE decisions on whether to expand in Stamford, said George Barrios, the chief financial officer, but it's not possible to say how crucial they've been.

Local Excitement

The fact that Linda McMahon, the former WWE CEO and wife of the current chairman, Vince McMahon, opposed the exact credits her company received in her recent campaign for U.S. Senate was an irony lost on no one. She was right to speak her mind and the company was right to take the credits, much of it under her watch.

But the irony leads to a broad question: With critics on the right as well as the left, why can't Connecticut measure the results and target the program to attract exactly what it wants, chiefly bricks-and-mortar, TV and digital enterprises?

Measuring the results will require an expensive study, which should happen, and it should be fully public. But targeting only those enterprises that add local, permanent jobs is not that simple, Norfleet said. It's all one industry with the same sets of skills, and it's impossible to separate films from TV when you're trying to build an industry.

"As you interact with companies, you start understanding that there are executives and there are decision-makers up the chain of command that are making decisions that are about feature film production and TV," he said.

The movie filming in Greenwich, a relatively low-budget project at $5 million or $6 million, was a natural for the town because the story takes place there. But producer Anthony Mastromauro said Thursday that he considered other locations. The tax credit helped make the decision easier, he said, along with the film office staff. "They're always very friendly and helpful and accommodating," he said.

Part of the payoff is not strictly economic. It's nice to have some excitement, even if it doesn't bring a fortune to the state. That's what Rocco Frank figured when his ComputerFox store in the Southport section of Fairfield made an appearance in the 2008 Kate Winslet, Leonardo DiCaprio movie "Revolutionary Road." Then again, the production basically shut down businesses on the main drag for several days after paying a stipend to the owners.

"We were kind of happy to see that we would be taking part in a movie, but we were really thrilled to see them leave," Frank said. "I think it was more exciting for the kids and the teenagers. ... As a business owner, it's a little different."

Lawmakers and Gov. Dannel P. Malloy should, and probably will, tighten the rules further — preferably in the arena of Hollywood film subsidies.

Meanwhile, Norfleet talks about studios that have taken root or expanded here: Televerse, Triple Threat, Palace, Sonalyst. A former producer in New York, he sounds like a wheeler-dealer from central casting when he adds coyly, "there are other folks that I can't talk about right now."