GCFC President Pushing for Big Tax-Credit Bump

Cleveland.com’s Jay Miller sat down at the beginning of the year with GCFC President & CEO Ivan Schwarz to talk about increasing the Ohio Motion Picture Tax Credit to $100 million this year, allowing for the creation of many more new jobs for the state, but more specifically, Northeast Ohio. ORIGINAL ARTICLE HERE

Ivan Schwarz

It took only until July 12, or 12 days after Ohio’s fiscal year began in 2018, for Ivan Schwarz to run out of money. In that short time, he said, the state distributed all of its $40 million annual film tax credit allocation to applicants.

It’s Schwarz’s job as president of the Greater Cleveland Film Commission to convince movie and television companies, as well as producers of commercials and industrial films, to bring their work to Northeast Ohio. He lures them with financial incentives from the pool of tax credits created by the Ohio Legislature.

But, he said, the $40 million cap constrains his plan for a robust, year-round film industry that creates good jobs in Northeast Ohio. Schwarz wants to push through legislation this year to increase the motion picture tax credit, arguing that every dollar spent by the state returns two dollars in economic activity, and that there is demand from producers to shoot in Cleveland.

In recent years, Northeast Ohio has been the backdrop for a number of movie and television productions. In May, a cast and crew shot in Ohio City and elsewhere around Cleveland for “The Last Summer,” a romantic comedy expected to be released on Netflix later this year. That same month, a production company was filming “I See You” in Chagrin Falls and Lakewood. No release date has been announced for that film.

A bill introduced by term-limited state Rep. Kirk Schuring of Canton (who is moving to the Ohio Senate) to increase the pool to $100 million died at the end of the last legislative session on Dec. 31. Schwarz hopes the next legislative session, which convenes Monday, Jan. 7, will make it happen.

“I feel 2019 with the new governor and Schuring moving over to the Senate and a lot of supportive members in the House, this is the year things will align,” Schwarz said in a Jan. 2 telephone call. “(Incoming Gov. Mike) DeWine has expressed support, where Kasich wasn’t always thrilled about tax incentives.”

Schwarz believes an increase in the tax credit can bring entertainment industry jobs, and a thriving year-round industry, to Northeast Ohio. An increase in film production could attract someone to build a film studio, he believes, which would attract even more jobs.

The legislation Schwarz and the five other regional film commissions in the state pushed, House Bill 525, would have raised the maximum amount of credits to $100 million per fiscal year. It also would have extended eligibility to live theater productions that were either in rehearsal or would be performed in Ohio for six performances a week for five weeks.

States have been using financial incentives to lure movie and television companies after productions started filming in Canada after 1997, when that country began offering incentives.

Schwarz said a larger tax credit allocation is key to building the Northeast Ohio entertainment industry he foresees, an industry that attracts creative talent to the region. He said the new School of Film, Television and Interactive Media at Cleveland State University also will be an attraction for, and will benefit from, additional production in Northeast Ohio.

Frederic Lahey, director of CSU’s new School of Film, Television and Interactive Media, supports Schwarz’s efforts to increase the tax credit.

“It’s critical,” he said. “One of the reasons for creating the film school is to attract and retain young creatives, and by having the work here, that makes for attraction and retention. One of the first things productions ask when they’re looking for places to shoot is, ‘What are the incentives?’ and then they ask about film schools. It’s infrastructure, and to me it’s key to economic growth for the area.”

The legislation stalled in the 2017-2018 session, Schwarz said, after Ohio House Speaker Cliff Rosenberger resigned in the wake of revelations that the FBI was investigating his relationship with the payday loan industry. State government ground to a halt as Republicans fought over who would replace Rosenberger. (No charges have been filed, and Rosenberger has maintained that his actions as speaker were lawful and ethical.)

While Schwarz doesn’t talk about productions that are or may be coming to Northeast Ohio, much less the ones that got away, he told the House Government Accountability and Oversight Committee in March that the state has lost more than $1 billion in production it could have had if the incentives were higher.

As it is, a 2015 study by Cleveland State University’s Center for Economic Development found that every dollar the state gave in tax credits pumped $2.01 back into the state’s economy. In Northeast Ohio, between 2011 and 2015, according to the study, film production created $50.1 million in labor income and $81.2 million in purchased goods and services — hotel rooms, restaurants, cleaning services, lighting equipment, vintage appliance rental and many other services. The production companies and their workers also paid $11 million in federal taxes and $4.8 million in state and local taxes.

The production of “Draft Day,” a 2014 football drama, spent $18.2 million in Northeast Ohio, according to the Cleveland State study.

Eligible productions receive a tax credit equal to 30% of the amount spent in Ohio on cast and crew wages, as well as goods or services purchased and consumed in Ohio. The credit may be taken against personal income or the commercial activities tax.

In 2018, 31 states, Washington D.C., Puerto Rico and the U.S. Virgin Islands offered film incentive programs, according to the National Conference of State Legislatures (NCSL). That’s down from 44 states in 2009.

States that eliminated the credits usually did so because of a lack of economic benefit to the state. West Virginia, which ended its tax credit in 2018, had an annual cap of $5 million but issued only $15 million over 10 years, according to the NCSL report. At the same time, however, Pennsylvania increased its annual incentive cap by $5 million to $65 million for fiscal 2018, though several legislators have proposed raising the cap to as much as $100 million or even eliminating the cap altogether.

Although Schwarz attributes the failure of HB 525 to turmoil in the Ohio House, the bill did have some opposition. Both the Buckeye Institute, a conservative think tank, and Policy Matters Ohio, a liberal advocacy group, question the value of the incentive.

Wendy Patton, senior project director at Policy Matters Ohio, a liberal advocacy group, told the House committee that a study by FilmLA, the Los Angeles film office, contended that state tax credits for motion picture production were a response to filmmakers fleeing Hollywood for Canada and cited a study suggesting federal legislation to put an end to the interstate incentive competition.

In May, Greg Lawson, a research fellow at the Buckeye Institute, included the motion picture tax credit in testimony about the proliferation of tax expenditures — ones he called “tax loopholes” — that make the state’s tax system “more complex, less transparent and less equitable.”

But to hear Schwarz talk about it, producers want to shoot in Ohio, but they have to follow the incentive dollars.

“There is more content being made than ever before,” he said, referring to the increase in production caused by streaming services such as Netflix, Amazon and Hulu. “There is so much opportunity, it’s going to go somewhere.”