When it comes to the film industry, New Mexico gets its fair share of close-ups.
All it takes is the presence of a big star and a big-budget movie (Johnny Depp in The Lone Ranger), the reported theft of Indian artifacts from a film set (The Maze Runner) or a famous actress like Tina Fey talking about an embarrassing episode at the Ten Thousand Waves spa to put New Mexico’s incentive program for filmmakers in national headlines.
And with an attractive program that gives productions up to 25 percent in rebates on some expenses for film and up to 30 percent for television series — especially if they hire New Mexico crew members — it’s no wonder Hollywood keeps setting up camp by the Rio Grande. Industry insiders within the state say every soundstage is full with a series of television and movie projects, including the return of Longmire and Better Call Saul and a pilot for NBC’s Midnight, Texas.
Executives of the New Mexico Film Office say a couple of “big movie projects” are coming this summer. New television programs setting up shop in the state include From Dusk Till Dawn, The Night Shift and Preacher.
Nick Maniatis, head of the state Film Office, said moviemakers are waiting in line, including director Steven Soderbergh, who plans to shoot the Netflix limited series Godless in New Mexico. The film industry pumped a record $288 million into New Mexico’s economy in fiscal year 2015, according to a report commissioned by the film office.
“We are as busy as we have ever been,” Maniatis said. “We’re hitting all the cylinders right now, and we just have to keep that going.”
But for all the good news, both the film industry and state budget hawks say the math behind the business isn’t working. The reason: A $50 million cap on annual film incentives that industry people say is too low and critics say is an unproven job producer.
“The cap sucks,” said Jon Hendry, a business agent for the state’s film technicians union, the International Alliance of Theatrical Stage Employees Local 480. “I don’t call it just a cap. I call it a cap on the hopes and dreams of young people. You are restricting film work that will come in the future for new people, people coming right out of high school.”
Hendry said he believes the movie and television business pays off in jobs, with somewhere between 3,500 and 5,000 New Mexicans working behind the scenes. At least two recent reports, including one commissioned by the state Economic Development Department, place the figure at 4,000. The film office is part of the state’s Economic Development Department.
Whiskey Tango Foxtrot, which opened in theaters this month, spent $16 million in New Mexico — including about $12 million on wages — and employed about 480 local cast and crew members, according to the Motion Picture Association of America.
“The cap is not a good thing,” agreed Santa Fe filmmaker Alton Walpole, who is working as a unit production manager on a new NBC series shooting at Albuquerque Studios. “I think it’s going to become a problem.” Both Hendry and Walpole fear the cap ultimately will dissuade movie projects.
State Rep. Antonio “Moe” Maestas, D-Albuquerque, has said there should be no cap if movies and TV shows employ New Mexicans and put money in the state treasury through more tax collections.
On the other side of the equation, at least one powerful state lawmaker questions whether all that money is creating as many jobs as it should.
“I don’t know how many full-time workers we are getting out of this program, and that does bother me,” said Sen. John Arthur Smith, D-Deming, chairman of the Senate Finance Committee.
If the industry is creating even as many as 5,000 jobs, he said, “at $50 million, what’s that — [an investment of] $10,000 per worker?”
Smith said another problem is that the Legislature has to set aside that $50 million every year, which cuts into planned allocations for education.
After the state spent about $96 million in film rebates in fiscal year 2011, newly elected Republican Gov. Susana Martinez voiced similar concerns and threatened to decrease the rebate from 25 percent to 15 percent — a move that some say scared filmmakers away. In a compromise, the Legislature set an annual limit of $50 million in rebates to filmmakers and TV production companies.
Since then, Martinez has silenced her criticism and has become a supporter of the movie industry, saying it’s good for the state economy and its workforce.
“New Mexico has so much to offer to those who are in the business of searching for the right place to shoot a movie or television program, and our communities clearly benefit from these opportunities,” she said after a state-ordered study in 2014 concluded that the film industry helped the state economy.
The state Taxation and Revenue Department expects the demand for rebates to exceed the $50 million cap by about a half-million dollars in fiscal year 2017 and by more than $20 million in fiscal year 2018. While the state cannot spend more than the cap in a given year, it can shift expected rebates into the next budget year.
The incentive program was signed into law in 2003 by then-Gov. Gary Johnson, then a Republican, and expanded by his successor, Democratic Gov. Bill Richardson. Under the program, a movie production that qualifies for the 25 percent rebate, for example, and spends $10 million in the state later receives $2.5 million back.
Critics of the rebates argue that the payoff isn’t worth the investment. In past years, various studies — some commissioned by the state of New Mexico and others conducted by outside entities — have reported that the film business generates anywhere from an additional 14.5 cents to $1.50 for every dollar invested.
Hendry has said that even if the business is at the low end of that estimate, it’s worth maintaining.
He and other advocates continually tout the economic impact of the film industry. The December 2015 analysis conducted by a Canadian accounting firm on behalf of the film office found that the industry generated nearly $514 million for the state economy from 2010 to 2014, peaking at $118.7 million in 2011. The Economic Development Department’s commissioned report says that about $513.9 million was spent by film and television productions on goods and services in the state during that period.
Walpole said this financial impact cannot be understated. “Last night, the cast of the show I’m working on went out to eat,” he said. “I’m sure that restaurant did pretty well.”
And the salaries are good for those working on crews. Hendry said most of his union’s members now average about $70,000 a year. Sam Tischler, who once earned about $10,000 a year as a photographer’s assistant, says he now earns $100,000 a year as a location manager. That “extra zero” allowed him to buy a house, he said.
Smith said that, while this may be true, the central and northern parts of the state are benefiting from the film business much more than the southern part. The Economic Development Department report states that 73 percent of total production spending in the state is within the central region, including Albuquerque. The state’s four main soundstages are located in Albuquerque and Santa Fe.
Many states have approved production incentive programs in the past decade or so. But several others, including Michigan, have since dropped them because they were not paying off or state governments wanted to redirect money to more pressing needs.
Michigan began losing competition for movies once it set a cap of $25 million — a point Hendry likes to make. Caps ultimately kill the business, he said.
Other states have scaled back the scope of such incentives for an array of reasons, including increased scrutiny of the finances involved. Such surveillance is difficult in private-public partnerships, critics say. Representatives of the New Mexico Film Office and the Taxation and Revenue Department say they cannot release proprietary information from the studios. That includes the budget of a film shooting in the state.
Immediate accounting for the amount of tax rebates is also hard to come by, although the state does keep annual figures. For example, in 2003 — the first year for the current incentives — the state refunded about $1.1 million. In fiscal year 2007, it refunded over $18 million. By fiscal year 2010, the figure rose to more than $45 million.
In 2011 — the year after Richardson left office — the rebate hit a record $96 million plus.
The next year, with a jittery film industry reacting to Martinez’s threats to reduce the incentives, the state paid out less than $12 million.
Since fiscal year 2013, New Mexico has rebated the full $50 million every year. But that does not mean the state is paying out that entire amount to projects filing for rebates that same year. Maniatis said state law allows him to pay off future cap debt: “Let’s say it’s $40 million in rebates this year,” he said. “I can take the other $10 million and pay out next year’s debt.
“We owe money now, we owe money in 2018. We may even owe money into 2019 because the cap works on a three-year basis.”
That’s because if the rebate is more than $5 million, the state pays it back in three installments over three years. For films with rebates in the $2 million to $5 million range, it’s two installments. Films budgeted at $2 million or less get their rebate immediately.
Maniatis said the state has to wait until film companies finish shooting and apply for the rebate. The application and the budgetary data that accompanied it was sent to the Taxation and Revenue Department in January.
The department did not respond to requests last week to provide a breakdown of how Fey’s Whiskey Tango Foxtrot benefited from the rebates.
But questions about how the rebate is paying off might not be as important as figuring out what to do once the cap begins overflowing in a state grappling with budget restrictions.
Maniatis says he isn’t concerned about the cap overflow slated for 2018, but Hendry is.
“We need to put more money into that cap,” he said. “2018 will be the year that slows us down if this doesn’t change. And we are talking fiscal year ’18, and we are in fiscal year ’17 right now. This is not two years away; this is barely over a year away.”
Tischler said he hopes state leaders find a solution by 2018.
“It’s a fickle industry,” he said. “You better believe that all those producers and studios in L.A. have their eye on that cap.”
Contact Robert Nott at 505-986-3021 or firstname.lastname@example.org.