LAS VEGAS, Nev. (FOX5) – A bill backing film tax credits for Summerlin Studios finally faces fiscal scrutiny before lawmakers, who must weigh the costs and benefits to Nevadans and the state budget.
Assembly Bill 238 backs the joint venture at Summerlin Studios between Warner. Bros. and Sony Pictures. Friday, the bill finally received a hearing during the Ways and Means Committee.
Lawmakers are closely weighing the impact on the budget: the state’s Economic Forum recently projected a $191 million shortfall over two budget cycles. Lawmakers also told FOX5 that the State Education Fund will also see a decrease of around $153 million.
A.B. 238 proposes a $120 million tax credit package over 15 years for productions at Summerlin Studios. The bill mandates that half of the 15,000 annual workers would be Nevadans.
Supporters argue for a need for economic diversification and a rapid infusion of revenue streams amid slumping tourism, decreases in consumer spending and high unemployment.
“These numbers speak for themselves: 19,000 good paying union construction jobs, nearly 18,000 permanent jobs with an average salary of $118,000, and an additional $3 billion in annual economic activity,” said Assemblymember Sandra Jauregui during the hearing, noting that tax credits do not kick in until 2028, which is after a proposed movie studio campus is built and a filming project has wrapped up.
“The construction of the Summerlin production studios and associated projects represent nearly $2 billion in capital investment: all private dollars,” she said.
Film productions generate direct revenue for the state from sales taxes and payroll taxes. Productions utilize and hire various other businesses in the community.
“It’s really, really smart economic diversification, because it naturally complements our main industry while adding new revenue and more recession resistant jobs,” said Cameron C.H. Miller, president of the Urban Chamber of Commerce and former state lawmaker.
A key debate centers around ROI: for every $1 given in tax credits, how much will the state get back in direct or indirect revenue?
According to a fiscal presentation before the Assembly Revenue committee, every $1 in tax credits given would generate $0.46 for state and local taxes; however, from business spending to job creation, the aggregate economic impact would be more than $24 for every $1 in tax credits given.
Critics voice concerns over those projections, warning of a negative fiscal impact to the state budget during a period of economic uncertainty.
“This bill would authorize $1.6 billion in General Fund money to film tax credits, drawn directly from the General Fund. In return, the state would recover just $143,000,000 to the General Fund. That is a 91% loss. That’s not just speculative, it is their own math,” said Andrew Clarke of New Day Nevada.
Others also argue that funding from tax credits should be diverted to boost budgets for education and social services.
“Just one day after this body approved a meager $2 Increase in per pupil funding, this body is considering handing $1.65 billion in public money to Hollywood. These tax credits don’t generate enough revenue for the state and wouldn’t help our schools,” said Alexander Marks of the Nevada State Education Association.
Lawmakers asked about future revenue growth: what levels are needed to keep up with the state’s operating appropriations, if this tax credit package gets approved?
According to Michael Nakamoto with the Fiscal Analysis Division, an additional $110 million in film tax credits is approximately 1.8% of the state General Fund that’s after tax credits; in fiscal year 2029, the state’s economic activity would have to grow by approximately 4.8% to support 3% additional revenue per year.
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