Upstate New York Film Project Flops | Citizens Against Government Waste

Upstate New York Film Project Flops

The WasteWatcher

The Motion Picture Association of America (MPAA) was established in 1922.  Since then, the organization has grown into a worldwide juggernaut, promoting America’s film artists and representing the industry issues before government regulators and legislative bodies across the globe.  According to the MPAA, the American film industry currently supports 1.9 million workers and contributes $41 billion to more than 345,000 businesses in a given year in the United States alone.

These figures make production and distribution of films and television shows one of the United States’ main economic engines.  When MPAA members shoot films or television shows on location, which occurs in all 50 states, they deliver a significant boost to that local economy.

For example, the popular Pitch Perfect and Pitch Perfect 2 bolstered Louisiana’s economy to the tune of a combined $40 million.  In Albuquerque, New Mexico, $23.5 million was added to the local economy after the 2015 hit Maze Runner: The Scorch Trails ripped through town during production.  New Mexico Film Office Director Nick Maniatis was thrilled:  “A film like this has a major economic impact in New Mexico as the numbers reflect. The success of this science fiction film series about young adults will be felt in the tourism industry for years to come.”  The highly anticipated sequel Independence Day: Resurgence, which was released in July, 2016,  added $44 million to New Mexico’s economy.  The critically acclaimed 2015 film Black Mass, starring Johnny Depp, pumped almost $20 million into Massachusetts’ economy, including $8.5 million that went to hundreds of locals hired for the movie. 

Television shows and even short series also lend an economic hand.  For example, HBO’s “Vinyl,” a short series filmed in New York, brought more than 3,445 jobs to the state, according to the MPAA.  On April 27, 2016, MPAA Chairman and CEO Chris Dodd said, “The tremendous economic contributions from HBO’s ‘Vinyl’ exemplify the film and television industry’s strong record of creating job opportunities and driving investment in New York.” 

However, when state officials decide to dabble in the movie making business, the plotline often takes an unfortunate twist and taxpayers become unwilling extras.  In Upstate New York, the result was stranger than any fictional movie or TV show.

On March 4, 2014, New York Governor Andrew Cuomo announced that the state would establish a “Central New York Hub for Emerging Nano Industries in Onondaga County that will specialize in providing advanced visual production research and education to support Upstate New York's rapidly growing film and television industry.”  The facility, which was to be spearheaded by the SUNY College of Nanoscale Science and Engineering (CNSE), would “focus on the use of nanotechnology to drive innovations in the computer generation imagery, animation, and motion capture technology used in film and television production.”  The announcement claimed that the new facility would be a “hotspot for research and education, bringing hundreds of new jobs and hundreds of millions of dollars of investment to Central New York.”  Specifically, there would be “a minimum private investment of over $150 million over the seven years, with an initial 125 jobs that will ultimately reach at least 350.” 

With such a dramatic buildup and commendable objectives, the next act for the hub seemed destined to be a massive economic boost to the entire area.  The facility was completed in 2015 at a cost of $15 million.  However, the first tenant, FilmHouse, supposedly based somewhere around Los Angeles, has yet to release a single film. 

The failure to produce anything of substance should not have been a big surprise.  According to an August 22, 2016 New York Times article, FilmHouse CEO and President Ryan Johnson owes at least $1.6 million bill for judgments against him for fraud and breach of contract, and he was found liable for $100,000 for failing to pay film crew workers.  The company’s chief strategy officer, Scott E. McIntyre, owes the Internal Revenue Service more than $1 million, and Kent Purdy, the senior vice president, owes more than $40,000 in state and local taxes.

The film that was started at the hub, American Dresser, is still in post-production.  And the locations for Film House’s next two projects?  Johnson decided that Syracuse was “not appropriate” for them.

On September 22, 2016, this financial disaster thriller reached its denouement.  The United States attorney in Manhattan unsealed a criminal complaint against seven individuals, including CNSE Senior Vice President and Chief Executive Dr. Alain E. Kaloyeros, who was in charge of the construction and management of the film hub.  The charges followed a lengthy  investigation into public corruption related to “the Cuomo administration’s efforts to lure jobs and businesses to upstate New York’s limping economy by furnishing billions of dollars in state funds to developers from Buffalo to Albany.” 

The fiscal tragedy of the Central New York Hub for Emerging Nano Industries in Onondoga County (someone needs to come up with a shorter title) ends with the taxpayers footing the bill for a multi-million-dollar white elephant, and the conclusion that Upstate New York does not have a “rapidly growing film and television industry,” and most likely never will.

In regard to the impact of tax incentives for film production, a June 5, 2016 study conducted by the University of Southern California (USC) found that “sales and lodging tax waivers had no effect on any of four different economic indicators.  Transferable tax credits had a small, sustained effect on motion picture employment levels but no effect on wages.  Refundable tax credits had no employment effect and only a temporary wage effect.”  In other words, the USC study claims that when states provide special incentives for a studio to film a motion picture in their state, the economic effects are very small and temporary.

On September 14, 2016, the MPAA directly refuted USC’s findings, claiming the study was false, misleading, and used “overly broad, aggregated data that paint an imprecise and inaccurate picture of employment trends in film and TV production.”  MPAA also noted that the study failed to properly examine who is affected by production incentives, since it did not include movie theater and sound recording industry jobs.  

States continue to struggle with how to craft special tax breaks, like those for the film industry, in order to maximize their positive economic impact.  The American Legislative Exchange Council (ALEC) found that “While film production companies often rely on film tax credits to make projects financially viable, a less burdensome but more neutral tax code would be a significant improvement for other industries in the state and almost certainly for film production companies as well.”

Whether states continue to provide incentives or cut taxes, the debacle in Upstate New York should be a warning that no one should go that far or be that wasteful.

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