ATLANTA – Two recent critical audits of Georgia’s generous film tax credit are helping build support for legislation calling for greater scrutiny of all of the myriad tax incentives the state offers to attract jobs.
A bill the Senate Finance Committee passed unanimously Feb. 3 calls on the governor’s office to contract with independent auditors to review up to five tax-incentive programs each year and determine whether their economic impact is worth what the state spends on them.
The General Assembly approved a similar measure last year, but Gov. Brian Kemp vetoed it. In his veto message last May, Kemp argued the audits should be conducted independently because the state auditor is responsible for preparing fiscal notes on all proposed tax breaks.
“The governor made the right choice,” said Sen. John Albers, R-Roswell, chief sponsor of Senate Bill 302. “We found an area in the bill to have an independent third party do the audits.”
The audits of the film tax credit, released last month, faulted the way the program is administered and asserted the credits have had less economic impact than supporters have touted.
The audit on the impact of the film tax credit concluded the Georgia Department of Economic Development used an inflated multiplier to calculate the dollar value of the program’s economic impact and reported misleading job numbers.
But Thomas Cunningham, chief economist for the Metro Atlanta Chamber, told lawmakers Feb. 4 that even the lower economic impact numbers the audit found demonstrate the tax credit’s value.
The audit reported Georgia provided $667 million in tax credits to film producers in 2016 – making the credit far and away the most expensive in the state’s arsenal. The credits generated $4.6 billion that year in return, including direct and indirect spending, increased tourism and studio construction, the audit found.
That’s nearly a 7-1 return on investment, Cunningham told members of the House Working Group on Creative Arts and Entertainment during two days of hearings on the film tax credit program.
“It looks like the returns are fairly decent,” he said.
Cunningham and others defended the film tax credit as a better investment than many other economic carrots the state offers.
“Here, you get the spending up front and the tax credits after the fact,” he said. “It’s not like a typical economic development incentive, [where] you’re giving money up front and hope you get the jobs later on.”
The second audit found the film tax credit program is so poorly managed that film production companies have received credits to which they were not entitled or more in credits than they had actually earned.
Both state bureaucrats in charge of the program and representatives of the film industry who testified during the hearings conceded administration of the credit needs to be tightened.
Andrew Capezzuto, general counsel for the Georgia Department of Economic Development, said one shortcoming in the current program is that it allows film companies to seek audits of the credits they receive but doesn’t require them.
“We believe a large majority of the issues identified by … the audits could be resolved by mandating audits for all taxpayers getting this credit,” he said.
“There are ways we can tinker with [the program],” added Atlanta entertainment lawyer Stephen Weizenecker. “But I don’t think we should destroy it or make changes that would destroy what we’ve created.”
Film executives shooting productions in Georgia have reason for concern. Given the tight budget facing the governor and the General Assembly this year, there’s been discussion of putting a spending cap on the film tax credit.
“We might need to tailor [the program] a little differently,” said Sen. Chuck Hufstetler, R-Rome, chairman of the Senate Finance Committee. “We need to get the best bang for our buck.”
State Rep. Matt Dollar, R-Marietta, the House working group’s chairman, declined comment on the possibility of a spending cap on the tax credit. But he said the two days of hearings highlighted the industry’s impact in a much broader sense than what could be found in the audits.
“It’s given us a good picture of what this is meaning to Georgians,” Dollar
said.
The industry’s supporters like to point out where Georgia was in terms of the film industry before lawmakers adopted the tax credit. In 2007, the year before passage of the credit, film production in the state accounted for a mere $242 million in economic activity. “We’ve created a new industry out of nothing,” said Brian Robinson, spokesman for the Georgia Screen Entertainment Coalition, a film industry advocacy group affiliated with the Georgia Chamber of Commerce. “There’s a really good story to tell about the economic impact this is having”