Baltimore Sun – David Zurawik

Incentives for film, TV productions may be in jeopardy again

Full Article

By David Zurawik, The Baltimore Sun

Updated November 28, 2014

Frank Underwood might be the most powerful leader in the world on “House of Cards,” but his fate could be determined in coming days by a small group of Maryland politicians led by Gov.-elect Larry Hogan.

The dust has hardly settled from last year’s bruising battle over the amount of tax incentives the state would give “House of Cards” to keep the Kevin Spacey drama filming here, and already the Netflix series is back in the cost-cutting cross hairs.

Two real-life political developments have the film and TV production community here deeply worried that Maryland and “House of Cards” could be parting ways for good after filming of Season 3 ends next month.

First is a Department of Legislative Services report that says the state is only getting a 10-cent return on every dollar given in tax credits to film and TV producers who make their movies and shows here.

There is a hearing Tuesday in Annapolis on the report, which recommends that the state stop funding the tax incentive program as of July 1, 2016, when it is scheduled to end.

That would likely mean the end of the marriage between Maryland and “House of Cards” — as well as HBO’s “Veep.” “Cards” has filmed much of its first three seasons in Baltimore and in Harford County (including renting space from The Baltimore Sun and Tribune Media), while “Veep” has largely been shot in Howard County.

It would also reduce to near zero the chance of any major TV series being made in the state in the near future.

The second and most important change: the election of Hogan. The Republican businessman ran and won an unexpected victory in large part on promises to cut state spending and reduce taxes even as Maryland deficits mount.

The pressure will be on him from day one to make good on his promises, and “House of Cards” and “Veep” are looking like a fast and high-visibility way for him to do that.

Jed Dietz, director of the Maryland Film Festival and a board member of the Maryland Film Industry Coalition, which advocates on behalf of incentives, acknowledges how bad the report makes the program seem.

“This is by far the worst report DLS has ever given this program,” Dietz said.

“It’s less than half. It used to be in the 22- to 25-cents range [return on the dollar],” he continued.

“But now, all of a sudden, it has come out and somebody has just decided, probably sincerely, that these kinds of programs don’t work and, therefore, they should be slashed. I mean, if you really believe that study, that would be your only conclusion.”

That’s certainly what The Washington Post concluded in an editorial published Nov. 20.

“Maryland Gov.-Elect Larry Hogan (R), who campaigned on a platform promising extensive but gauzily defined spending cuts has just been handed a small gift by the state’s nonpartisan legislative analysts,” the editorial said.

“In a new report, they concluded that for every dollar in tax credits that Maryland has lavished on film and TV productions — $62.5 million over the past three years, most of it to HBO’s ‘Veep’ and the Netflix production ‘House of Cards — state and local governments have reaped just 10 cents in tax revenue.

“If there’s a fatter target for Mr. Hogan’s budget-cutters, we don’t know what it is,” the editorial said.

Talk about painting a bull’s-eye on a program’s back.

But as bad as things might be looking as the public conversation begins with Tuesday’s hearing, there are several voices in favor of the incentives that have gone overlooked.

One of them belongs to Anirban Basu, chairman and CEO of Sage Policy Group, a Baltimore-based economic and policy consulting group.

In 2010, his firm studied the issue of film incentives for the Maryland Film Office and submitted a report that painted a much rosier picture of the program than the Department of Legislative Services study. Basu was recently appointed to Hogan’s transition team as adviser on economic development and policy.

In an interview last week with The Baltimore Sun, Basu said that while he understands the calls to sharply reduce or eliminate film incentives, he favors keeping them. He emphasized he is not speaking for the incoming administration.

“People can disagree on rate-of-return calculation, and let’s face it, we have several hundreds of millions of dollars of fiscal shortfall for [fiscal year] 2015 and FY 2016,” he said.

But “we as a state still do not have enough high-quality jobs. And … from an economic development perspective, we really cannot afford to give up on this industry. … I really believe that if we stay with the current formula, because the current formula is working, very large benefits will be experienced in the future. And it should be stated that the benefits are already quite large.”

Basu says there are “reputational and marketing benefits” to having “House of Cards” and “Veep” here — benefits Baltimore City and the state didn’t get with series that explored crime in Baltimore — NBC’s “Homicide: Life on the Street” and HBO’s “The Wire.” He’s “skeptical” that the DLS study “fully calculates those.”

“The shows ‘House of Cards’ and ‘Veep,’ while not actually set in Baltimore, are filmed in Baltimore and help to portray the city in a much more favorable light,” Basu said. “After all, Baltimore is able to play an effective stand-in for the capital of the free world. That’s not bad.”

For Basu, what’s most underappreciated in the Department of Legislative Services study is the “base of human capital” that’s been developed by and for the film and TV industry here.

“The jobs that are created by the film industry are in general highly technical and well compensated,” he said. “These are creative class jobs, and once a city establishes a base of human capital in terms of set design or lighting or other aspects of production, it is often the case that even more filming is done in that community as producers seek to leverage that talent.”

On the other hand, he added, that pool of talent tends to be “highly mobile” and will go elsewhere if the production jobs move to another state.

There is no shortage of stories in Maryland to flesh out what Basu is saying in economist-speak about a highly talented “base of human capital” here.

Before the national Emmy Awards, I profiled four Marylanders who were nominated for their work on productions in the Baltimore area.

Halina Gebarowicz was up for art direction on “House of Cards.” Born in England, she came to Baltimore in 2002 to work on “The Wire.” She started making the Baltimore area her home in 2003 and has lived in the state since — in Fells Point, Columbia and now Clarksville.

Lorenzo Millan was born in Baltimore, but after graduating from New York University’s Tisch School of the Arts, was ready to go wherever he could find a job in the film industry.

That opportunity came in Baltimore, not New York, with the chance to break into the business on “Homicide.”

He has been working steadily ever since as boom operator and sound mixer — and won his first Emmy this year for sound mixing on “House of Cards.”

“I was so green when I started on the second unit of ‘Homicide,’ ” Millan said in an interview on the eve of the Emmys. “But I kept working at it and kind of moved along from there.”

Dietz wonders at the wisdom of driving such talent away by ending the incentives program once you have already invested in helping to train it.

But that’s what the Department of Legislative Services report advocates: “Going forward, DLS recommends that the General Assembly focus economic development efforts on incentives that create permanent and lasting employment, rather than temporary jobs.”

They don’t have to be temporary, according to Dietz.

“Film and television crews hire up and down the socioeconomic level — from entry-level kinds of positions like production assistants up through very skilled camera operators and costume people,” Dietz said. “And people say those jobs aren’t permanent. Well, they’re only not permanent if we choose to make them nonpermanent. If we cut off the funding, then they won’t be permanent. But if we can keep the business coming in, we can keep people employed year-round here.

“What’s a permanent job anyway?” Dietz asks, citing the changing nature of labor in America. “Do you have one?”

Welcome back to the battle over “House of Cards” and the future of Frank Underwood.