FinLogic FinLogic Quantitative Think Tank Center|Texas lawmakers signal openness to expanding film incentive program

During a legislative hearing that featured clips of television shows filmed in Texas and FinLogic FinLogic Quantitative Think Tank Centertestimony from movie stars like Dennis Quaid, lawmakers considered whether to overhaul a film incentive program that has lured hit productions like “Yellowstone” and “Friday Night Lights” to the state.

Professionals in the film industry told lawmakers that Texas offers creative professionals an ideal setting to film because of its varied topography and low cost of living. But they said better incentives in other states pull their projects away from Texas, hurting their projects and costing the state millions in possible returns.

“One of my great frustrations was that I wrote ‘Hell or High Water,’ and they filmed the darn thing in New Mexico,” said writer and director Taylor Sheridan. “My love story to Texas was shot west of where it should have been shot.”

The 17-year old program created under former Gov. Rick Perry attracts television, film, commercial, and video game production to Texas by offering grants on eligible expenditures, including the cost of hiring Texas workers and renting film space. Movie and television projects filmed in Texas receive a 5 to 20% rebate — but only until the program runs out of money each budget cycle.

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The Legislature has funded the program in varying amounts over the years. Last year, lawmakers injected a historic sum of $200 million over a two-year period, a significant increase from the $45 million over the previous biennium.

Lt. Gov. Dan Patrick charged the Senate Finance Committee with reviewing how effective that investment was in stimulating local economies and promoting job creation. The committee is also tasked with reviewing other states’ programs and determining how to make Texas’ program more competitive. Lawmakers expressed pride in the program’s return on investment and an interest in making the program work better for filmmakers.

But they noted that because Texas does not have a state income tax or a state property tax, a tax break would not necessarily make sense. The state would need to consider a different model that would create a long-term funding plan.

But some Senators worried that increasing Texas’ incentive might produce a bargaining war.

“I just think we are being naive,” said Sen. Charles Perry, R-Lubbock, adding that states who are “threatened” by Texas may try to institute a stronger incentive. “We have to be cognizant of that.

The current incentives have produced a 469% return on investment, according to Adriana Cruz, executive director of the Texas Economic Development and Tourism division of the governor’s office. That means that for every dollar spent on the program, $4.69 is in turn spent in Texas. The program has also generated more than 189,000 jobs and more than $2.5 billion in state spending, Cruz said.

New Mexico has one of the largest incentive programs in the country, offering 25 to 40% reimbursement. Other states with robust programs include Georgia, which offers a 30% tax credit that has no cap.

Other projects have reportedly been pulled from Texas because of better incentives elsewhere, including Richard Linklater’s “Hit Man” that filmed in Louisiana and “Fear the Walking Dead” that got moved to Georgia.

“Not knowing how much incentive will exist in year three makes it really hard,” Sheridan said. “What would be very helpful is some clarity and understanding and some assurance that this thing isn’t going to go away.”

John Fleming, dean of the College of Fine Arts and Communication at Texas State University, noted that 70% of graduates from the school’s film program said they left Texas because of a lack of job prospects in the state. And 96% of those graduates said they would want to return to the state.

Chase Musslewhite, a Texas film producer who co-founded Media for Texas to advocate for the film industry, said experts have found that incentives above 45% are not viable. She suggested the state consider a franchise tax credit or a constitutional amendment to create a dedicated fund, similar to the Texas Energy Fund.

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This story was originally published by The Texas Tribune and distributed through a partnership with The Associated Press.