Leading State Economic Development Organization Joins the Fight for PROTECT IP

by Vans Stevenson 07/25/2011 08:43 (UTC-08:00) Pacific Time (US & Canada)

Earlier this month, the State International Development Organization (SIDO) sent a letter to the Senate in support of the PROTECT IP Act, the bill crafted to fight foreign rogue websites that traffic in counterfeit goods and stolen films and music.  SIDO is the premiere U.S. organization dedicated to supporting state international trade agencies and is the only national organization focused exclusively on state international trade development.  

“As part of the President’s National Export Initiative, U.S. small and medium-sized exporters (SMEs) are charged with the lofty task of doubling America’s exports by 2015,” SIDO’s leaders wrote. “As such, it becomes increasingly important to identify threats and strengthen enforcement against intellectual property (IP) theft and other harmful practices abroad and that negatively impact American exporters. Criminals have turned to the Internet, abusing its virtually unlimited distribution opportunities to expand their illicit activities.”

As an important vehicle for economic development in the states, SIDO has a first-hand understanding of the importance of protecting legitimate channels of trade by confronting foreign based rogue sites that would rob Americans of jobs and states of revenue.  We commend them and look forward to working with them to get this critical bill passed.

L.A. Times Writer Mischaracterizes LAEDC Study, Ignores Well-Researched Findings

by Vans Stevenson 07/20/2011 12:37 (UTC-08:00) Pacific Time (US & Canada)

Michael Hiltzik, generally speaking, is one of the more thoughtful opinion writers on staff at the Los Angeles Times, but his latest missive, which takes issue with a recent report on California’s film production tax credit prepared by the Los Angeles Economic Development Corporation (LAEDC) and sponsored by the MPAA, needs a reality check. 

First, some context.  We asked the LAEDC, a highly respected, decades-old think tank whose policy and economic expertise has been relied upon by government agencies, educational institutions, and businesses for many years, to analyze whether the production tax credit enacted by the California legislature in 2009 and signed into law by Governor Arnold Schwarzenegger was producing a benefit to the economy, the workforce and government. 

In keeping with its reputation for rigorous, high-quality research, LAEDC employed the IMPLAN economic impact modeling system, a respected and widely-accepted methodology for local economic analysis.

Based on this analysis, LAEDC found that the production tax credit program is a pretty good deal for California: The first $200 million spent by the state (discounted to $198.8 million) generated more than $1.5 billion in production spending and more than $3.8 billion in total economic output.  Even more importantly, it generated over 20,000 jobs. 

The program is not a subsidy of motion picture and television production –  in fact, it generates a POSITIVE return on the state’s investment:  for every $1.00 the state invests in qualified motion picture and television projects, state and local government get $1.13 back.  If Mr. Hiltzik’s question is whether that’s a good use of taxpayer funds, that kind of return on investment should be a pretty convincing answer.  Indeed, the study’s conclusions are very conservative; LAEDC did NOT include tourist related follow-on economic activity, nor did it include capital expenditures by entertainment companies.  So actual economic benefits to California from supporting film production could be even greater.

Unfortunately, Mr. Hiltzik’s column didn’t provide any evidence that LAEDC’s results were incorrect.  Instead, he took shots at the integrity of the researchers.  That doesn’t feel like a productive contribution to the discussion, to us.

As with any public policy program, it’s always possible that the production tax credit could be improved.  While LAEDC’s job was not to make recommendations on how to do that – perhaps the Times could assist LAEDC with resources to undertake such a study – the researchers did analyze two types of production that are ineligible for the production tax credit: large budget feature films and network television series. LAEDC found both types of productions would return a positive investment for state and local government.

It’s also worth noting that this year, in the face of steep budget deficits, many states have sustained and in many cases, improved and enhanced their production incentives, finding them to be sound investments in jobs and economic development, including, Pennsylvania, Oregon, Wisconsin, Ohio, Georgia, South Carolina, North Carolina, Rhode Island, Connecticut, New Mexico, and Massachusetts. 

It’s disappointing that Mr. Hiltzik seems so eager to discount a solid, well-researched report by a highly reputable group of researchers.  And it’s a shame for California’s economy and the talented industry workers struggling to do their jobs closer to home that he can’t see the benefit in this modest and cost-effective program.

Cities concerned about the grave impact of content theft on jobs and the economy

by Vans Stevenson 07/05/2011 13:47 (UTC-08:00) Pacific Time (US & Canada)

One place where job loss always hits especially hard is in America’s cities.  When it comes to protecting and creating jobs and strengthening our economy, our mayors and city officials are the boots on the ground: the first line of defense for vulnerable citizens and businesses.  With films and television shows now being made in cities and towns in all 50 states, supporting more than 2.4 million jobs and over $140 billion in total wages, who better to understand movie theft’s risk to jobs and local economies than city officials?

Now, the National League of Cities (NLC), which advocates for more than 19,000 cities, villages and towns across America, is calling attention to the urgent need to fight online content theft.  In an article in its weekly publication, Nation’s Cities Weekly, NLC’s Mitchel Herckis updated its members on the status of the PROTECT IP Act and other legislation related to cybersecurity, noting that “NLC’s National Municipal Policy supports federal efforts to address cyberspace crimes such as Web piracy, which has a detrimental impact on jobs and the economy.” 

NLC also announced that its Public Safety and Crime Prevention (PSCP) Committee “intends to propose a resolution on cybersecurity and online criminal activity at the 2011 Congress of Cities,” and we applaud NLC for its efforts to address this grave threat to local economies.

NLC’s strong statement comes not long after last month’s resolution by the U.S. Conference of Mayors in support of the PROTECT IP Act at its Annual Meeting in Baltimore.  The resolution expressed the Conference’s support for efforts to fight content theft and said its members would work with Congress and other stakeholders to pass the PROTECT IP Act and related legislation.  

America’s cities get that content theft costs jobs.  Their support will be invaluable in this fight.

Film and TV Tax Incentives Create Jobs, Bolster Local Economies

by Vans Stevenson 06/03/2011 12:28 (UTC-08:00) Pacific Time (US & Canada)

Pure and simple: film and tax incentives create jobs, expand revenue pools and stimulate local economies.  That’s why a study released by the Tax Foundation yesterday strained credulity and provided a host of prejudged conclusions about the value of film and television tax credits in bolstering jobs and local economic development.

With no real understanding of film and television financing, nor the incentives it argues against, this out-of-touch think tank was simply driving its own tax policy agenda and produced a report to back up its positions, peddling it as unbiased research.

I think we all would agree that during this recession, keeping middle-class jobs in the U.S. and generating local economic development is crucial, and that is exactly what these tax credits do in states all across our nation.

At the end of the day, this is a report produced by an organization that makes its opposition to tax incentives clear in its own mission statement, and unfortunately, the political slant of the foundation seems to have dictated the outcome of its research.

The film and television industry contributes in a very real way to the economies of all 50 states and the District of Columbia through on-location production and infrastructure development.  More than 115,000 businesses – 81 percent of which employ fewer than 10 people - and over 2.4 million American workers depend on the film and television industry for their jobs.  The industry generates roughly $13 billion in state taxes and $40 billion in payments to vendors, suppliers and others nationwide.

These jobs provide an immediate opportunity to expand local employment during a difficult economy and the state has the benefit of current time value of money: employ now- pay later.  The time value of money makes these incentives extremely valuable to the states where production incentives are utilized.

Even as many states are facing budget deficits, new and expanded production tax credits continue to emerge because they have proven effective in reinvigorating state economies by providing rapid relief to local businesses and replenishing shrinking state revenue pools.

States that recently created or expanded film and television production tax incentives:

  • In Florida, the state recently increased by $12 million, their $242 million transferable film and digital media tax credit   program established in 2010.
  • New York’s production incentive program enacted last year was sustained, and that includes $2.1 billion in funding to the New York production tax credit for five years.
  • Connecticut adjusted their 30% film and digital media tax credit this year keeping the centerpiece of the incentive, and retaining the competitiveness of the program, which will continue to make the state an attractive production location.
  • North Carolina bolstered their film tax credit (which is uncapped) and created a new digital media tax credit program as well.
  • Mississippi increased their incentive.
  • Maryland created a new film production activity credit this year.
  • Utah’s program was expanded. 
  • Virginia has a new film tax credit.

States that have recently overcome adverse legislative initiatives to reduce or eliminate production incentive programs:

  • Georgia
  • Pennsylvania
  • New Mexico
  • Illinois
  • Louisiana
  • North Carolina
  • Massachusetts
  • South Carolina

The states that have terminated their production incentives were not competitive.  Kansas’ suspended film incentive program only applied to in-state companies and was not designed to attract out-of-state filmmakers.

Iowa’s film credit program was suspended due to corruption and inadequate program oversight. Iowa is looking to revive the production tax credit program and the Governor has been supportive of a vibrant film production tax credit program in Wisconsin.

There were several proposed legislative eliminations and cut backs of state film production tax credit programs in 2010, which were all defeated. These include initiatives in Massachusetts, Michigan, New Mexico, Pennsylvania, Rhode Island and South Carolina.

Two recent studies that performed cost/benefit analyses confirmed the economic benefits of production tax incentives to New York and Michigan.  Michigan’s report, sponsored by the Detroit, Ann Arbor, Traverse City and Grand Rapids Convention & Visitors Bureaus indicated that the incentive created nearly 4,000 full-time equivalent jobs for Michigan residents in 2010 at an average salary of $53,700 per year, and generated roughly $6 per dollar of net credit cost. The New York report showed a 1.9 return on the state’s investment (ROI).

In locations with uninterrupted film tax credit programs there have been continuing investment and job growth. In Massachusetts, for example, only 10 films were produced over seven years with $67 million of direct investment.  Once the credit was enacted the Commonwealth had 26 films in three years with a startling $676 million of direct investment to the state.

The film and television incentive programs can do wonders and are a robust economic stimulus. In the short term, it generates substantial tax revenues with credit claims paid 18 to 24 months after production has wrapped.  New investment in film and digital media production is, on balance, revenue positive. 

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