RALEIGH, North Carolina — North Carolina's film incentives may finally become a permanent fixture in the state's economic development pitch to television and movie producers. Or it could get written out of the script.
The state's 25 percent refund on expenses by production companies that film in the state is set to expire at the end of the year unless the General Assembly agrees to extend it, like it did in 2012, or rewrite it. The debate begins formally when the legislature reconvenes in May, but a discussion familiar to legislators on other tax breaks already has started over the effectiveness of publicly funded incentives targeting specific industries.
Film groups and in-state businesses have organized the North Carolina Production Alliance to work to keep the credit, saying it's generating thousands of jobs and local spending that spreads through communities. A study paid for by film boosters and poised for release shows North Carolina governments take in more revenue than the state gives through the credit.
North Carolina's film industry has gotten a boost as blockbuster movies such as "The Hunger Games" and "Iron Man 3" were shot in the state. The movies' two production companies received nearly $34 million in refunds in 2012 while spending $136 million, according to Department of Revenue data.
"There's no question that people inside of the business see North Carolina's tax credit as a good one and if there wasn't an incentive, they would not be here," said Susan Ruskin, dean of the filmmaking school at the University of North Carolina School of the Arts in Winston-Salem, whose film credits include "Anaconda." If the incentive goes away, Ruskin added, filmmakers will go elsewhere.
Critics of the credit, which began in 2005 and pays out to companies even beyond what they paid in taxes, agree some projects will probably go elsewhere if it's eliminated. But they say the refunds, which totaled $77 million in 2012, go mostly to out-of-state companies that hire temporary workers. State Commerce Department analysts calculated recently it cost North Caroilna $18,500 for each job created by companies receiving the credit in 2012.
"I think we can do a better job with that money somewhere else. We can do a better job putting in our infrastructure," said House Majority Whip Mike Hager, R-Rutherford. "We can do a better of job of giving it to our teachers or our Highway Patrol."
North Carolina film advocates attribute a recent boom in filming to changes in 2010 that raised the credit from 15 percent and the maximum payouts from $7.5 million per production to $20 million, with no cap for TV series. At least $250,000 must be spent. About 40 states have film incentives, but some states have recently eliminated their programs.
More than 60 productions were registered with the state film office during 2013, leading to more than $254 million in direct spending, according to Gov. Pat McCrory's office.
Studios "have had great success working in the state, and have many projects lined up that they hope to shoot soon in North Carolina," said Vans Stevenson with the Motion Picture Association of America. "But keeping those projects in North Carolina — and the jobs and tax revenue they bring with them — will depend on a robust state incentive."
McCrory's administration has been careful expressing it wants to help the industry without yet providing details on how to do so or promising a solution. Legislative leaders will have a lot to say about it. John Lassiter, a close McCrory ally and chairman of an economic development board that recommended the film credit get reworked, said any new incentives need to work toward turning North Carolina into a permanent home for film-making.
TV series filming in North Carolina such as "Homeland" and "Under the Dome" already are providing a steadier stream of activity to caterers, clothing stores and construction supply retailers, according to industry workers. Although other cities see film crews, major work is still largely anchored around Wilmington and Charlotte.
Nick Hoisington, a School of the Arts graduate from Ohio, and two other classmates decided last year to start a video production company in Winston-Salem. He spoke last week while working from Georgia, but he'd rather have enough opportunities to stay in North Carolina: "That's where my home is and that's where I want to be."
The industry argues the incentives create more than the 4,000 direct and indirect full-time equivalent jobs, the Commerce Department report estimated. A North Carolina State University professor with expertise in supply chains is finalizing another study on film industry's impact, paid for by the Wilmington Film Commission and the Motion Picture Association.
Wilmington-area lawmakers have been briefed on its findings. Rep. Susi Hamilton, D-New Hanover, who wants a permanent tax credit, said the study, among other matters, determined state and local governments get roughly $1.50 back for every dollar in state incentives given to production companies.
"Obviously the credit is working and it's benefiting the state," Hamilton said, "so why change it?"
Jon Sanders with the conservative-leaning John Locke Foundation said the state should stop trying to pick winners and losers and instead reduce business tax rates further for all. Instead, he said, the film credits are in place in part because some "people like the idea that Hollywood likes us."