Nevada film credit expansion backers still confident despite critical reports
Backers of the two bills to significantly expand Nevada’s film tax credits remain confident in their proposals even after recent state-commissioned reports cast doubt on their likelihood of being financially sustainable.
In correspondence shared with The Nevada Independent, Sen. Roberta Lange (D-Las Vegas) criticized an independent report commissioned by the Governor’s Office of Economic Development (GOED), saying the analysis of her bill ( SB220 ) had “flawed and misleading conclusions.”
Meanwhile, the proponents of the bill sponsored by Assm. Sandra Jauregui (D-Las Vegas) and led by Sony Pictures and Warner Bros. Discovery ( AB238 ) did not push back against the report’s findings, but provided additional context as to why the third-party analysis differed from their own fiscal estimates.
The responses reflect the confidence that each side has in their own proposals heading into the home stretch of the legislative session. Given the state’s precarious financial situation, legislators are skeptical about whether the projected economic benefits are enough to offset the massive tax credit expansion.
Lange has proposed a merger of the two proposals that would decrease each project’s allocation of film tax credits but increase the overall price tag to about $2.2 billion over 18 years, The Indy reported Wednesday.
The GOED-commissioned reports, first reported by The Indy and conducted by the Arizona-based firm Applied Economics, cast doubt on both proposals’ long-term economic viability. Though they expected a significant economic return on investment — meaning ripple effects in the economy of (which they acknowledged was difficult to predict), the analyses estimated that the amount of recouped direct tax revenue would fall far short of breaking even with how many tax credits were invested.
In other words, the bills could benefit the economy at large even though they would bring a negative return on investment when looking at just the public funds involved.
But is that deterring the lawmakers who may soon decide the idea’s fate?
Several prominent legislators — including Senate Majority Leader Nicole Cannizzaro (D-Las Vegas) and Senate Finance Chair Marilyn Dondero Loop (D-Las Vegas) — told The Nevada Independent on Tuesday that they were still assessing the proposals. Jauregui and Assembly budget chair Assm. Daniele Monroe-Moreno (D-North Las Vegas), the two primary sponsors for the bill backed by Sony and Warner Bros, said Tuesday they had not read the state’s report.
However, Assm. Brian Hibbetts (R-Las Vegas), one of several members to vote the Sony-backed bill out of committee while reserving his right to change his vote on the floor, said while he had not read the full report, the initial reporting “does not bode well, in my opinion, for either one of those measures.”
Progressives have pushed back on the film tax credit measure, with the Executive Director of Battle Born Progress Shelbie Swartz saying that the analyses from the Governor’s Office of Economic Development prove that expanding film tax credits is unsustainable.
“These tax credits are and always have been an unprecedented corporate handout,” Swartz said. “Now, lawmakers and Nevadans everywhere deserve transparency and the full release of this analysis to see just how bad this deal really is.”
Lange’s bill
The state-issued report brought particularly negative news for Lange’s bill, which has not yet received a hearing in a pivotal money committee. Her proposal calls for $1.6 billion in film tax credits across an 18-year period (the current film tax credit program would instead set aside $180 million during that same time frame) and the creation of a nonprofit supporting a UNLV-affiliated research center.
The independent report’s estimate of state and local tax revenues on Lange’s proposal came in 341 percent and 169 percent lower, respectively, than the analysis by the firm hired by Birtcher Development and other backers. It acknowledged that these differences were likely attributable to differences in modeling and methodology.
The analysis also expected a significant decrease in the fiscal (taxpayer dollar) return on investment in Lange’s bill.
In a response shared with The Nevada Independent, Lange pushed back on the independent report’s economic impact model, which is based on historical assumptions and is one that the state frequently uses for economic analyses. When the bill’s proponents commissioned an economic analysis, it relied on a model that used real-time market data, she said.
“While we welcome analytical rigor, we reject the suggestion that historical assumptions from unrelated employment categories should dictate future opportunity for Nevada and its citizens,” Lange said in her response.
Lange said that the analysis “grossly understates the job creation and income effects for local workers” by expecting that 25 percent of the jobs created would be sourced locally, while proponents project that number to actually be 75 percent. That delineation is not specifically outlined in the report.
Lange also criticized the report for not addressing a three-year ramp-up period, which she said in an interview would have increased the estimated job and revenue numbers. Her bill’s proponents also said they believe the report mischaracterized the kinds of jobs that would be created under the project, which resulted in lowballing estimated wage numbers.
And she criticized the report for doubting the verifiability of tourism related to film production “despite strong industry precedent and recent global benchmarking studies,” citing a study on Nevada’s film tax credits conducted last year.
Sony, Warner Bros. bill
AB238, sponsored by Jauregui, proposes appropriating $95 million in annual transferable film tax credits for 15 years beginning in 2028, an 850 percent increase from the amount that would be set aside under the state’s existing film tax credit program.
An amended version would also create a special entertainment district to funnel revenue from certain local taxes related to the film production toward the Clark County School District (CCSD) to build up pre-K programs. There are different estimates on how many pre-K seats it would fill, ranging from 2 percent to 5 percent of current need.
The independent report on Jauregui’s bill showed a fiscal return on investment ($0.52 for every dollar invested) higher than what proponents of the measure projected ($0.46 for every dollar). However, the independent analysis stated that this “does not ensure that sufficient new tax revenue will be generated for this type of incentive to be sustainable.”
In response to the report, proponents of Jauregui’s bill told The Indy that although the analysis expected slightly lower economic return across the 15-year period, this was likely because of different types of calculations, such as the monetary amount of sales per square foot of land.
Supporters also acknowledged that their own report might have been “overly conservative” on sales and use taxes related to construction that “may warrant future reevaluation.”
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This story was originally published by The Nevada Independent and distributed through a partnership with The Associated Press.