Georgia speaks to Hollywood’s bottom line

Georgia plays a zombie wasteland in the hit TV series “The Walking Dead.” Scenes shot in Atlanta will portray dystopian poverty and splendor this fall in “The Hunger Games: Catching Fire.” A British movie giant that works on the James Bond and Harry Potter franchises is building a studio campus in Fayette County.

Yet at a Los Angeles convention to drum up movie business last month, Georgia’s spartan 10-by-10 booth gave little hint of the state’s rise to A-list stature. While Hawaii’s booth nearby looked ready for a full-blown Luau, Georgia’s featured a flat-screen scrolling clips and a logo befitting an airbrushed T-shirt.

The low-budget approach was apt. While industry folks love Atlanta’s airport, local talent base and pleasant but generic scenery, it’s something else that really gets their attention: Money.

“You shoot in Atlanta because it’s cheap,” filmmaker Peter Farrelly said during a podcast recently when revealing plans to film the “Dumb and Dumber” sequel here later this summer.

A big reason for that is the gusher of Georgia tax credits that Hollywood has used, or more likely, sold, for cash — representing a hit of at least a $250 million to the state treasury from 2008 to 2011.

Georgia revamped and sweetened its tax credits in 2008, with the goal of becoming more competitive in a race among states to lure Hollywood out of Hollywood. It’s worked. Production spending here tripled to $880 million in fiscal 2012.

“In a stalled economy, this business has absolutely been thriving,” said local talent agent Mystie Buice. Before the the tax credits her clients mostly worked in commercials and corporate videos. Now she’s helping them land more sizable gigs and is working with people moving here from elsewhere.

“Even people who have gone to L.A. in the past are seeing more opportunities here,” she said.

That’s exactly what Claire Bronson and her husband Scott Poythress did. The couple moved from California to Georgia in 2009 in search of film industry work.

“The number of opportunities here while we were twiddling our thumbs in California” made the decision to move easy, Bronson said. “We wouldn’t have moved if there wasn’t a boom going on here.”

She and her husband, along with fellow acting couple Catherine Dyer and husband Jason MacDonald, launched Drama Inc., a Grant Park business offering acting classes, demo reels, headshots and other services to industry aspirants.

Dyer will appear as Arnold Schwarzenegger’s character’s wife in the locally made movie “Sabotage” next year. They moved here from New York for family reasons in 2006, thinking they were putting their acting careers on hold.

Instead, they became two of the estimated 25,000 to 30,000 Georgians employed in movie, TV, music video and commercial production — an industry that state officials say generated $3.1 billion in economic impact in the 12 months ended June 2012.

But Tinseltown’s love affair with Georgia could end in a heart beat if those incentives ever shrink or disappear as some states are contemplating. Other competitors also could poach from Georgia by upping the ante.

It’s happened before.

Hollywood started bypassing Georgia in the 1990s and 2000s when Canada and many states piled freebies on the table to win business. Louisiana and North Carolina ate Georgia’s movie making lunch for years when those states started offering steep incentives.

More than 40 states now offer incentives, and competition is fierce from overseas, including the U.K., and Bulgaria.

Governments that have pulled back their perks — like New Mexico and Michigan — soon found themselves jumping back into the game.

The movie business has bled out of California to the point that that industry leaders want the state to beef up their incentive structure after years of decline.

Several projects to build new or expand existing filmmaking campuses suggests permanence in Georgia, but the bottom line is king.

“The question is simple: Do you want this industry or not?” said Aaron Syrett, director of the North Carolina Film Office. “No incentive, no industry.”

An industry takes root

Just a few years ago, Georgia only had enough top-tier production crews for two or three large scale movies, said Lee Thomas, the head of the entertainment division of the state Department of Economic Development. Today, she said, it has enough for about 10.

“It’s funny because now no matter what the script says, they’ll say, ‘We’ll make it work,’” Thomas said. “Back when we had no incentives the script could be written for Georgia and they would say, ‘Oh you’re not quite right.’ “

Now films go in the opposite direction. The Denzel Washington hit “Flight” was originally set in Oklahoma but incentives — along with metro Atlanta’s mix of urban and rural backdrops — persuaded producers to come to Georgia and redo the script.

At the same time, advances in filming technology and methods have turned Georgia into a Method actor who can take on virtually any role.

Jekyll Island stood in for Cuba in “X-Men: First Class.” Charlie Brown Field in Fulton County played an Ethiopian airport in “What to Expect When You’re Expecting.”

Construction of studios, film-related education programs at area schools and the rise of local production companies is creating a true local movie industry, as opposed to simply a succession of come-and-go productions, said Ric Reitz, an actor and writer who was part of a task force that formed the state’s incentives.

Arguably the most prestigious project of late: a joint venture in Fayette County between a trust tied to Chick-fil-A’s Cathy family and Pinewood Studios — the U.K. studio facilities where James Bond films are made. The site, backers say, could employ thousands.

Reitz said growth at Tyler Perry Studios and Turner Broadcasting also make Georgia more resilient if Hollywood starts moving business or the state decides to cut back incentives.

There’s no sign of weakening political support, but those in the business want to keep it that way.

This spring, Perry had a party at his home after a red-carpet screening of the movie “Temptation: Confessions of a Marriage Counselor.” Guests included Kim Kardashian, Kanye West — and Georgia Lt. Gov. Casey Cagle.

Some of the Perry’s remarks aimed squarely at the state’s lawmakers.

“I am committed to making sure these tax credits become permanent in the state of Georgia,” he said.

Perry has said he may expand the five-soundstage operation in south Atlanta where he shot “Meet the Browns” and currently shoots other shows and feature films.

Turner, with more than 7,000 employees in Georgia, produces content for CNN, HLN and NBA TV that does not qualify for incentives. But animated shows for Cartoon Network and pilots for TNT — including the legal comedy-drama “Franklin & Bash,” do qualify. (“Franklin & Bash” later moved to California, which has strong incentives for one-hour television series.)

“We could suddenly become the next great media capital of the United States,” Reitz said. “Not to supplant L.A. and New York, but to be the third leg (of the stool).”

Easy come, easy go

Or, Georgia might not.

Though state officials swat away suggestions they will alter course on incentives, Georgia could get the Hollywood brush off if it ever fails to keep up with other states or countries.

Production companies can earn a credit of up to 30 percent of what they spend on qualifying projects. What they can’t use to defer their own taxes — many aren’t based here and have little tax liability — they can sell for cash at upward of 90 cents on the dollar. Companies that buy the credits can then use them to reduce their Georgia tax bills.

Projects that spend $500,000 can earn a minimum 20 percent credit, which can be boosted to 30 percent by featuring a Georgia logo in a production’s credits.

In 2011, the last full year with complete information, the credits resulted in a $95.3 million hit to the state’s coffers, as taxpayers exercised the credits. That’s up from $83.3 million a year earlier, according the state.

That isn’t the full picture, though. Buyers of tax credits have five years to cash them in.

If every dollar in production spending in fiscal 2012 was eligible at the 20 percent rate, the credits that year could total about $175 million, according to an Atlanta Journal-Constitution analysis of state data. At 30 percent, the credits bill could be more than $250 million.

That’s more than the state’s Medicaid shortfall last legislative session. Lawmakers filled that budget hole by renewing a controversial fee on hospitals.

A 2010 study by the non-partisan Center on Budget and Policy Priorities in Washington, D.C., found that transferable credits such as Georgia’s are typically acquired by businesses in other industries, such as banks and insurers. The study found purchasers can hold the credits and mask the true cost for years.

Georgia does not disclose who ultimately winds up using the credits.

“It’s a very expensive subsidy that is based on glamor and glitz and not creating jobs,” said Nick Johnson, vice president of state fiscal policy at CBPP.

Asked if the credits are worth the cost, Gov. Nathan Deal said the answer “is a resounding yes.”

“Whatever sacrifice we make in revenue on the tax credit, we more than make up for through the multiplier effect of economic development,” he said.

Critics such as Johnson insist jobs estimates are overblown. The incentives subsidize a shallow-rooted industry that can easily pack off to a higher bidder, they add.

Even Canada, an incentives pioneer, has seen business migrate south. New Mexico this year sweetened its program after enacting changes that led to a Hollywood snub.

At last month’s Los Angeles confab, known as the Association of Film Commissioners International Locations Show, banners touted spots like Nevada as “cheap” places to shoot films. Illinois officials gave out white cubes with the words “30% off.”

“Why this show is called the locations trade show, I have no idea,” said Syrett, of the North Carolina Film Office. “It should be called the incentives trade show.”

Georgia snags ‘Hunger Games’ 

Georgia had a movie business before incentives.

After “Deliverance” hit theaters in 1972, major pictures such as “Smokey and the Bandit,” “Driving Miss Daisy,” “Forrest Gump” and TV shows like “In the Heat of the Night” made Georgia one of the top production states outside California and New York.

But when Canada launched incentives in the 1990s and states like Louisiana got into the game in the early 2000s, Georgia’s appeal waned.

Ray Charles might deserve some credit for changing that.

A 2004 biopic of the pioneering blind pianist was set to shoot in Georgia, and producers had opened an office in Atlanta and were scouting locations.

“It was a done deal as far as we were concerned,” Thomas said.

Then Louisiana lawmakers approved their tax credit, and the critically acclaimed “Ray” up and left.

 “We knew we were in trouble if we couldn’t get the story of Ray Charles,” Thomas said.

Now, Georgia’s reinvigorated incentives program does something few states do: allow production companies to earn credits for the salaries of big stars, writers and directors — spending that’s known in the industry as “above the line.”

Such a structure helped the state nab the upcoming “Hunger Games” sequel, “Catching Fire,” whose cast received a big bump in pay following the blockbuster success of the first film, said Syrett, of the North Carolina Film Office.

It also helped stuff locally made “Anchorman 2” so full of stars that you had to wonder who was left in Hollywood.

The comedy starring Will Ferrell, Paul Rudd, Steve Carell, Dave Koechner, Kristen Wiig, Christina Applegate and Harrison Ford added names like Tina Fey, Amy Poehler, John C. Reilly, Jim Carrey, Kanye West, Sacha Baron Cohen, Liam Neeson and Kirsten Dunst to its roster during a huge scene in Woodruff Park.

“We basically shot a $100 million movie for half the price,” director Adam McKay said. “The tax credit’s huge.”

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