Florida’s six-year, $296 million entertainment incentive program expired June 30, and already two major productions have committed to filming without new tax giveaways.
The projects defy warnings from state legislators and film industry advocates who for several years pushed for an expanded tax credit program.
HBO announced last week it would produce a third season of its hit series Ballers, which takes place in “sun-soaked Miami.” The second season began July 17, with its first episode attracting 5.7 million viewers, according to Casey Bloys, president of programming.
A Ballers advertisement featuring Dwayne “The Rock” Johnson appears atop the homepage of the Florida Office of Film and Entertainment, the state’s economic development agency for the entertainment industry.
It helped finance the first season of Ballers – 64 production days – to the tune of $6.8 million in tax credits.
Earlier in July, Netflix announced it would produce a third season of its Florida Keys-based original series Bloodline. Netflix received $8 million in tax incentives for the 122 production days of Bloodline’s first season.
Incentive totals for the second seasons of Ballers and Bloodline were not listed in Office of Film and Entertainment annual reports. A request from Watchdog.org was not immediately returned.
Both projects received state financial commitments before the six-year incentive program, established in 2010, blew through its entire $296 million credit allowance in its first three years.
The program’s first-come-first serve basis proved a major flaw as resources were allotted too quickly. Hopes of additional funding were finally dashed when the program expired one month ago.
Film Florida, a statewide entertainment association, marked the end of the expired tax incentive program as a senseless betrayal.
“The legislature’s ultimate decision to officially abandon our film, television and digital media professionals has our entire industry and supporters outraged,” said former president Michelle Hillery.
John Lux, executive director of Film Florida, said, “The state legislature sent a very clear signal that they are not interested in continuing to improve the economic growth the state has seen and that is unfortunate.”
But HBO and Netflix’s production announcements run contrary to such concerns that large film and television companies would avoid the Sunshine State without government assistance.
Upon the more recent news of Bloodline’s return, Film Florida cheerfully announced that Netflix’s commitment to film a third season, this time without state assistance, was evidence the “financial incentive program put in place in 2010 worked.”
Florida’s unique locations played persuasive roles in the new production decisions. The state’s zero income tax rate and year-round sunny weather also serve as competitive advantages over other states.
According to Todd Kessler, co-producer of Bloodline, shooting the Emmy-nominated series in Florida was more important than tax breaks — not that he wouldn’t take them if offered.
“We decided to set the show there (Florida Keys) because it’s crucial to what the show is, not because of the tax incentive, but it does affect things financially for us and the show will be challenged because of that,” Kessler told Hollywood Reporter, an industry publication, in June.
The Office of Film and Entertainment awarded sales tax exemptions and transferrable tax credits of up to 30 percent of productions costs. Recipients could even sell their credits to other companies if their tax liability was less than the total credit amount.
Critics called the perks unnecessary “Hollywood handouts.”
“Money is drained from general revenue that would otherwise be there, and Florida has less money at its disposal for the important work of governance,” said Skylar Zander, deputy state director for the conservative activist group Americans for Prosperity.
State Sen. Nancy Detert, R-Venice, spearheaded a multi-year effort to expand the tax credit program, to no avail. Fiscal conservatives, particularly in the state House, consistently blocked Detert’s legislative proposals on the grounds such incentives were “corporate welfare.”
“Three years I worked on it and it didn’t get done,” Detert lamented at the close of the 2016 state legislative session.
House Democrats voted for Republican-sponsored entertainment funding bills in 2015. State Sen. Jack Latvala, an influential Republican from Clearwater, announced at the outset of this year’s session that he’d use his position as chairman of an appropriations committee to make sure entertainment incentives were included in the 2016-17 state budget.
“To the best of my ability, any bill that passes the Florida Senate that has to do with economic development is also going to include provisions related to the TV and film incentive program,” he said. But the funding never materialized.
Powerful groups such as the Florida Chamber of Commerce, Associated Industries of Florida and the Motion Picture Association of America supported incentive proposals.
In April, HBO said it was “disappointed” with the lack of new Florida film incentives and that it would reassess future productions like Ballers. Last week, HBO changed its mind.
Numerous industry-funded studies show lost economic potential stemming from the lack of incentives. A widely cited examination of Florida’s tax credit program by the Motion Picture Association of America estimated the state’s $296 million investment had an economic impact, including employment and tourism benefits, of $3.7 billion.
State economists arrived at different results.
According to the Office of Economic and Demographic Research, entertainment sales tax exemptions generated only 54 cents in state revenue for every dollar the state gave up to a film or television company. Tax credit awards returned only 23 to 43 cents for every taxpayer dollar.
The state economic agency also said that attempts to quantify the impact of entertainment projects with respect to tourism are unreliable.
Plans for a new-and-improved incentive program are expected ahead of next year’s legislative session, but the public return on investment isn’t likely to change, according to the Tax Foundation, a Washington D.C.-based research group.
“Based on fanciful estimates of economic activity and tax revenue, states invest in movie production projects with small returns and take unnecessary risks with taxpayer dollars,” the group says.
Sam Staley, an economist and director of Florida State University’s DeVoe Moore Center, told Watchdog the calls for incentives make sense from an industry perspective.
“Most lobby organizations don’t represent taxpayers,” Staley said. “They represent members of their organizations.”
HBO and Netflix are showing Florida’s incentive-free approach may just work for everyone.