The governor's 2010-2011 budget proposal calls for a new allocation of $420 million per year for the tax years 2010-2014 and contains some tweaks to the current incentives program that experts say could provide a boost to New York's post-production industry.
Last year, New York had freed up $350 million for its popular program that gives productions a 30% tax credit on below-the-line costs. The entertainment industry argued it would only amount to about one additional year of incentives after a previous $690 million commitment ran out of money early in 2009.
According to entertainment industry executives, the $350 million in incentives funds earmarked last year are pretty much used up.
The industry has pushed for a multi-year commitment by the state to particularly give TV productions more planning safety.
Paterson's budget outline seems to pretty much follow the provisions in a bill pushed last year by entertainment sector officials lwith Republican state senator Martin Golden and others. But political chaos in the state capital of Albany meant the bill never went anywhere.
Following Paterson's budget proposal Tuesday, the New York state assembly and senate must now weigh in on the budget, and the state must adopt a final bill for the new budget year by April 1.
While populist critics have argued that state money shouldn't go to Hollywood at a time of big budget holes, the entertainment industry has pointed to an Ernst & Young study that has shown the production incentives have boosted New York's tax revenue and led to job creation. They also highlight that the state doesn't have to shell out money ahead of time to attract productions.
The new incentives proposal contains small tweaks designed to fine-tune the program and "enhance the state's return on investment," according to budget materials provided by the governor's office.
For example, tax credit recipients must conduct at least 10% of shooting days at a qualified New York facility, at least 75% of post-production costs must be incurred in the state to be considered a qualified cost, and only purchases of taxable property and services from registered sales tax vendors are eligible in the credit calculation.
Plus, productions must either use an end-credit acknowledging financial support from New York State or provide a promotional video for New York as part of the film or DVD release.
Industry insiders said in first reactions that these new provisions may provide a boost to New York post-production businesses and keep productions in the state for a few extra days.
"This is really fantastic," New York Production Alliance executive director John Johnston said in a first reaction, arguing the New York incentives program would be "substantially funded" with this. "It will mean a lot for the New York production community, job creation (especially for the below-the-line community) and the state because the industry is bringing in money...Film is working for New York. Let's keep New Yorkers working in film."
"We are thrilled," said Kaufman Astoria Studios president Hal Rosenbluth, calling the incentives "crucial" to narrowing the gap of production costs between New York and other states with weaker film and TV infrastucture. With his studio set to open a new stage next month, he pointed to the loss of "Fringe" last year as a key loss to New York state, arguing the new incentives provision would particularly allow TV shows, such as "Nurse Jackie," which films at Kaufman, to make a long-term New York commitment. "I couldn't be happier."
He also lauded the budget proposal as a validation of the financial benefits of the incentives for the Empire State. "The governor has recognized how well the program has played out," Rosenbluth said. According to industry research, the state gets $1.90 for every dollar of tax credits, which generally get redeemed only one or two years after film or TV money flows into the state.
The governor's office seemed to validate the importance of tax revenue contributions from productions, detailing the incentives extension in a section of the budget proposal entitled "Revenue Actions." Like other states, New York has faced various budget holes amid the recession and stimulus efforts.
An extension of the state incentives could also lead to a new tax credit program for New York City. The city's previous 5% tax credit program ran out of money last year, and city officials then proposed slightly lower credits. According to sources, the city is reviewing the impact of the proposed state budget and a potential future NYC tax credits program.
– Nielsen Business Media