Jason Miller RFP Final Paper

7/31/2019 Jason Miller RFP Final Paper

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Can Louisiana Be

The Creative Capital

of the South?

Jason Miller

PADM 7917


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Table of Contents

Executive Summary ............................................................................................................ 4

Measuring Return on Investment ........................................................................................ 6

Amount of Investment ..................................................................................................... 7

State Tax Incentives..................................................................................................... 7

Local Government Economic Enticement ................................................................... 8

Jobs Created .................................................................................................................... 8

Quantitative Factors:.................................................................................................... 9

Qualitative Factors:...................................................................................................... 9

Research Methods: ...................................................................................................... 9

Total Economic Impact ................................................................................................. 10

Quantitative Factors ................................................................................................... 10

Qualitative Factors ..................................................................................................... 10

Research Methods...................................................................................................... 11

Benchmarking of Return on Investment ....................................................................... 11

Infrastructure ..................................................................................................................... 12

Physical Infrastructure................................................................................................... 12

Research Questions.................................................................................................... 12


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Human Infrastructure .................................................................................................... 13

High School Programs ............................................................................................... 13

College and Vocational Programs ................................................................................. 14

Quantitative Factors ................................................................................................... 14

Qualitative Factors ..................................................................................................... 14


Community Support .......................................................................................................... 15


Benchmarking ................................................................................................................... 17

Conclusion ........................................................................................................................ 18

Executive Summary

The State of Louisiana has placed tremendous effort and resources into

positioning Louisiana to be a national and international leader in the production of

movies, television, music and digital media. Using tax credits and other local incentives

the state has been able to lure production companies and content producers to the state

but the sustainability of this practice, especially given recent budget shortfalls, has

recently been questioned. This study will present a clear analysis of entertainment,


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business, and educational environments within the state allowing policy makers and

officials to best utilize the states limited resources.

Factors we will consider when deciding if the entertainment industry is worthy of

continued investment by the state are; returns on past investments, existing and potential

infrastructure, public and political support of the industry, as well as benchmarking the

state as compared to peer states and regions. Once this data has been gathered it will be

possible to test the hypothesis that entertainment is an economical driver for the state that

is sustainable and worthy of governmental support.

When measuring return on investment we will consider three main factors;

amount of investment by the state, amount of permanent jobs created, and yearly

economic impact for the state. For the entertainment industry, we will analyze data of

these factors from the last five years. Although eight years of data is available we feel

that five years of data both gives us a manageable amount of data as well as a large

enough sample to pinpoint any trends. We will compare this data to similar 5-year data

from the manufacturing sector.

In order to measure infrastructure we will not only look at physical production

facilities but also educational and vocational programs that serve the entertainment

industry. When examining these resources we will be measuring the ability of the

content producers to completely produce content within the state from concept through

final product.

We also seek to measure public and political support for investment in the

entertainment industry. Information will be gathered using surveys and focus groups


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with the goal of discerning whether taxpayers and policy makers feel that this is the best

use of their resources. Specific analysis will be made between the opinions of those in the

major film centers of Baton Rouge, Shreveport, and New Orleans as compared to the rest

of the state.

Using all of this data, we will attempt to benchmark the industry in Louisiana as

opposed to peer states and cities. For the film, television and movie sectors, we will

compare Louisiana to the traditional media centers of New York, Los Angeles, and

British Colombia. For our benchmark of live performances, we will compare the

intrastate cities of Baton Rouge, New Orleans, and Lafayette and interstate cities of

Austin, Houston, and Nashville.

After completing this study, we will have both qualitative and quantitative

research as to the sustainability and potential of the entertainment industry within the

state. We feel that the one million dollars for this study would be a well-spent investment

that will pay for itself in cost savings from either discontinuing or decreasing support for

the industry or increased revenue for the state due to a successful entertainment sector.

Measuring Return on Investment

Policymakers and taxpayers alike both need to know that the limited resources

available through tax credits and direct subsidies are being used to their fullest. We

propose a rigorous study of the return on investment for the entertainment industry to

evaluate whether the $700 million invested in the industry in just the last decade alone

has been the best use of tax funds during a difficult budget environment.


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When evaluating return on investment we will look at three key factors; amount

of investment made, amount of jobs created, and net economic impact. When evaluating

the amount of investment made we will exam the two main forms of enticement for

entertainment producers; local enticement, which are offered individually at the local

level, and state tax incentives, which most often occur via tax credits offered to

companies if they meet certain criteria. When examining the amounts of jobs created, we

want to separate permanent opportunities from those that are short term or temporary in

nature. In order to measure net economic impact we will calculate tax revenues from

employment and consumption of local goods and services less any tax credits and

economic incentives received. A combination of all of these factors taken together will

give us the best opportunity to measure the actual return on the investment made.

Amount of Investment

State Tax Incentives

Beginning in 2002 Louisiana began to offer tax incentives to attract the motion picture

industry. The current tax incentive is a 30 percent credit with and additional five percent

credit for hiring Louisianans. (Development, 2010, pp. 6-8) Additionally in 2007, the

state began a sound recording investor tax credit, which has resulted in an estimated $21

million investment to the music production industry on just over $333 thousand in tax

credits. (Development, 2010, pp. 13,15) In the area of digital media, the state offers a

Digital Interactive Media Tax Credit (DMTC) as well as direct investment in digital

production facilities. (Development, 2010, p. 19) The final area in which the state has

provided financial incentives for the entertainment industry is in the area of live

performance. Largely in response to the devastation to the live performance, industry by


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Hurricane Katrina the state began to offer a first of its kind tax incentive program for live

performances and infrastructure to kick start the recovery of the industry. (Development,

2010, p. 24) All together, these tax incentives have totaled just over $700 million.

Local Government Economic Enticement

While the state has done a complete job of tracking state tax incentives less

attention has been paid to incentives offered at the local level. Each local government

has had the autonomy to offer whatever enticements it deems necessary in order to attract

industries and jobs to their communities. Examples of these enticements include TIF

funding which has subsidized investment and infrastructure development for the

entertainment industry as well as direct subsidies to attract studios, production facilities

and shows to a particular local. While an exhaustive analysis of each city and town in the

state would be extremely time consuming and expensive we propose that a

comprehensive study of the state entertainment centers of Baton Rouge, Lafayette, New

Orleans, and Shreveport will give us a more complete picture of the additional local

incentives that the media industry has received in order to produce in the state.

Jobs Created

One of the major questions to be answered when measuring the return on the

investment from the Entertainment Industry incentive program is whether the investment

is actually creating any jobs in both the short-term and the long-term. In order for the

industry to be successful in the state of Louisiana, it requires that companies build a solid

permanent workforce comprised of native workers with the skills to drive production.

Our research will analysis both quantitative numbers of jobs created as well as qualitative

data on types of jobs created and deficiencies still present.


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Quantitative Factors:

How many total jobs have been created in the Entertainment Sector sincethe start of the incentive programs?

How many of these jobs have been temporary(less than 6 months innature)?

How many of these jobs have been permanent? How many jobs have been filled by Louisiana natives? What is the average salary of jobs created?

Qualitative Factors:

What kinds of jobs have been created? Where are non-native workers coming from? What kinds of jobs are being filled by non-native workers? Why are companies not hiring native workers?

Research Methods:

A variety of research methods will be required in order to measure the amount of

types of jobs created by Entertainment Incentive programs. Employment directly by

media production companies can be measured by analyzing tax credit applications for

media productions. Indirect employment such as for related industries such as hotels,

food service vendors, and facility construction will be harder to measure but will be

completed by comparing vendor employment size before and after the incentives began.

Qualitative data will be gathered by surveying media production companies in order to

gather information about their workforce composition and areas of strength and concern.

We would like to randomly sample 20% of all production companies, which have

received tax credits in order to get a diverse data sample, as well as, in the event of


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companies who have received multiple credits, identifying any trends in employment

over time.

Total Economic Impact

The final factor we will research when measuring return on investment will be the

Net Economic Impact of the entertainment industry. Three factors that we will consider

well evaluating economic impact are tax revenues, consumption of local goods, and

consumption of local services. We feel that these three factors will give us the best

picture on whether there is a positive effect of the industry or whether there is a neutral or

even negative net effect on revenue actually generated for state and local governments.

Quantitative Factors

How much was each companys state tax liability? How much was spent on local hotels? How much was spent on local dining? How much was spent on local production services? How many local companies were hired? What percentage of each projects budget was spent locally? What was the payroll of native production workers?

Qualitative Factors

What goods and services are being purchased locally? What goods and services are being purchased from outside the state? What kind of effect have local businesses seen from the entertainmentindustry?

Are there services that are available locally but are being purchasedoutside of the state?


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Research Methods

Economic impact data will be collected from submitted tax credit applications.

We will also seek to gather data from local service providers to gain information on

changes in revenue during the time that the credit has been offered. Additional sources of

data will include trade associations and local and state tax receipt figures. One way that

the data could be more easily collected is to incorporate a survey into the tax credit

application. This method would allow for a high response rate and would require a much

lower cost than administering a separate survey. Surveys could be completed

confidentially or not depending on input from vendors and production companies.

Benchmarking of Return on Investment

By comparing the return on investment for entertainment industry tax credits to

the return on investment of other state incentive programs that seek to attract business we

will be able to get a more complete picture of whether this is the best use of state

resources. Specifically we would like to benchmark the entertainment industry compared

to the manufacturing industry. Although other incentives are offered in areas such as

research, small business, and commercial and residential restoration we feel that the

entertainment industry and manufacturing industry are the two that most closely match up

for comparison. By looking at the manufacturing industry as a whole we would like to

compare incentives offered, jobs created and net economic impact with the goal of

picking a clear winner in regards to which is a better investment based on economic

factors. Data would be gathered from 10 manufacturing industry projects, which have

received tax incentives. While 10 projects only gives us a small snapshot into the


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industry we believe that taken both individually and as a whole that sample size can give

us an accurate benchmark comparison for return on investment.

Infrastructure

One of the major obstacles to establishing an entertainment industry in the state

was the absence of both a physical and educational infrastructure that allowed content to

be completely created and produced within the state. We feel that in order for the

entertainment industry to become sustainable there must be a movement towards creating

a substantial physical and intellectual infrastructure base that creates an incentive, outside

of a monetary one, for content to be produced completely locally.

Physical Infrastructure

Physical infrastructure for the media industry includes studios, live performance

venues, access to necessary resources and materials, as well as access to capital. When

evaluating physical infrastructure we would attempt to compile a list of all resources that

are locally available for the entertainments industry. Our major source for data on

physical infrastructure would be Louisiana Entertainment, which maintains an up to

date and comprehensive list of resources for the entertainment industry. Other sources of

data would be local chambers of commerce and business association, which maintain lists

of available resources.

Research Questions

Has there been an increase in physical infrastructure since the start ofincentive programs?

What infrastructure needs have been completely met?


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What infrastructure needs still need to be met more fully? What infrastructure needs have not been addressed at all? Is there a significant enough amount of infrastructure to support theindustry if tax incentives were reduced or eliminated?

Human Infrastructure

Perhaps even more vital to the sustainability of the industry than physical

infrastructure is trained entertainment workforce that desires to produce siginificaltly

local content. Human infrastructure can be divided into three main categories;

performance, production and vocational trades. Traditionally Louisiana has had a

sufficient amount of human capital in the vocational trades areas but has struggled to

develop performance and production capital. In order to evaluate the levels of potential

for entertainment skill capital we will look at programs being offered at the high school

and college level.

High School Programs

One way to increase the available skilled workforce needed for the industry is

through implementation of high school programs that emphasize creative arts and

technical careers. We will sample 30 schools from throughout the state with the goal of

measuring the availability and size of programs that are available. We intend to take a

weighted sample that samples more heavily schools located within major entertainment

centers but also completely sample the state. The survey will seek to answer two

fundamental questions:

1. What programs are available to students that closely relate to the mediaindustry?


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2. What level of interest is there in existing programs and is their support forexpansion?

College and Vocational Programs

In order to properly utilize any interest in the industry created at the high school

level there must be sufficient college and vocational programs that allow students to

visualize and work towards a career in the entertainment industry. Along with measuring

what programs are currently available, there also needs to be a measurement of the

amount of students from these programs who remain in state once they graduate.

Quantitative Factors

How many schools currently offer programs geared towards the entertainmentindustry?

How many students are currently enrolled? How many programs does each school offer? What percentage of students remains in-state after graduation?

Qualitative Factors

What programs are currently offered? Are there any partnerships between schools and the entertainment industry? Where are students getting employment? Are different universities offering repetitive programs of study? What other programs would the entertainment industry like to see offered?

Research Methods

In order to gather information about the educational offering at the university

level related to the entertainment industry we will use a combination of surveys and focus

groups. Our surveys will be distributed to production companies and university

administrators and will be geared towards gathering mostly quantitative data on the


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amount of students currently studying industry related courses, the amount of students

who are placed locally, and the availability of programs for students. Additionally we

will ask industry respondents on the input for programs that they feel there is a need for.

Focus groups will be conducted with university students and will be a combination of

students who are studying industry related coursework and those in outside programs.

From these focus groups, we hope to discern interest levels for careers in the

entertainment industry, where students plan to look for employment and what would

make entering a career in the industry more attractive for students.

Community Support

Another factor that we would like to measure when gauging the effectiveness of

entertainment incentives on the state is the amount of public and political support that the

initiative has statewide. The key research question that we hope to answer here is, Is

their widespread support that the entertainment industry is something that the State of

Louisiana desires and feels is the best use of their tax resources?

Research Methods

We hope to gather information from legislatures and local government officials

with an emailed survey. We feel that this is the most effective and efficient way to reach

them because there is a finite number that we know that we need to reach, they are

geographically spread out, and completion rate and any follow-up issues can easily be

managed with survey software. When designing or survey we are using a Likert Scale of

1-10, which forces respondents to make a choice positively or negatively. Although we

will hire a professional survey, instrument designer to design and administer all of our


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surveys, our sample survey would most likely ask respondents to rate the following types

of questions.

Rate the effectiveness of tax and local incentives in attracting the media industryto Louisiana

Rate the sustainability of the media industry in Louisiana Attraction of the media industry benefits the state as a whole Attraction of the media industry is the best use of taxpayer resources The media industry creates local permanent jobs I would support the continued investment in the media industry in the state of

Louisiana

When analyzing the data gathered we would not only look at the data as a whole

but would look at with potential interest for any differences in responses between

respondents from areas that have received large influxes of media industry

participation and those of areas not as closely related to the industry.

We would like to use focus groups instead of surveys in order to gather the

opinions of taxpayers as a whole. We feel that focus groups while significantly more

expensive will allow us to gather the most complete information about taxpayer

opinions about tax incentives. We would hold nine focus groups of between 10-15

participants. Four of these focus groups would focus on residents of Baton Rouge,

Shreveport, Lafayette, and New Orleans, which have been the most active markets for

those utilizing tax incentives. The remaining five focus groups would meet

throughout the state to gather the opinion of those outside of the major markets. We

also feel that this division of focus groups should give us a diverse population sample


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that is representative of the state as a whole. Focus group participants would be

selected randomly based on census data. Potential questions would be:

What is your opinion on the use of tax incentives to attract theentertainment industry to Louisiana?

Do you feel that a robust entertainment industry benefits the state as awhole?

Do you feel that entertainment incentives benefit the state as whole andare the best use of our resources?

What do you think would happen to the entertainment industry if taxincentives were stopped or scaled back?

Do you support the continued use of incentives to attract the industry tothe state?

What would you rather the state spend your tax revenue on?The use of focus groups allows for a more open ended discussion of the

nuances of the incentive system and public opinion about it. In addition, focus

groups allow you to have a captive audience and to evolve the conversation as the need

arises.

Benchmarking

A final component of our analysis of the tax incentive program will be to attempt

to benchmark the states incentive program as it compares to states which have offered

similar incentive programs or which have mature entertainment industries. For film,

music, and digital media we will attempt to benchmark Louisiana compared to New York

and Los Angeles. Attempting to find a true comparison for Louisiana within the

entertainment industry is difficult because although Louisiana does not have the maturing


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of New York or Los Angeles they have made a much larger and more comprehensive

attempt at incentives than any other state. We also feel that it is important to benchmark

Louisiana against industry leaders to allow us to get the most accurate measurement of

where Louisiana stands as a market competitor.

In the area of live entertainment we will seek to not only benchmark Louisiana as

it compares to the outside markets of Austin, Houston, and Nashville but also to

benchmark internal amongst Baton Rouge, New Orleans, and Lafayette. By doing both

internal and external benchmarking we will be able to see where the state compares as a

whole as well as how the various media markets in Louisiana compare against each other.

Conclusion

We feel that a comprehensive analysis of the entertainment incentive program

from a program analysis perspective is a valuable tool that the state can use to make

decisions going forward for the various incentive programs. Although some may argue

that there is a much better use for $1 million than another government study, we feel that

this would be a wise investment for the state. When compared to the millions of dollars

that have already been committed to the incentive program and the potential for millions

more to be committed in the coming years having a clear picture of the benefits and

challenges positions the state to best use its limited resources.

Bibliography

Development, O. o. (2010).Building a Permanent Entertainment Economy. Baton

Rouge: Louisiana Economic Development.


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Can Louisiana Bethe Creative Capital

of the South?

Amount of Return

on Investment

Amount of

Community Support

Infrastucture

Available

Benchmarking of

Industry

Return on

Investment

Amount of

Investment

Local

Enticement

State Tax

Incentive

Jobs Created

Temporary

Construction

Short Term

Work

Permanant

Native Workers

Talent

Production

Transplanted

Workers

Total Economic

Impact

Tax Revenue

Consumption of

Local Services

Consumption of

Local Goods


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Community

Support

General Public

Within

EntertainmentCenters

Interest in

Industry

Opinion on

Return on

Investment

Possible

Alternative Usesof Resources

Outside


Interest in

Industry

Opinion on

Return on

Investment

Possible


Political

Within


Interest in

Industry

Opinion on

Return on

Investment

Possible


Outside


Interest in

Industry

Opinion on

Return on

Investment

Possible


Infrastructure

Physical

Infrastructure

Educational

Infrastructure

Vocational

Programs

Entertainment

TradesConstruction

College

Programs

Performance

Programs

Production

Programs

High School

Programs

Creative Arts

Programs

Vocational

Programs


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Market Benchmarking

Digital Media

British

Colombia

New York

Los Angeles

Live

Entertainment

Baton Rouge

New Orleans

Lafayette

Austin

Houston

Nashville

Digital Media

Indicators

Tax Incentives

Number of Productions

Revenue Generated

Jobs Created

Available Infrastructure

Live Entertainment

Indicators

Tax and Local Incentives

Attenance Levels

Revenue

Venue Capacity

Jason Miller RFP Final Paper

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