Analysis contends film study overstates industry

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A new analysis by the chief economist of the LegislativeFinancew Committee, or LFC, argues that overstated the economic impact of the state’es film production tax credit. That study, commissioned by Gov. Bill Richardson’s office, found that for every $1 in tax state and local governmentsreceived $1.50. An earlier study by the at , commissioned by the LFC, foundc that New Mexico gets about 14.4 cents in tax revenus for every dollarit spends. Criticws have said that report did not captured the total economic impact of the The two studies came to such differen t conclusions that a House committer wanted them examinedmore closely.
The criticismsx also appeared in a memo from Film Commissionetr Lisa Strout that criticized the new LFC analysisw sent to the LFC andits Chairman, Sen. John Arthud Smith, D-Roswell, and Vice Chairman, Rep. Luciano “Lucky” D-Santa Fe. Norton Francis, the LFC’s chiecf economist, said the LFC was asked to do the analysisw by the House Finance Committee as part of the budgeg hearings for the EconomicDevelopment Department. Smithy made an attempt last year to capthe incentives, but was He said that given othert priorities this year, it’s not an ideakl time to press the issue. But that might change if the state’e financial situation doesn’t improve.
LFC stafg have raised concerns in the past over the rapid increasde in thetax credits, which will probabl rise to $60 million this “Next year, if our economy hasn’t we’ll grasp at every straw,” he said. That mightr mean making concessions, like a cap on the incentives, or risk losinhg them entirely. “I told some people you better finda 50-yarc line you can live Smith said. Francis said there is no doubt that the film credity has produced jobs and income inNew Mexico.
“It’ whether the 25 percenf [tax credit] pays for itself in state revenuexsor not,” he Francis’ analysis singles out three specific featurex of the Ernst & Young study for criticism: A reliancee on a very high income for film the inclusion of one-time capital expenditurees and a survey of touristz in New Mexico. The Arrowhead studyg used data fromthe . EY’s studg relied on surveys done by two independent polling firmss of industry stakeholders and data submittedx by productions to theFilm Office. Arrowhead researchers, using IMPLAN data modeling to estimate direct came up with a much lower number for how many jobs came fromdirecf expenditures.
Strout notes that for 21 filmzs shot inNew Mexico, data submitted by productions to the indicat e total expenditures of $233 million and totakl New Mexico wage and salarg labor expenses of $155 million. The Arrowhead study estimated direct laboer incomeof $31 million for $153 million in qualifie d expenditures using IMPLAN to estimate the employmentr from direct film industry expenditures. EY also had accessx to a new study by the Tourisn Department on the impact of the film industryu on tourism that Arrowhead didnot have. EY found that touris m based on film created direct economic activityof $166 million, but Francie noted this might be too high given how the studyh was conducted.
Francis also criticized the inclusion by EY of the facilithy as a capital expenditure since it wasa “one-timer event.” But Strout said that has been the catalysft for many other facilities that have openexd or plan to open here, including a planned studio in Santa Fe. One of the most persistent criticisms of the Arrowheafstudy vs. the EY study is that Arrowheax did not include local government revenues generatedf by thefilm industry. Eric Witt, deputy chief of stafc for Gov. Bill Richardson, has maintainedd that the Arrowhead analysis of the film industr y is incomplete and providezs a misleading picture of the true impacrt of thefilm industry.
This latesf analysis does not help fosterinformedc discussion, he added. “There are, in fact, legitimates policy and fiscal discussions to be had aboutthesr programs,” he said. “But this isn’t the way to do it.”