Keeping film tax credits eases minds in industry

Pennsylvanians in the movie business are seeing a half-full glass this week. State legislators last week closed a $3 billion budget gap in part by reducing - but not eliminating - the Film Tax Credit program, trimmed from $75 million to $42 million for fiscal year 2009-10.

The program provides a 25 percent tax credit to productions that spend 60 percent of their budgets in the state. Since its inception in 2007, film tax credits have brought more than $300 million in direct spending to Pennsylvania and created 4,000 jobs.

"The Senate Republicans who initially wanted to eliminate the tax credit altogether now understand how valuable it is," Sharon Pinkenson, executive director of the Greater Philadelphia Film Office, said yesterday.

Over the two subsequent years, the tax-credit program is to be restored to its 2008-09 level. Jane Saul, director of the Pennsylvania Film Office, said the tax credit was expected to increase to $60 million in 2010-11 and be reinstated to $75 million in 2011-12.

During budget negotiations, according to the state Republican caucus, a number of tax-credit programs - including the Educational Improvement tax credit and Neighborhood Assistance Programs - took two-year cuts of about 25 percent.

Tax credits are responsible for attracting two major films currently in production. As the untitled James L. Brooks romantic comedy with Paul Rudd, Owen Wilson, and Reese Witherspoon films in Philadelphia, Unstoppable, the thriller starring Denzel Washington and a runaway train, shoots in Pittsburgh.

From union members to special-effects wizards, film-industry workers said they were grateful the tax-credit revenue stream hasn't evaporated.

"I'm happy that the tax credit is still in the budget," said Mike Barnes, international vice president of IATSE, the stagehands union.

"Still," he said, "the 45 percent reduction in the tax credit will probably mean 45 percent fewer jobs." For him, the math is simple: "The bigger the tax credit, the more films come to the state. The more films come, the more jobs created."

The protracted budget impasse had a chilling effect on business, said Saul, who had no way of reckoning the short-term damage.

Two productions set to shoot in Philadelphia rescinded their applications upon learning that the tax credits were imperiled, she said. "Some studios told us, 'Because of uncertainty about tax credits, you won't be hearing from us this year.' "

While early this month, there was concern that more than $42 million had already been committed to productions, Saul says that isn't so. "We are open for business."

Ray Carballada, president of Shooters/DIVE, the Philadelphia production and special-effects company, said, "The three-month delay on the budget cost DIVE about $2 million in business."

"Right now, we're compensating for the curveball we've been thrown," said Carballada of his shop, which last year employed 74 full-timers and 160 freelancers.

Though Shooters/DIVE has imposed a hiring freeze, Carballada is seeing past the cloud to the silver lining.

"The Film Tax Credit was treated the same as the other tax credits," he said. "What's good is that the state legislators see the value of our industry and Pennsylvania companies are investing in it, which is what the state intended."

Given that the film tax credit might have been eliminated entirely, "this is a victory," Carballada said.