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Reality shows, pro wrestling may be cut from NC TV-film incentives program

By Patrick Gannon and J. Andrew Curliss
pgannon@ncinsider.com acurliss@newsobserver.com

When World Wrestling Entertainment staged matches in cities across North Carolina in 2010 and 2011, millions across the country watched on TV as the high-flying, muscle-bound stars body-slammed each other.

Taxpayers in North Carolina played a part, too. They subsidized the broadcasts with $570,000 in tax credits, based on more than $2.3 million in in-state spending, from a program that rewards television and movie projects filmed in the state.

And when ABC’s “Extreme Makeover: Home Edition” filmed the rapid construction of new houses for lucky Fayetteville and Lincolnton residents in 2011, the production company, Lock & Key Productions, claimed $590,000 from state taxpayers, state records show.

Film industry executives often point to high-budget motion pictures such as “Iron Man 3” and TV series such as Showtime’s “Homeland” as examples of projects the state tax incentives have lured here – creating high-tech jobs, they say, and sparking spending in towns and cities for dry cleaning, catering, hotel stays and other services.

But reality-show episodes, late-night TV shows, commercials, documentaries and “sports entertainment” programs such as professional wrestling also are eligible for and get money back from their spending in North Carolina – at least for now.

Lawmakers will return to Raleigh May 14 to begin the year’s legislative session, and the film industry incentives program is expected to be among the most intensely debated issues. It cuts across political lines, with members from both parties supporting and opposing it. The incentives cost taxpayers $60.1 million in the fiscal year that ended June 30, 2013. The film industry says that money was crucial to creating thousands of jobs and luring at least $240 million in spending.

The Department of Revenue is expected to issue a new report next this week on the cost of film incentives.

The program is scheduled to “sunset,” or go away, at the end of this year, leading to an intense lobbying campaign by the film industry to keep it going.

Trimming program to protect it

Internal documents and interviews with film industry advocates and state officials indicate a strategy that would propose making changes to try to preserve the incentive, including making some types of productions ineligible for the credit.

Late-night shows, reality TV and wrestling would no longer qualify, according to draft proposals, but the incentives program would remain for larger-budget motion pictures, scripted TV series and pilots and commercials.

Eliminating some types of productions would lower the cost of the program to the state and could protect against subsidizing shows that might have come to North Carolina even without the incentive. That could make the program more palatable to some legislators.

The General Assembly will decide whether to extend the current incentives program, extend it with changes or let it die. Josh Ellis, a spokesman for Gov. Pat McCrory, said the administration is still examining the issue, “but right now there is no approved plan that will be in the governor’s budget.”

The N.C. Production Alliance, a coalition working to extend the incentive, is among the proponents of eliminating reality TV, talk shows and sports entertainment from consideration for incentives. The alliance said in a statement that it is “open to the idea of making necessary modifications to the current program, especially if it means making the current incentive more equitable for companies and taxpayers.”

State Rep. Susi Hamilton, a Wilmington Democrat and film industry supporter, said she is willing to entertain minor changes in the current law, including eliminating certain types of productions from incentives consideration.

“I don’t like reality TV. I don’t watch reality TV,” Hamilton said. “If it makes everybody feel better to eliminate reality TV, fine.”

But she added that reality shows, wrestling and similar programs also hire workers and spend money in local communities on hotel rooms, meals and other goods and services.

“I’m certainly open to minor changes to the existing statutes,” Hamilton said. “However, if these shows are coming to town and creating jobs and spending money, I really don’t see why we would single them out.”

Tom Waring, chief executive officer of Trailblazer Studios in Raleigh, said the proposal to remove reality TV shows and smaller-budget projects from eligibility appears aimed at saving the “big boys” – at the expense of small business owners.

His studio has more than 25 employees and works on a range of projects. It helped produce “Salvage Dawgs,” a reality show about salvaging architectural pieces that has aired on HGTV and the DIY network, and has worked on others, such as “Sister Wives” and “Jon & Kate Plus 8.”

Waring’s company reported spending of about $312,000 on “Salvage Dawgs” which earned a $78,000 claim from taxpayers. Trailblazer produces commercials for a range of clients, including the Carolina Hurricanes.

Waring said his company has three projects from the past year awaiting approval for tax credits. He said he couldn’t understand why film industry or government officials would distinguish between types of film projects, saying that dollars spent filming in North Carolina – whether it’s reality shows or big-budget movies – employ film workers and contribute to the state’s economy.

“If they want to save jobs ... that’s going to hurt,” Waring said. “I just don’t understand why they would be sticking it to the little guy.... This proposal seems to be helping the major players and sticking a knife in the back of the small business person.”

Vans Stevenson, senior vice president of state government affairs for the Motion Picture Association of America, said he couldn’t say whether the association would support eliminating certain productions without knowing all of the details of any film incentives proposal. He said the association is aware that various reforms are being discussed by the governor’s office and lawmakers.

The MPAA’s goal, Stevenson said, is to “maintain North Carolina as a top competitor for location, motion picture and television production worldwide.”

‘Bachelorette’ and first lady

The Department of Revenue, in annual reports, lists the “cost of credits” to taxpayers for filming in North Carolina. That cost is based on a formula, written into tax law, that wipes out tax liability for film productions and then refunds additional money to the production companies. They get back 25 percent of their spending on such qualifying expenses as paying their actors, buying hard drives for their digital cameras and renting trucks to haul their gear.

The film industry has claimed $170 million in credits since 2005, on about $824 million in spending. To be sure, that includes a host of big-budget films and long-running TV series.

A News & Observer analysis of film reports shows that taxpayers in North Carolina are also subsidizing:

•  Reality shows

From 2007 to 2012, at least $6.2 million was claimed in credits by productions for reality TV shows. Among them: “The Bachelorette,” “Extreme Makeover: Home Edition” and “Stars in Danger: The High Dive.”

According to state records, the “Extreme Makeover” episodes – shot in Fayetteville and Lincolnton – employed 208 people and spent $1.5 million on wages, $458,000 on services and $305,000 on goods. In the Fayetteville episode, first lady Michelle Obama joined the show’s cast in welcoming to her new home Barbara Marshall, a former Navy officer who takes in homeless female veterans and their families.

Reality shows reported spending $28 million on their productions in North Carolina – the vast majority of it, about $20 million, on services. Wages accounted for only about $5 million.

•  Commercials

From 2005 to 2012, taxpayers supported the filming of commercials with about $1.5 million in credits.

Companies that filmed ads for Verizon, Belk, Novant Health, Diet Mountain Dew and K-Swiss all claimed the credit.

•  Entertainment shows

In 2012, comedians Jon Stewart and Jimmy Fallon filmed their late-night shows in Charlotte during the Democratic National Convention. They spent a combined $1.2 million in North Carolina and claimed more than $300,000 in film perks, state records show.

In the most recent three years of film reports, companies claimed credits of at least $2.8 million on entertainment shows.

WWE shows in 2010 and 2011 claimed more than $570,000 in credits. Tara Carraro, a WWE spokeswoman, said the number of people hired locally varies based on need. She also said WWE would still come to North Carolina if the incentives go away.

“WWE applies for applicable film and tax credits offered by any state where we do business just like many other production companies do,” Carraro wrote in an email.

Patrick Gannon writes for the NCInsider.com, a government news service owned by The News & Observer. www.ncinsider.com

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