While Connecticut’s film industry celebrates its latest victory — the first taping last week of “The Jerry Springer Show,” which recently moved its operations from Chicago to Stamford — questions linger over whether the state will be able to continue to attract production companies.
That’s because Gov. M. Jodi Rell, in her latest budget proposal, tightened the screws on the state’s film tax credit even further by capping it at $25 million. That’s $5 million less than her original proposal earlier this year to cap the credit at $30 million.
Rell is proposing the cap in an effort sure up the state’s $8.5 billion budget deficit over the next two fiscal years.
But industry insiders, who have been lobbying against the cap for months, say it’s the wrong move at the wrong time. They say such a cap will halt growth of the industry and prevent large film studios, which could produce big payoffs to the state, from coming to Connecticut because they would not have the ability to attract major productions.
“The governor and legislature have been very supportive of the film-tax programs, but we think the cap would be a big mistake,” said Kevin Segalla, founder of the Stamford-based Connecticut Film Center. “It would put the brakes on the growth of the industry.”
Segalla said his company has plans for a $20 million studio expansion in Stamford that would not go forward if a tax credit cap is implemented.
“It would be unfortunate to cut one of the only growing industries in the state,” Segalla added.
The state offers three film tax credit programs for production, infrastructure and digital animation.
The production credit, which Rell is proposing to cap, has been hotly debated this year both inside and outside of the halls of the General Assembly.
Many Democratic heavyweights, including former House Speaker James Amann and state Sen. Gary LeBeau, of East Hartford, have come out publicly against such a cap, saying it would kill the industry in the state precisely at a time when it’s about to give its biggest payout.
Several developers have proposed building large film studios in the state, but they say their projects won’t go forward if there is a cap on the production credit.
At stake, for example, is a $65 million studio proposed for South Windsor, a project that developers say will create thousands of jobs.
“It is a shortsighted move,” said LeBeau, who is chairman of the state’s commerce committee and who recently announced that he will run for governor in 2010. “Studios have repeatedly told us that their operating model wouldn’t work with a cap. I don’t think the governor has thought this through fully.”
But Joan McDonald, commissioner of the Department of Economic and Community Development, said she doesn’t think a cap would derail the state’s film industry.
McDonald said other tax credits the state offers including those for urban and research development also have caps and are still effective. She added that tax credits aren’t the only reason film producers want to come to the state.
She said a talented workforce, low interest loans available from the state, and Connecticut’s proximity to New York, Boston and New Jersey also make it attractive.
“We don’t like to cap anything but we have to deal with the fiscal realities,” McDonald said.
Michael Cicchetti, deputy secretary of Rell’s budget writing office, said the governor’s $25 million cap is a reasonable solution that addresses the state’s financial problems, while also ensuring that Connecticut can encourage future growth of the industry.
“In these very tough fiscal times we had to look at all aspects of state government and make a determination of where our priorities are going to be focused,” Cicchetti said. “Having the full film tax credit program as it was, is simply a luxury we cannot afford at this time.”
Cicchetti added that the governor is still willing to negotiate the proposed cap. But a source familiar with the budget negotiations said the topic has not yet been brought up.
Questions do remain over whether the film tax credits are an economic stimulus to the state.
That debate was ratcheted up in June when the liberal advocacy group Connecticut Voices for Children released a scathing report that attacked the production credit as more costly than it’s worth.
Connecticut Voices’ report said that only 11 percent of the $113.2 million in tax credits given to the film industry so far, were actually spent in Connecticut and that the state has awarded $2.73 in production tax credits for every dollar of actual Connecticut spending on film productions.
Amann and other tax credit proponents discredited the report, saying it didn’t paint a true picture of the tax credits’ economic impact. They said, for example that the study excluded more than $125 million in Connecticut wages paid to production crews in the state, which are all subject to Connecticut income tax.
Segalla said the film industry would support altering the tax credits so that only expenditures made in Connecticut be eligible to receive them. That would ensure that no credits are earned for expenditures made outside the state and would increase the program’s efficiency.
When asked if Connecticut Voices’ report influenced Rell’s decision to cap the tax credit Cicchetti said, “There is a host of information out there and she took all that into consideration.”
Reader response:
“Punishing success is not the way to prosperity. Rell and the legislature should look at the amazing success of the flm tax credits and apply them to other industries. Instead, they want to kill the goose that is laying golden eggs. Brilliant – NOT.” — Dave
“It is both foolish and naive to think that any business, (let alone the film and television industry) would consider shooting in CT for “other reasons” such as its proximity to New York and other nonsense. If that were true, we would have had an industry here equal to NYC. The fact is, tax credits are what will bring and keep this industry here, cap the credit and you can say goodbye to any gains you have made to date, thus, the money you have spent will be for nothing.
Gov. Rell had the courage to start this and she needs to have the courage (and the political will) to stand by it. Now is not the time to second guess. Businesses have made considerable investments and many people in our industry are counting on it staying here.
Look at Rhode Island for a glimpse into the future if you cap the credit.” — Gina, Visual Music Ink