Governor signs bill to boost film, TV production

March 31, 2019

ALBUQUERQUE — New Mexico is doubling down on the film industry.

Gov. Michelle Lujan Grisham signed a law on Friday dramatically expanding tax credits for film and television productions in a bid to bring more business to New Mexico’s studios as well as its cinematic mesas and small towns.

A priority for the newly elected Democratic governor during the 60-day legislative session that ended earlier this month, the bill also pays off up to $225 million in tax credits already owed to the film and television industry.

For Lujan Grisham, the bill is a signal to Hollywood and beyond that “we’re going to pay our bills. We’re open for business.”

But following opposition from budget hawks on both sides of the aisle at the Roundhouse, the bill does not go as far as the governor had originally proposed.

And with the tax incentives proving as politically explosive as ever — critics call the additional credits a handout for Hollywood — it will be up to the new administration to deliver with new jobs not just in the state’s biggest cities but across New Mexico.

Sponsored by Sen. Nancy Rodriguez, D-Santa Fe, Senate Bill 2 originally would have scrapped the state’s annual $50 million limit on tax credits for the film industry, as Lujan Grisham had urged in her inaugural address.

That idea met with opposition from some Democrats and Republicans in the Senate who argued it would only make budgeting more difficult and likened the concept to writing a blank check for the film industry.

Under the previous law, qualifying film and television producers can claim a 25 to 30 percent credit for expenses in the state. If the credits exceed the producer’s tax bill, the state cuts a check for the balance.

Legislative aides raised concerns in one analysis about the risk to state revenues from eroding the government’s tax base through additional or expanded credits.

Negotiations yielded a sort of compromise, more than doubling but not altogether removing the amount of money the state can pay out each year.

Under the new law, the state can provide up to $110 million in in tax credits for film and television productions each year. That cap does not apply to production companies that have purchased or signed a 10-year lease for facilities, like Netflix, which is setting up shop in Albuquerque.

The new law also provides an additional 5 percent credit for productions more than 60 miles outside of Bernalillo and Santa Fe counties, a measure that proponents argued would promote the industry in cities like Las Cruces as well as in rural areas of the state.

The law also requires the state to collect additional data on how the credits are used.

The film and television industry has been hitting the $50 million annual cap on tax credits in recent years, leaving the state with a backlog of $382 million through fiscal year 2023, according to the governor’s office.

The new law pays off up to $225 million of that backlog and caps future backlogs at $100 million.

Some lawmakers questioned why the state needs to spend so much money to pay off the backlog immediately when the production companies could have expected a wait to get credits under the $50 million cap.

Republicans blasted the move, pointing to Democratic proposals to raise taxes at the same time as raising the cap on the tax credit.

“We literally want to raise taxes on New Mexico families and send it to Hollywood executives,” Sen. Mark Moores, R-Albuquerque, said during a debate on the bill earlier this month. “That’s what this bill in a nutshell really is. We can claim it creates jobs, but those jobs cost a lot.”

Some labor leaders, too, questioned the necessity of paying off the backlog, arguing the money would be better spent on giving larger raises to public employees or to address any number of other issues.

“State employees have been suffering under 10 years of austerity,” Dan Secrist, executive vice president of the Communications Workers of America Local 7076, told The New Mexican in February while urging a 6 percent raise for public employees instead of the 4 percent included in the budget. “… What’s the hurry to pay off the film producers?”

Lujan Grisham said Friday that paying off the backlog would show New Mexico is serious about the film business and taking care of old liabilities, a step that an analysis by the state Board of Finance suggested would be viewed positively by bond ratings agencies.

“My goal is to present a budget that doesn’t have deficiencies, that doesn’t have backlogs, that doesn’t put the legislators in the position to have to pick between one issue where we owe money and another,” the governor told reporters.

In the end, the bill passed 32-8 in the Senate, with bipartisan support that seemed to signal hope that the state can ride the film industry even further as New Mexico emerges from years of economic stagnation.

Surrounded by industry boosters, Cabinet officials and film union leaders, the governor signed the bill in a cavernous sound stage at Albuquerque Studios.

The first public bill signing Lujan Grisham has held outside the Capitol, it was another indication of just how much of a priority the film and television industry has become for the new administration.

It is a marked contrast from the administration of Gov. Susana Martinez, who came to office in 2011 pushing to put the cap on tax credits. She later warmed to the industry as it made New Mexico famous in a different sort of way with hits like Breaking Bad and the spinoff Better Call Saul while giving work to crews at a time when unemployment was particularly high.

But Lujan Grisham has been an ardent booster for the industry. She tapped a film industry veteran, Alicia Keyes, as her economic development secretary. And she pushed hard to raise the limit on tax credits.

“Now, everyone in the film industry knows that New Mexico is stable. It keeps its word,” said Rep. Moe Maestas, a Democrat from Albuquerque who co-sponsored Senate Bill 2. “We have the most beautiful and modern studios, the landscapes, the workers. We know New Mexico is the best place in the world, and thanks to the film industry, the world will know that as well.”