Pennsylvania taxpayers subsidize film making; good deal or boondoggle?

The stars were out in Hollywood on Sunday night.

But the rest of the year, Pennsylvania does its best to attract A-listers to the commonwealth. And taxpayers foot the bill through state tax breaks.

There’s no question the silver screen is marketing gold.

“You can’t put a price tag on seeing a Pennsylvania location up on the big screen,” said Carrie Fischer Lepore, Deputy Secretary for Marketing, Tourism and Film in the Department of Community and Economic Development.

Think the movie “Witness” and what it did for Amish Country.

Or Philadelphia’s most famous example and favorite fictional son, Rocky.

“You’re hard-pressed to find a family that goes to Philadelphia for the first time and doesn’t make it a priority to run up the Art Museum steps with their arms held high imitating what Rocky did back in the 70’s,” Lepore said with a smile while raising her arms triumphantly above her head like the movie character.

The positive publicity was free in the “Yo Adrian” days. It comes at a cost now.

They’re called film tax credits.

“We want to incentivize film production companies to make their films in Pennsylvania and in return help keep people employed and keep business healthy and strong,” Lepore explained.

Since the program began in 2007, 444 movies and television shows have gotten nearly $600 million in state tax breaks. Lepore insists it’s money well spent because those productions have spent nearly $2.5 billion in Pennsylvania, a 4-1 return on investment.

“They’re staying in our hotels. They’re eating in our restaurants. They’re hiring our caterers,” Lepore said, adding that there are stringent criteria to qualify for a tax credit. Productions must spend at least 60 percent of their total budgets in the Keystone State and they don’t get the credit until after they’ve spent the money and it’s been verified by the department.

“This is a carve out for one industry,” said Nate Benefield of the conservative Commonwealth Foundation, which is philosophically opposed to rolling out the red carpet for movie makers.

“Supporters of film tax credits say, ‘hey, if we lower their taxes for these studios, they will come and produce in Pennsylvania.’ Guess what? That’s true of every other business as well. If you lower their taxes, they’ll come and produce in Pennsylvania and create jobs,” said Benefield.

In last year’s annual report to lawmakers, DCED said the Film Tax Credit program has created nearly 18,680 jobs since its inception.

“I am appropriately skeptical, like I am of all programs,” Democratic Auditor General Eugene DePasquale said.

DePasquale referred to a 2014 audit of DCED that looked at grants in general but not film tax credits specifically. It found that DCED only created 56 percent of the jobs it claimed to have created. DePasquale said an audit of the Film Tax Credit Program is on his to-do list.

“We want to make sure that the exact number of jobs are being delivered and that the movies are actually being filmed in Pennsylvania,” DePasquale said.

Famous movies like “Creed” and “Silver Linings Playbook” got millions of dollars in tax credits from Pennsylvania. But in a real plot twist, producers never used the credits. They sold them. Records show that last year, $58 million of the $60 million in tax credits awarded were sold to non-entertainment companies like Verizon or Comcast. So, if a film producer gets $3 million in tax credits, they can sell them for $2 million. The producer gets $2 million in cash and the company that bought it got a million-dollar state tax break.

It is completely legal.

“I know why it ticks people off, I get it,” said DePasquale. But he’s not so sure the curtain should fall on the program.

“If 49 states are offering tax credits for movies to come and you’re the only one, it’s hard not to do it,” he said.

DePasquale said the real test is virtually unknowable. Would the movie have come here without the tax credit? If the answer is yes, then it’s a bad deal to give them the incentive. But, DePasquale said, if the movie came here specifically because of the tax credit and would have gone elsewhere without it, then it is a good deal.

Lawmakers have mostly given the program a thumbs up. They upped the tax credits this fiscal year from $60  million to $65 million.

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