Richard J Schneider
Expanding Colorado’s current film incentive program would have a “net positive impact” on the state’s economy, creating more than 700 new permanent jobs and $226 million in annual film production activity within five years, a University of Colorado study of the industry has concluded.
Despite national growth in the film industry, production and post-production activity in Colorado “has been on the decline” and the state’s current film incentive program “has not stopped the downward trend,” the study said.
Much of the decline, the study says, is due to the ineffectiveness of Colorado’s current production incentive program and the aggressive competition mounted by other states seeking the film production business.
If Colorado does nothing, the state can expect to lose nearly $45 million in annual business activity and just under 400 direct jobs in the industry over the next five years, the study concludes, resulting in additional tax revenue declines to state and local jurisdictions.
“Colorado has the opportunity to grow industry output by more than 55% by 2013, to nearly $226 million (annually) given more competitive film incentives,” said the study, conducted by researchers at CU’s Leeds Business School in Boulder.
The study, Impact of Film Incentives on the Colorado Economy and on Public Revenues, was requested by the Colorado Film Commission, which is working with legislators to introduce a proposal to expand the state’s current incentive program during the upcoming legislative session. The study built upon the 2003 Leeds study, The Impact of the Film Industry in Colorado.
Colorado’s declining film production industry has already cost the state $1 million in tax revenue between 2006 and 2008, the study said, and predicted additional losses of permanent jobs and tax revenues as the current trend continues.
Without expanded incentives, the state’s film production industry is expected to shrink from its current employment level of 1,572 to 1,184 employees by 2013, according to the study. That’s in addition to the 297 direct jobs lost since the state’s current incentive program was enacted in 2006, the study said.
However, the researchers concluded that by expanding the state’s current 10 per cent cash incentive to a 15-20 per cent tax credit program, the industry can be expected to grow to an employment level of 2,597 primary jobs by 2013, and generate enough state and local tax revenue to offset the tax credits.
Primary jobs are those that result in exporting goods and services outside of the state, which brings new revenue into Colorado.
In addition, the study said that for each direct job generated by the film production industry, 1.337 “indirect” jobs are created in other industries that provide support to the production employees.
“Colorado’s film industry is intricately tied to many other industries in the state, relying on, for example, the construction industry for building and wiring film sets, the transportation industry to transport people and equipment to locations across the state, and the food services industry to feed the production crew during filming – all indirect employees,” the study said. “In addition, film employees spend their earnings on various household goods, which translates to greater employment in Colorado’s communities.”
Other major conclusions of the study:
State investment in the film industry will “quantifiably reward the state” through increased economic activity, jobs, wages and tax revenues-benefiting state, county, and local government, school districts and special districts.
Film industry growth will help diversity the state’s economy, and boost both rural and urban economies since production activities occur statewide.
Colorado’s film industry “has been competing on an uneven national and international playing field” because of “aggressive incentives” offered by other states and countries such as Canada.
New aggressive film incentives new film would allow Colorado to compete in an industry that is incentive-driven, leading to “new film activity in the state, greater development of infrastructure and higher levels of employment and wages â€¦ while managing the fiscal constraints put forth by the legislature.”
Colorado’s current film production industry can reverse its downward trend and increase economic activity to $226 million annually by 2013 with new incentives.
Average film industry wages in Colorado at 10.5 per cent higher than the average wages for all of the state’s industries. However, Colorado film wages are significantly lower than the national average for the film industry, giving the state an added labor cost benefit to produce and post-produce films in the state.
Tax incentive proposals in Colorado do not involve up-front cash expenditures, but rather are paid after the production and economic activity take place.
The expanded economic activities represent “new money” that pays “above-average wages, which are then circulated and re-circulated through the Colorado economy â€¦ on homes and rents, services, and taxable goods, leading the employment in other sectors and tax revenues at all levels of government.”