New Mexico Film Incentive Spending Could Surge

By Dan Boyd and Adria Gomez | April 14, 2023

SANTA FE – In the final days of this year’s legislative session, New Mexico lawmakers tacked big changes to a state film incentive program onto an omnibus tax bill before sending it on to Gov. Michelle Lujan Grisham’s desk for final approval.

While the governor ultimately vetoed many of the tax package’s provisions, she left intact the film changes that will allow the state to gradually increase its annual spending on incentives – from $110 million to $160 million – and offer a larger per production credit to NBCUniversal, Netflix and other film “partners” that have set up shop in New Mexico and are not subject to the broader spending limit.

The expanded tax credit for film “partners” applies specifically to wages paid to non-resident actors, directors, producers and writers.

But those benefits are set to expire in five years under this year’s legislation, giving time for recently-established state media academies to start churning out enough graduates to fill more film industry workforce needs.

State Economic Development Secretary Alicia J. Keyes said the increase to the so-called “above-the-line” credit cap from $5 million to $15 million per production for New Mexico Film Partners – Netflix, NBCUniversal, and 828 Productions – will allow New Mexico to capture larger and more lucrative productions. The maximum state spending on those credits will be capped at $40 million per year.

“A lot of the streamers are making bigger, more expensive series,” Keyes said. “We want to be able to attract those here. When we do, it means a lot more outside money is coming to the state.”

The updates also exempt resident principal performers from a $5 million credit cap per production to further incentivize local casting for leading roles.

Senate Minority Whip Craig Brandt, R-Rio Rancho, who played a key role in crafting the film incentive changes during the session’s final stanza, said he’s been skeptical of the state’s film incentive program in the past.

But he said the film industry provides a way to help diversify New Mexico’s economy, as taxes and royalties collected from the oil and natural gas industries currently make up nearly 40% of the state’s budget.

“I definitely think we’ve got to diversify the economy, and if this is one of the ways to do that then I’m open to it,” Brandt told the Journal.

He also said New Mexico’s828 partnership with Netflix and other studios could make a lasting impact going forward, in large part by providing a steady supply of job opportunities for local residents with training in the film industry.

“That’s really what you’re trying to get – the long-term shows,” said Brandt, who happened to be watching a show on Netflix when a reporter called for an interview. “The plan is within five years, most of the people working in the industry will be from New Mexico.”

Cost of incentives

In all, the changes to the film incentive program are expected to cost an additional $87.3 million in annual funding once they’re fully phased in by 2027, according to a fiscal estimate of the bill.

The cost of the subsidies – and their effectiveness in generating jobs – have over the last decade prompted studies and generated fierce political debate.

During this year’s legislative session, four House Republicans filed a bill to repeal the film incentive program, but the proposal stalled in its first assigned committee.

Rep. James Townsend, R-Artesia, one of those legislators, cited a 2014 study that showed film production activity – both movies and TV shows – generates an estimated 43 cents in tax revenue for every incentive dollar spent by the state.

“I think those movie subsidies are excessive and the people of New Mexico are not well-served by them,” Townsend told the Journal.

Already, the state spends a hefty amount of money on film rebates, though exact amounts have varied from year to year.

According to an annual state tax expenditure report, New Mexico spent about $60 million on film incentives in the 2022 budget year, but spent more than $148 million in 2019, in large part to pay off a backlog of credits that had been approved during the administration of former Gov. Susana Martinez.

Changes approved this year maintain other existing provisions regarding New Mexico’s film partners, exempting studios that have signed a 10-year agreement with the state for sustained production spend, job creation, and a commitment to soundstage infrastructure investments from the state’s annual spending cap.

“The updates to our film incentive are New Mexico’s calling card to the industry and will attract larger scale productions, create more jobs, and drive the industry’s growth statewide,” said Amber Dodson, New Mexico Film Office director. “New Mexico is staying ahead of the pack in an increasingly competitive national landscape with these film legislation updates.”

‘Rural uplift’

Another change to New Mexico’s film incentives could benefit parts of the state outside the Albuquerque-Santa Fe corridor.

That’s because the package approved by lawmakers increases a “rural uplift” incentive from 5% to 10%, while updating the zoning to at least 60 miles from the city hall of each county to align with other jurisdictions.

In the 2022 budget year, the rural areas outside the Albuquerque and Santa Fe corridor received $50 million in spend.

Keyes said enhancing the rural film tax provision will be a gamechanger for communities statewide – including areas like Doña Ana County, McKinley County and the Mescalero Apache Reservation.

Las Cruces and the surrounding area has already seen a boom and MovieMaker named it the No. 7 small city to live and work as a filmmaker earlier this year.

“Bringing productions to the rural areas makes a huge difference for the communities,” Keyes said, while touting the work of Sen. Jeff Steinborn, D-Las Cruces, on the issue. “We want all communities across the state to benefit from the film industry.”

The new film incentive program will take effect on July 1.

Article Source: https://www.abqjournal.com/2591075/new-mexico-film-tv-spending-incentives-netflix-amc-nbcuniversal-828-productions.html