Film Incentives and Watching State Finances

Incentive are a key component of Film and TV Financing packages these days.  These vital elements come in many varieties:  States like California (okay), Georgia (the best).   Countries like Canada – which has federal and provincial (state) incentives.   Other countries have incentives depending on the specific production and the amount of local content, local labor participation, etc.,

Watch State Economies for Your Incentive

Several states had great incentives but bad economies.  Many state economies are horribly mismanagement.  California has a massive unfunded pension liability.  You can read about it here in the Sacramento Bee.   Why should this matter to you, Mr. Film Producer?  Because politicians will surely cut off paying Film Incentives to wealthy Hollywood people (though most are resolutely middle class workers) before depriving their state of funds needed elsewhere.

Puerto Rico Incentive – State Economy Crashes

Puerto Rico had a pretty good incentive.  Both Above the Line and Below The Line had 40% with 20% for non-residents.

But Puerto Rico was run by incompetents.  They have so bungled the states finances that its bonds are in junk status, the government is essentially filing for bankruptcy and residents are fleeing the islands in a massive population decline.  When the Puerto Rico government was negotiating with bondholders, they still paid out a Christmas bonus to the tune of $130 million – despite owing fortunes to bondholders.  That does not instill much trust or consideration.  No wonder the bondholders refused to renegotiate.   And then there’s the utilities and more.  Read it here.

With the state government in shambles,  how can you count on a Film incentive for your film?  You can’t or I wouldn’t.

Check out these headlines:

Illinois is Now a Banana Republic

Illinois has had no budget for almost three years.  Filming in Chicago is challenging even when it’s incentive is working.   But now they are $15.1 billion behind in paying their monthly bills.  And the city of Chicago and the state are near or at Junk Bond status.    In this article, the state controller is actually speaking the truth. 

With just 10 days to go until Illinois enters its third year without a budget, resulting in the state’s imminent downgrade to junk status and potentially culminating in a default for the state whose unpaid bills now surpass $15 billion, Democratic Illinois Comptroller Susana Mendoza issued a warning to Illinois Gov. Rauner and other elected officials on Tuesday, saying in a letter that her office has “very serious concerns” it may no longer be able to guarantee “timely and predictable payments” for some core services.

In the letter posted on her website, Mendoza who over the weekend warned that Illinois is “in massive crisis mode” and that “this is not a false alarm” said the state is “effectively hemorrhaging money” due to various court orders and laws that have left government spending roughly $600 million more a month than it’s taking in. Mendoza said her office will continue to make debt payments as required, but indicated that services most likely to be affected include long-term care, hospice and supportive living centers for seniors. She added that managed care organizations that serve Medicaid recipients are owed more than $2.8 billion in overdue bills as of June 15.

Would you want an incentive in this failed state?  I don’t think so.

Financial Research for the Producer

You as a producer should also research the financial state of your location and its incentive.  Funding is one thing.  Imminent Crisis is another thing.  Even if the incentive is on the books with money allotted, will they have the money when it comes time to pay?  One way is to lay off the risk earlier than later with various discounts and banking institutions.  Sell the tax credit early and get the money.  But simple research on a State, country or terriories incentive and its financial stability might stop a lot of grief, trips to  your psychiatrist and damage to your project.

Caveat Emptor!  Buyer Beware!