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Eastland project won’t persuade Rucho to back incentives

By Eric Frazier
Eric Frazier
Eric Frazier covers economic development. He has been reporting and editing at the Observer for more than 15 years. If you have a story idea or news tip to share, contact him at:
eastland_bert hesse
DIEDRA LAIRD - dlaird@charlotteobserver.com
Bert Hesse in front of Eastland Mall. He's the man who promises to turn the old Eastland Mall into a multi-million dollar film complex. Diedra Laird - dlaird@charlotteobserver.com

The folks who want to replace Eastland Mall with a massive $250 million-plus movie production complex might want to get on the phone with N.C. Sen. Bob Rucho.

Rucho, a key voice these days on budget issues in Raleigh, is not sounding like a fan of the project – and especially not its reliance on state incentives for the movie industry.

The backers of the Studio Charlotte complex say their plan would revitalize the entire east side by building movie studios, residences, office space, a film school, even a farmers market.

But Rucho, a Republican from Matthews, says he opposes extending the state film incentives that movie companies used to claim some $69 million in credits last year.

Without those incentives, observers say, the movies won’t come to North Carolina, and entrepreneur Bert Hesse’s Studio Charlotte plan likely falls apart.

Rucho doesn’t sound inclined to start supporting the incentives in order to avoid torpedoing the Eastland plan.

“If that’s the only reason (it’s being built), then shouldn’t we be reconsidering the long-term value to the city?” he asked.

The incentive refunds movie companies 25 percent of their costs, with a cap of $20 million. It’s set to expire in December 2014, and Hollywood – via the Motion Picture Association of America – is already warning that without it, movie makers will take their business elsewhere.

Rucho’s response to a question about that: “Do you want to be bribed by it? Because that’s what’s happening.”

It leaves a difficult road ahead for Hesse and his Studio Charlotte co-developer, Pacifica Ventures out of Santa Monica, Calif.

Already facing skeptics who wonder if it’s a sound idea or if he has the background to pull it off, he and his partners must persuade not only City Council, but state lawmakers, to get behind it.

Rucho, co-chairman of the Senate Finance Committee, says lawmakers did a lot to encourage business in general by lowering personal and corporate tax rates.

The movie industry specifically? North Carolina, he says, shouldn’t give one industry or company incentives that others don’t enjoy.

“Every time you do that,” he says, “you’re picking winners and losers.”

Like many film subsidy critics, he cites studies indicating that movie projects don’t create enough long-term jobs to make them worth the state’s investment. People parachute in and make movies, he says, and then they leave.

My colleagues at the News & Observer in Raleigh investigated the incentives earlier this year and concluded the subsidy amounts aren’t tied to job-creation numbers. And since it’s technically a refundable credit, movie and TV companies get checks back from the state even if they owe little in taxes.

Film industry backers point to other studies showing the productions can have a huge impact on local economies. They say the projects boost not only studios but also local electricians, carpenters, caterers, coffee shops, dry cleaners and other local small businesses.

Having had Showtime’s hit series “Homeland” film for a day or so in our newsroom this summer, I can say I was surprised at how many “regular” guys work on such projects. I saw a lot more electricians setting up lights than movie stars posing in front of them.

When I saw another film crew filming next to the Mint Museum uptown last week, I asked a crew member how much of the crew was local. About 70 percent, he told me.

It does seem that if you’re talking about a TV series that runs five or so years, that’s a lot bigger economic impact than a one-time movie project.

“I understand the politics of saying we need to spend this money on something else,” Pacifica Ventures CEO Dana Arnold told me. “But what I believe they’re going to find is that the money is well spent.”

Commerce Secretary Sharon Decker has said she would like to keep the incentives around in some form.

But if Rucho is any indication, the Studio Charlotte developers – and all backers of the state film incentives – have a long way to go.

Eric Frazier writes about economic development, jobs and the economy. Got a story tip? Contact him at 704-358-5145, efrazier@charlotteobserver.com or @Ericfraz on Twitter.
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