Tucson struggles to attract film industry without state incentives

Fans of the movie industry are still irked that Arizona legislators stopped allowing incentives to entice filmmakers six years ago and continue to rebuff their efforts to reinstate them.

They contend that the lack of incentives, such as tax or spending rebates or waivers, is a major reason why Pima County — with its scenic Sonoran Desert, Old Tucson Western-themed movie set and almost 80 years of movie-making history — hasn’t come close to its potential.

Incentives are controversial, though. Fiscal conservatives say they don’t help local economies that much in the long term. Recent studies by the University of Southern California concluded that they offer little return for the investment, perhaps as little as 15 cents on the dollar.

But those who favor them say Arizona only has to look at neighboring New Mexico to see how incentives can pay off if you give them enough time. Arizona’s neighbor, which began offering incentives 13 years ago, attracted an estimated $514 million in film-related spending from 2010 through 2014, according to a study by the Canadian company MNP LLP. That includes production of the popular TV series “Breaking Bad.”“This entertainment, the motion picture and television business is one of the biggest, most successful exports that the United States has around the world. Even in a recession, they continue to produce films and export them around the world.”

“And now with Netflix and Amazon, there are more television series than ever — or as we call it, content,” said Shelli Hall, director of the Tucson Film Office. “So we’re missing an opportunity to be involved in a business that is hugely successful, very lucrative and easy for Arizona to get because of our proximity to Los Angeles.”

Filming survives in the Tucson area thanks to independent movies such as "Hot Bath an ‘a Stiff Drink," TV episodes and commercials. Old Tucson shares some of this business, but about 40 percent of its business is from this month’s Nightfall event aimed at Halloween lovers.

There were 362 projects filmed in the Tucson area from 2010 through 2015, giving the region $45 million in direct spending, mainly on hotel room nights and wages, Hall said.

Arizona one of 11 states with no incentives

From 1997 to 2015, 45 states, including Arizona, adopted incentives and collectively contributed $10 billion in tax breaks to Hollywood, according to the University of Southern California’s Price School of Public Policy.

Arizona was among 11 states that have stopped offering incentives since 2009.  Arizona’s lawmakers removed them as they struggled to balance the state budget and because they didn’t think they were valuable and have resisted efforts since then to reinstate them.

Scot Mussi, president of the Arizona Free Enterprise Club, wrote in a 2015 Arizona Republic column that the Arizona Department of Commerce calculated that in the final and fifth year of Arizona’s incentive program, “taxpayers shelled out over $2.6 million in tax credits to moviemakers, while only generating $600,000 in tax revenue for the state. It created no real permanent jobs, and the temporary jobs it did create were low paying.”

Tucson City Councilman Steve Kozachik, a strong proponent of incentives, suspects there may also be ideological reasons behind the Legislature’s resistance.

“The Republican Legislature in Phoenix has the notion that Hollywood is a leftist organization and they are not going to do anything to attract them here. I think that’s crap.”

Kozachik, whose brother Pete works as a film effects artist and animator, has been a big proponent of resuming the incentives.

After Arizona’s incentives expired at the end of 2010, Hall said she noticed a drop off immediately in interest in filming in Arizona. 

While trying to drum up business, she called a producer she had worked with before.

“He said  ‘I can get 30 percent of what I spend back in New Mexico. Can you give me that?’ and I said no,” she said.

“That’s the deal. That’s what happened as soon as the (Arizona) tax incentives went away. We lost the ability to be in the game for the big projects, for the TV series and the big features. When I say big, I mean $2 million or more. Smaller ones (film projects) also depend on that. That’s how they raise money. They say they are going to get 30 percent on one million dollars spent in New Mexico, and the bank will give them money,” she said.

Kozachik said there are definite economic benefits and he hopes lobbying can resume with the Legislature.

“They (film crews) are coming in and building sets. They stay in hotels. They rent cars. They have catering services. I mean it’s all of the above. It’s multiple sectors of the economy while the film is here shooting,” he said.

Hall, though, doesn't plan to lobby the Legislature, at least this fiscal year. "Yes, I believe it's a great industry but I don't believe this is the right time to take action at the state level. I am wholly focused on bringing business to Tucson and the southern Arizona region," she said.

Incentives are controversial

Two studies of state film incentives by the Price School of Public Policy concluded they are generally a bad investment because they have no sustained impact on wage growth and little effect on employment.

Crew members often come in from out of state and then leave when filming is done, the studies showed. Nor did they help states gain much, if any market share. The bulk of movie making remains strong in California and New York.

But Hall said that “the industry doesn’t put a lot of stock in that study by an assistant professor at USC. I have read so many studies in the past 10 years. You can have two studies in a state, and one says it (incentives) are good and the other says they don’t help. It depends what you are looking at.”

Indirect benefits are often overlooked in such studies, she said. 

Incentives come in many forms and can be an immediate waiver or a refund for in-state purchases or tax credits or rebates for any money spent on wages or capital investments in the state. Incentives range from 15 percent to more than 40 percent.

They are entrenched in many states. From 1997 to 2015, the five states offering the most cumulative investment were New York, $2.6 billion; Louisiana, $1.5 billion; Connecticut, $614 million; California, $582 million and Georgia, $529 million. Arizona gave just $23.7 million, and New Mexico, $490 million.

New Mexico's success

One example of indirect benefits is the fact that in Albuquerque, you can tour some of the locations filmed in “Breaking Bad.”

A July study by the Canadian company MNP LLP estimates that film making may have influenced between 5 and 13 percent of New Mexico’s tourism in 2014, resulting in estimated visitor spending of $302 million to $777 million and taxes of $31 million to $80 million.

The Motion Picture Association of America in July reported that production of Twentieth Century Fox’s movie “Independence Day: Resurgence” (released in June) generated more than $44 million in benefits to New Mexico. More than 5,750 people were hired and paid about $19.4 million.

The company spent 158 days in New Mexico and also spent $3.72 million on hardware and lumber; more than $1.8 million on transportation, such as car and truck rentals; more than $1.26 million on local wardrobe expenses $1.27 million on food. 

New Mexico Republican Gov. Susana Martinez initially tried to scale back the incentives after taking office in 2011 but changed her mind and signed a law expanding them, according to the Albuquerque Journal. The state has capped incentives at $50 million a year.

“New Mexico has had a program for about 15 years,” Hall said. “If they didn’t think it was benefiting, they would have ended it. And they have grown their crew base from 250 people to 2,500 people. I looked at the New Mexico web site. They have seven feature films and five TV series that are going on now or about to start. So how can that not affect your state?”

Hall has a discretionary fund supported by the city of Tucson, Pima County, Oro Valley and more than 500 individuals and businesses that she can use to use for incentives for any production that spends at least $2 million. She has only given one token $20,000 incentive, more of a thank you, to the makers of independent "Hot Bath an’ a Stiff Drink 2" because they spent $3.5 million and booked 1,950 hotel room nights.

Diversification helps

The Tucson region and the privately owned Old Tucson Company that operates Old Tucson, survive by expanding into different markets.

The Tucson Film Office, for example, has had luck with border films. Seven episodes for a Fox series to be aired in Latin America just wrapped up.

“If that series gets picked up and there is a second season, that will be great for us. I am told all the U.S. portions of the shows were done in Tucson and Southern Arizona. That’s huge for us and it’s diversification for us. We work at getting the border stories because that’s something that is unique to Southern Arizona," Hall said.

“We market ourselves as ‘You can film in our barrio and you can pretend you are in Mexico. You can film in one of our mines or pretend you are in the Middle East or in a sci fi landscape. The movie 'Three Kings' with George Clooney was filmed in a Sacaton mine, and it looks like the Middle East.”

Old Tucson, meanwhile, where the Hot Bath movie was filmed, survives by diversifying into festivals like the 26^th annual Halloween-themed Nightfall event underway this month and the sci-fi fantasy Wild Wild West Steampunk Convention that will be held in March. The event at Old Tucson, the sixth annual, claims to be the nation’s first and only steampunk convention.

Old Tucson was built in 1939 by Columbia Pictures for the movie "Arizona." More than 300 movies, films and TV shows have been filmed there since then, mostly in the decades before a fire destroyed about 40 percent of it in 1995.

Visitation dropped so much after that and then during the recession but has finally come back, said Mary Davis, director of marketing, sales and communication.

“For many years the park was not making money because of the recession and economy. In the last two years it has been in the black, in large part due to a new general manager, Terry Verhage,” she said. The park saw 167,000 visitors in 2015.

Old Tucson also continues to expand its role as a historical theme park. It now has a nonprofit arm, the Arizona Sonoran Western Heritage Foundation,  that is seeking a development director to seek grants for improvements such as restoring the 1872 Reno steam engine used in many movies.

Joe Camarillo, who handles group sales, envisions a multi-cultural center that shows not just the cowboys but all the other cultures of the Tucson area, including Hispanic, Tohono O’odham, Yaqui and Chinese. When the Old Tucson movie set was originally built (to resemble the city of Tucson), members of the Tohono O’odham Nation were hired to make adobe bricks because they were the most experienced, he said.

“We want Old Tucson to reflect all people, not just the people in the movies, but there is nothing wrong with that. We wouldn’t be here if it wasn’t for the movies. That is part of our history and our culture,” he said.

And while it reaches into the past, Old Tucson is also reaching into the future, to young people who like to see the West in a different way. The HBO TV series Westworld and the steampunk festival unite Westerns and science fiction.

“We love the John Wayne fans,” said Davis. “But if you ask a 40-something what movies John Wayne did, they won’t know. If you ask a 20-something, they won’t even know who John Wayne is. So we know we need to develop new audiences with expanded programing activities and events. So that’s what we are doing.”