Film Incentive Program Fears Guilt by Association

^{* Editor's note: This story has been updated to include additional data from the Texas Film Commission.}

Roughly one decade after lawmakers ponied up state money for an incentive program to entice filmmakers to Texas, many in the industry feel the program is just beginning to hit its stride. But as the legislative session gets underway with new lawmakers and leadership, a growing wariness of incentive programs could threaten that progress.

Last year, incentive funds started losing their charm when a damning state audit of the Texas Enterprise Fund, which Gov. Rick Perry used to lure businesses to the state, revealed that many decisions about who got money were made outside formal channels and, in a number of cases, not properly monitored to ensure that jobs promised were delivered.

Gov.-elect Greg Abbott has publicly said that the Enterprise Fund specifically needs to be “thoroughly re-evaluated.” And sources close to Abbott told The Texas Tribune that his team intends to review the state’s approach to all incentives.

Some in the Legislature, like freshman state Rep. Matt Rinaldi, R-Irving, think all incentives should be done away with — including those for film, which are administered by the Texas Film Commission.

“The rationale behind cutting the film commission is a scope-of-government issue,” Rinaldi said. “We just don’t believe the government should be subsidizing private enterprise and favoring certain producers over others.”

But supporters of the film incentives say they're being tarnished by association. The program's structure makes it more difficult to game than the other funds, they said. Filmmakers aren't handed money up front, instead applying for reimbursement after working in Texas. And if international notice and growing reputation are any measure, Texas is succeeding in claiming its place in the film industry.

The film program does not play favorites, said Heather Page, director of the Texas Film Commission. “As long as we have had funding, the door has been open to projects that fit our qualifications,” she said. “There have been projects we’ve turned away because they don’t meet our qualifications.”

Even the favorite sons of the Texas film world have been turned away.

“For our program,” Page said, “the basic qualifications are in the statute itself, so it makes it very clear to us the law we have to follow. It helps us be very clear with other people as well.”

The Texas Moving Image Industry Incentive Program offers feature films, television programs, commercials, video games and post-production projects a 5 to 20 percent incentive, depending on how much the production spends in the state. An additional 2.5 percent incentive is available if the project is located in an underutilized or economically distressed part of the state. To receive incentives, 60 percent of production days must occur in Texas, and 70 percent of employees on the project must be Texas residents.

Robert Rodriguez was famously denied incentives for his movie Machete, knocked out of the box by a clause allowing the commission to withhold incentives if a film “portrays Texas or Texans in a negative fashion.”

Richard Linklater, an Austinite and major figure in the Texas film community, snagged three Golden Globes and six Oscar nominations for his 2014 film Boyhood, which was filmed in the state. But he will not be receiving incentive funding for the project.

Because production had already started before the incentive program existed, Boyhood, which filmed the same group of actors for a few days each year from 2002 through 2013, was ineligible. And though he did try to get funding in the later years of filming, an exception was not made for Linklater.

“Not even he could get an incentive,” said Lawrence Collins, a lobbyist who represents various Texas film industry clients. “It serves up a good example of just how good our program is.”

Because incentive funding is not tallied up and paid out until after a production wraps and submits its receipts, supporters argue that, unlike the state’s other programs, those given money must prove their economic impact before they get funding.

“It’s clean as the driven snow in that regard,” said Bill Hammond, the CEO of the Texas Association of Business, which supports all of the state’s incentive programs. “It’s pristine in nature because it’s all after the fact.”

According to the TAB, the state’s film incentives have accounted for more than $1.5 billion in direct and indirect economic activity in the state. According to the film commission, since September 2007, the Texas Moving Image Industry Incentive Program has paid out more than $149 million in grants to nearly 860 applicants who have or are budgeted to spend more than $1 billion in the state.

Though he did not secure state funds for his work on Boyhood, Linklater remains a staunch supporter of the program. Without it, he told the Tribune, “there wouldn’t be a film industry in Texas.”

“When you’re dealing with out-of-state money, which most film industry money is, they don’t care where you film,” he said. “If someone’s offering an incentive, they will encourage you to go there.”

He said would have filmed his 2011 film Bernie in Louisiana if not for incentive funds, which for that project totaled nearly $610,000. He said he would have also gone out of state to make a forthcoming project, which he has described as a “spiritual sequel” to his 1993 film Dazed and Confused.

Last session, the Legislature gave the film incentive program $95 million for the biennium, the largest appropriation in its relatively short history — a more than $60 million increase from the previous budget. The industry response was swift, said Rebecca Campbell, executive director of the Austin Film Society. The annual income at Austin Studios increased by 83 percent.

“These past two years have been huge, and it tracks directly back to the incentive,” she said.

Campbell contends that the most effective way to attract more production would be to increase the percentage of money that productions can get back if they qualify. Other states, such as Georgia and Louisiana, where the upcoming movie Don’t Mess With Texas was shot, have more generous offerings.

But Page said she's glad the state has taken a “low and slow approach” to incentive funding because it allowed the commission to lean more heavily on Texas selling points such as the state’s crew and cast base, its diversity of locations and its business climate.

“All those things were teed up, and people wanted to come here,” she said. “Until we had an incentive that was just marginally better, we couldn’t pull that business away from other states. Now, without giving away the farm — which in my opinion, some other states do — our little change has had a huge impact on us.”

On its way out the door, Perry’s administration requested that funding be kept level for the program. In the House’s base budget released on Thursday, the program was allotted less than $10 million over the course of the next biennium.

That number is expected to change as budget negotiations proceed. The Enterprise Fund and the Emerging Technology Fund, another of Perry’s go-to incentive funds, were not even funded through the biennium in the base budget.

Hammond said he hopes the Legislature will increase funding even more this session, though he admitted that “is a little pie-in-the-sky on our part.”

“It feels like it’s really working now,” Linklater said of the incentive program. “The goal now is to keep it funded. That’s the hardest part. If that goes away, we’re right back to where we were. It will be instantaneous how quickly things will disappear.”

He said the funding decision would say a lot about the state. 

“Do we want to tell our Texas stories in other states?” he said. “I hope not, but it could happen.”

Disclosure: The Texas Association of Business is a corporate sponsor of The Texas Tribune. Richard Linklater is a major donor to the Tribune. A complete list of Tribune donors and sponsors can be viewed here.