Friday, May 3, 2013

One hell of a multiplier

A small data point on the very big story of states using tax incentives to attract businesses. I was researching a post on an article on film and television in Georgia that mentioned the incentive package that convinced Disney to move the Miley Cyrus film The Last Song away from North Carolina.

Here's the relevant passage from Wikipedia:
The Last Song had originally been set in Wrightsville Beach and Wilmington in North Carolina. Though they wished to shoot on location, filmmakers also examined three other states and identified Georgia as the next best filming site. Georgia’s housing prices were higher, but the state’s filming incentive package refunded 30% of production costs such as gasoline, pencils, and salaries. ...

Though other movies have been filmed in Tybee Island, The Last Song is the first to actually be set in Tybee. With the city’s name plastered on everything from police cars to businesses, Georgia officials predict a lasting effect on the economy. In addition, The Last Song is estimated to have brought up to 500 summer jobs to Georgia, $8 million to local businesses, and $17.5 million to state businesses.
When you hear accounts of how much money a movie or a factory or a stadium brought to an area, you should maintain a healthy skepticism. According to that same Wikipedia article, the budget for the film was $20 million. Presumably almost all of the above-the-line costs and much of the rest of the budget (particularly post-production) went out of state.

If someone has a better number I'd be glad to revise this post, but until then, let's say eight to ten million was spent in Georgia by Disney and its employees in the summer of 2009. That's not a trivial amount of money. It certainly provided a big bump for the south Georgia economy; it may even have been worth the cost in state revenue, but to get to that 17.5, you have to assume that money is doing a lot of heavy lifting.

Of course, if you have a truly in state-production the story's quite different. For example, most of the money from Tyler Perry's next Madea film really will end up in Georgia.

But it's worth remembering, Perry started making movies in Georgia years before those incentives started.

Along related lines, check out James Kwak's thoughts on Rhode Island's $75 million loan to Curt Shilling's gaming company and Matt Yglesias's explanation of why the Kings stayed in Sacramento.

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