New Mexico Film Production Tax Incentive Study
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New Mexico Film Production Tax Incentive Study Phase III Report July 2016 New Mexico Film Production Tax Incentive Study Phase 3 Report TABLE OF CONTENTS Executive Summary .................................................................................................................................... 2 1 Background and Study Purpose ..................................................................................................... 6 1.1 Introduction ......................................................................................................................................... 6 1.2 Purpose and Scope of Phase 3 .......................................................................................................... 7 1.3 Report Structure .................................................................................................................................. 7 1.4 Report Limitations ............................................................................................................................... 7 2 Film Tourism and Its Measurement ................................................................................................ 8 3 Experience of Film Tourism in Other Jurisdictions ...................................................................... 9 4 Film Tourism in New Mexico ......................................................................................................... 12 4.1 Review of Previous Studies of Film Tourism in New Mexico ............................................................ 12 4.2 Individual/Annecdotal Evidence of FIT in New Mexico ..................................................................... 14 4.3 Survey of Visitors .............................................................................................................................. 16 4.4 Survey of Tourism-Related Businesses and Organizations ............................................................. 17 5 Impacts of Film Tourism in New Mexico ...................................................................................... 23 5.1 New Mexico’s Tourism Industry ........................................................................................................ 23 5.2 Estimation of the Economic Impacts of Film Tourism in New Mexico .............................................. 25 6 Film Tourism Recommendations .................................................................................................. 29 7 Impacts of Film and Television on Educational Institutions ...................................................... 31 7.1 Film and Television Related Educational Programs ......................................................................... 31 7.2 Impact of Film and Television Industry on Educational Institutions .................................................. 34 7.3 Partnerships ...................................................................................................................................... 37 7.4 Role of the Film Tax Incentive on Educational Institutions ............................................................... 37 8 Film and Television Related Infrastructure Investments ............................................................ 38 8.1 Existing Production Studios in New Mexico ..................................................................................... 38 8.2 Additional Infrastructure Investments ............................................................................................... 40 Appendix A. Description of Data Sources ........................................................................... A-1 Appendix B. Economic Impact Definitions .......................................................................... B-1 Appendix C. Film Agreements from New Zealand .............................................................. C-1 Appendix D. Survey of Visitors ............................................................................................ D-1 Appendix E. Survey of Tourism-Related Businesses and Organizations ....................... E-1 Appendix F. Survey of Educational Institutions .................................................................. F-1 i New Mexico Film Production Tax Incentive Study Phase 3 Report EXECUTIVE SUMMARY This is the third in a series of reports prepared by MNP LLP on the New Mexico film and television industry. The previous reports, which were released in 2014 and 2015, analyzed the economic impacts arising from film and television production spending, and its resulting effects on suppliers and the labor force. This report is focused on the following three aspects of the New Mexico film and television industry: Analysis of the effects that the film and television industry has on the New Mexico tourism industry. Documentation of educational programs that are designed to encourage participation by New Mexico residents in the film and television industry. Review of investments made in New Mexico in film and television infrastructure. EFFECTS OF THE FILM AND TELEVISION INDUSTRY ON NEW MEXICO TOURISM The interaction between film and television and tourism is known as film-induced tourism, or FIT. FIT effects include both the influencing of visitors to travel to a jurisdiction, and the encouraging of increased visitor spending through participation in film-related experiences. In general, the assessment of FIT on a jurisdiction-wide basis is a difficult task. The study of FIT in a systematic fashion has only been of recent interest, and few jurisdictions have established systems to measure it in an ongoing fashion. This is currently the case in New Mexico, where no ongoing measurement system for FIT exists. As a result, our approach involved considering all available information on FIT, supplemented, as much as possible within the study terms of reference and budget, by original research. This approach can be described as an examination using multiple lines of evidence, where the multiple lines of evidence consisted of: Research and interviews regarding FIT in other jurisdictions that have film and television industries with similar characteristics. Review of previous studies on FIT undertaken in New Mexico. Research and interviews with individual New Mexico businesses and organizations that have reported FIT. Survey of visitors to New Mexico regarding the effects of FIT. Survey of New Mexico tourism businesses and organizations regarding the effects of FIT. Key Findings on FIT in New Mexico The following are our key findings on FIT in New Mexico: FIT is a contributor to the tourism industry in New Mexico. While it is difficult to isolate the effects of any single factor on the decision of visitors to travel to New Mexico, there is clear evidence that many visitors have been influenced, in whole or in part, to travel to New Mexico because of scenery or locations that have been featured in film or television productions, or to see locations where film and television productions have been filmed. In addition, some visitors not initially influenced to travel to New Mexico by film and television productions engage in film-related tourism experiences during their stay. The available evidence suggests that FIT has increased substantially since 2008. This increase appears to be largely due to the popularity of the Breaking Bad television production and its related production, Better Call Saul. On a regional basis, FIT appears to have the most effect in the Central Region (Albuquerque), followed by the North Central Region (Santa Fe). Tourism businesses and organizations from the Central Region that were surveyed as part of the study believe that roughly 20 percent of visitors to that region may be influenced by film and television productions, while tourism businesses and organizations from the North Central Region believe film and television productions may influence 2 New Mexico Film Production Tax Incentive Study Phase 3 Report roughly 15 percent of visitors to their region. Tourism businesses and organizations in the remaining regions believe film and television productions may influence roughly 5 percent of visitors to their regions. At present, FIT accounts for a small but not insignificant portion of total New Mexico visitor spending. A conservative estimate is that FIT influenced, in whole or in part, between 5 percent and 13 percent of total visitor spending in 2014 (or between $302 million and $777 million).1 Based on that range, the estimated economic impacts attributable in whole or in part to FIT in 2014 are shown in the following table. ESTIMATED RANGE OF FIT ECONOMIC IMPACTS IN 20142 Low Median High Visitor Spending (millions) $301.6 $539.2 $776.8 Total Output (millions) $423.8 $757.7 $1,091.7 Total Gross State Product $219.2 $391.8 $564.5 (millions) Total Employment (FTEs) 4,412 7,888 11,363 Total Labor Income (millions) $115.6 $206.6 $297.7 Total State Taxes (millions) $20.8 $37.2 $53.7 Total Local Taxes (millions) $9.9 $17.7 $25.6 Recommendations on FIT Based on a review of FIT practices in other jurisdictions and on research conducted in New Mexico, we recommend the following regarding FIT: Coordination between film and television production companies and tourism organizations is a key factor for capitalizing effectively on FIT opportunities. New Mexico should consider the New Zealand model of introducing collaborative marketing agreements between production companies and relevant tourism agencies as part of its film incentive program. (Such agreements