Capital News Service
RICHMOND – Gov. Ralph Northam recently praised the American spy thriller series “Homeland” for bolstering Virginia’s film industry and boosting the state’s economy. Recent studies add context to how Virginia attracts these productions through tax incentives and how such productions benefit the state.
Northam announced that season seven of SHOWTIME’s “Homeland” is on track to produce about $45 million in direct spending in Virginia — the largest single production expenditure in the state’s history. Factor in the film’s effect on secondary businesses, and the economic impact may be nearly double that, at $82 million, he said.
Filming for season seven began in the fall and is scheduled to finish early this spring. Northam expressed his excitement to see Virginia portrayed in the new season.
“We have been delighted to host this iconic show in the Commonwealth,” he said in a press release. “‘Homeland’ has had an incredible impact on Virginia’s economy and created an excitement that is impossible to measure.”
Andy Edmunds, director of the Virginia Film Office, and Esther Lee, Virginia’s secretary of Commerce and Trade, said the decision to film in the state has several economic benefits for the commonwealth.
“Cast members have dined and raved about Virginia’s food scene; our beautiful scenery and cultural assets are in the national spotlight,” Edmunds said. “Virginia’s status as a competitive film location has been bolstered.”
Lee said the commonwealth’s film production industry has grown consistently over the last several years.
“‘’Homeland’s’ record estimated spend shows the remarkable potential this industry holds for Virginia,” she said. “This series has and will continue to contribute millions to Virginia’s economy, and provide high-income jobs to our industry workers.”
Impact of Virginia’s Film Industry
Despite the praise, studies examining the impact of film productions and film tax incentives on Virginia’s economy offer somewhat mixed results.
Mangum, an independent economics firm, found that the film industry has boosted Virginia’s economy significantly. Data compiled by the firm revealed that in 2016 the film industry contributed to Virginia’s economy 4,287 full-time-equivalent jobs, $215 million in labor income, $697 million in economic output and $27 million in state and local tax revenue.
This includes the impact of productions such as documentaries, long-form specials, television series or mini-series, commercial ads and music videos.
Season three of AMC’s “Turn” and season two of PBS’s “Mercy Street” were filmed in Virginia from September 2015 to July 2016. A separate Mangum study said the two productions had a “sizable impact” on Virginia’s economy.
Those two series generated 530 full-time-equivalent jobs, $29 million in wage and salary and $40 million in economic output. They also generated more than $2 million in state and local tax revenue.
A study published by the Joint Legislative Audit and Review Commission in 2017 evaluated Virginia’s film incentive programs from 2012 to 2016. It found that although incentives positively impacted economic growth, that impact was smaller than the impact of similar programs in other states.
The programs Virginia offers have a low return on investment at 20 or 30 cents per dollar. But Edmunds said the return on investment appears low because the study doesn’t take every factor into account.
“If infrastructure investment and local business expansion, local resident career advancement and the added value of a broadcast platform related to tourism advertising were taken into account, the return on investment would likely be much higher,” Edmunds said in a written response to the study.
The study also found that incentives do influence production companies to film in the state, but they are not significant factors in the decision. Additionally, growth in Virginia’s film industry has been small overall, despite increased spending through incentives. The film industry is being concentrated in metropolitan areas and is overshadowed by other states like California and New York.
Virginia’s Motion Picture Incentives
Virginia is one of 31 states and U.S. territories that offer motion picture incentives, alongside Washington, D.C., Puerto Rico and the U.S. Virgin Islands. The state offers two major incentives for filmmakers: The Motion Picture Opportunity Fund and the Motion Picture Tax Credit Fund.
According to the Code of Virginia, the Motion Picture Opportunity Fund is a grant to help cover the costs of production companies and producers who make their projects in Virginia using Virginia employees, goods and services.
This grant is awarded at the discretion of the governor and there is no minimum required expense. The legislature appropriated more than $3 million for the grant each of the last two fiscal years.
The Motion Picture Tax Credit fund provides a tax credit of “15 percent of the production company’s qualifying expenses or 20 percent of such expenses if the production is filmed in an economically distressed area of the Commonwealth,” according to the Code of Virginia.
The JLARC study recommended eliminating or simplifying the tax credit and creating a point-based scoring system to evaluate applications for the grant. There was no legislation introduced in the 2018 session to address either recommendation.
“Homeland” is eligible to receive a Virginia film tax credit and grant. The exact amount will be based on the number of Virginia workers hired, Virginia goods and services purchased and intangible products including Virginia tourism promotions.