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7/31/2019 Jason Miller RFP Final Paper
1/21
Can Louisiana Be
The Creative Capital
of the South?
Jason Miller
PADM 7917
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Table of Contents
Executive Summary ............................................................................................................ 4
Measuring Return on Investment ........................................................................................ 6
Amount of Investment ..................................................................................................... 7
State Tax Incentives..................................................................................................... 7
Local Government Economic Enticement ................................................................... 8
Jobs Created .................................................................................................................... 8
Quantitative Factors:.................................................................................................... 9
Qualitative Factors:...................................................................................................... 9
Research Methods: ...................................................................................................... 9
Total Economic Impact ................................................................................................. 10
Quantitative Factors ................................................................................................... 10
Qualitative Factors ..................................................................................................... 10
Research Methods...................................................................................................... 11
Benchmarking of Return on Investment ....................................................................... 11
Infrastructure ..................................................................................................................... 12
Physical Infrastructure................................................................................................... 12
Research Questions.................................................................................................... 12
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Human Infrastructure .................................................................................................... 13
High School Programs ............................................................................................... 13
College and Vocational Programs ................................................................................. 14
Quantitative Factors ................................................................................................... 14
Qualitative Factors ..................................................................................................... 14
Research Methods...................................................................................................... 14
Community Support .......................................................................................................... 15
Research Methods...................................................................................................... 15
Benchmarking ................................................................................................................... 17
Conclusion ........................................................................................................................ 18
Executive Summary
The State of Louisiana has placed tremendous effort and resources into
positioning Louisiana to be a national and international leader in the production of
movies, television, music and digital media. Using tax credits and other local incentives
the state has been able to lure production companies and content producers to the state
but the sustainability of this practice, especially given recent budget shortfalls, has
recently been questioned. This study will present a clear analysis of entertainment,
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business, and educational environments within the state allowing policy makers and
officials to best utilize the states limited resources.
Factors we will consider when deciding if the entertainment industry is worthy of
continued investment by the state are; returns on past investments, existing and potential
infrastructure, public and political support of the industry, as well as benchmarking the
state as compared to peer states and regions. Once this data has been gathered it will be
possible to test the hypothesis that entertainment is an economical driver for the state that
is sustainable and worthy of governmental support.
When measuring return on investment we will consider three main factors;
amount of investment by the state, amount of permanent jobs created, and yearly
economic impact for the state. For the entertainment industry, we will analyze data of
these factors from the last five years. Although eight years of data is available we feel
that five years of data both gives us a manageable amount of data as well as a large
enough sample to pinpoint any trends. We will compare this data to similar 5-year data
from the manufacturing sector.
In order to measure infrastructure we will not only look at physical production
facilities but also educational and vocational programs that serve the entertainment
industry. When examining these resources we will be measuring the ability of the
content producers to completely produce content within the state from concept through
final product.
We also seek to measure public and political support for investment in the
entertainment industry. Information will be gathered using surveys and focus groups
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with the goal of discerning whether taxpayers and policy makers feel that this is the best
use of their resources. Specific analysis will be made between the opinions of those in the
major film centers of Baton Rouge, Shreveport, and New Orleans as compared to the rest
of the state.
Using all of this data, we will attempt to benchmark the industry in Louisiana as
opposed to peer states and cities. For the film, television and movie sectors, we will
compare Louisiana to the traditional media centers of New York, Los Angeles, and
British Colombia. For our benchmark of live performances, we will compare the
intrastate cities of Baton Rouge, New Orleans, and Lafayette and interstate cities of
Austin, Houston, and Nashville.
After completing this study, we will have both qualitative and quantitative
research as to the sustainability and potential of the entertainment industry within the
state. We feel that the one million dollars for this study would be a well-spent investment
that will pay for itself in cost savings from either discontinuing or decreasing support for
the industry or increased revenue for the state due to a successful entertainment sector.
Measuring Return on Investment
Policymakers and taxpayers alike both need to know that the limited resources
available through tax credits and direct subsidies are being used to their fullest. We
propose a rigorous study of the return on investment for the entertainment industry to
evaluate whether the $700 million invested in the industry in just the last decade alone
has been the best use of tax funds during a difficult budget environment.
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When evaluating return on investment we will look at three key factors; amount
of investment made, amount of jobs created, and net economic impact. When evaluating
the amount of investment made we will exam the two main forms of enticement for
entertainment producers; local enticement, which are offered individually at the local
level, and state tax incentives, which most often occur via tax credits offered to
companies if they meet certain criteria. When examining the amounts of jobs created, we
want to separate permanent opportunities from those that are short term or temporary in
nature. In order to measure net economic impact we will calculate tax revenues from
employment and consumption of local goods and services less any tax credits and
economic incentives received. A combination of all of these factors taken together will
give us the best opportunity to measure the actual return on the investment made.
Amount of Investment
State Tax Incentives
Beginning in 2002 Louisiana began to offer tax incentives to attract the motion picture
industry. The current tax incentive is a 30 percent credit with and additional five percent
credit for hiring Louisianans. (Development, 2010, pp. 6-8) Additionally in 2007, the
state began a sound recording investor tax credit, which has resulted in an estimated $21
million investment to the music production industry on just over $333 thousand in tax
credits. (Development, 2010, pp. 13,15) In the area of digital media, the state offers a
Digital Interactive Media Tax Credit (DMTC) as well as direct investment in digital
production facilities. (Development, 2010, p. 19) The final area in which the state has
provided financial incentives for the entertainment industry is in the area of live
performance. Largely in response to the devastation to the live performance, industry by
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Hurricane Katrina the state began to offer a first of its kind tax incentive program for live
performances and infrastructure to kick start the recovery of the industry. (Development,
2010, p. 24) All together, these tax incentives have totaled just over $700 million.
Local Government Economic Enticement
While the state has done a complete job of tracking state tax incentives less
attention has been paid to incentives offered at the local level. Each local government
has had the autonomy to offer whatever enticements it deems necessary in order to attract
industries and jobs to their communities. Examples of these enticements include TIF
funding which has subsidized investment and infrastructure development for the
entertainment industry as well as direct subsidies to attract studios, production facilities
and shows to a particular local. While an exhaustive analysis of each city and town in the
state would be extremely time consuming and expensive we propose that a
comprehensive study of the state entertainment centers of Baton Rouge, Lafayette, New
Orleans, and Shreveport will give us a more complete picture of the additional local
incentives that the media industry has received in order to produce in the state.
Jobs Created
One of the major questions to be answered when measuring the return on the
investment from the Entertainment Industry incentive program is whether the investment
is actually creating any jobs in both the short-term and the long-term. In order for the
industry to be successful in the state of Louisiana, it requires that companies build a solid
permanent workforce comprised of native workers with the skills to drive production.
Our research will analysis both quantitative numbers of jobs created as well as qualitative
data on types of jobs created and deficiencies still present.
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Quantitative Factors:
How many total jobs have been created in the Entertainment Sector sincethe start of the incentive programs?
How many of these jobs have been temporary(less than 6 months innature)?
How many of these jobs have been permanent? How many jobs have been filled by Louisiana natives? What is the average salary of jobs created?
Qualitative Factors:
What kinds of jobs have been created? Where are non-native workers coming from? What kinds of jobs are being filled by non-native workers? Why are companies not hiring native workers?
Research Methods:
A variety of research methods will be required in order to measure the amount of
types of jobs created by Entertainment Incentive programs. Employment directly by
media production companies can be measured by analyzing tax credit applications for
media productions. Indirect employment such as for related industries such as hotels,
food service vendors, and facility construction will be harder to measure but will be
completed by comparing vendor employment size before and after the incentives began.
Qualitative data will be gathered by surveying media production companies in order to
gather information about their workforce composition and areas of strength and concern.
We would like to randomly sample 20% of all production companies, which have
received tax credits in order to get a diverse data sample, as well as, in the event of
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companies who have received multiple credits, identifying any trends in employment
over time.
Total Economic Impact
The final factor we will research when measuring return on investment will be the
Net Economic Impact of the entertainment industry. Three factors that we will consider
well evaluating economic impact are tax revenues, consumption of local goods, and
consumption of local services. We feel that these three factors will give us the best
picture on whether there is a positive effect of the industry or whether there is a neutral or
even negative net effect on revenue actually generated for state and local governments.
Quantitative Factors
How much was each companys state tax liability? How much was spent on local hotels? How much was spent on local dining? How much was spent on local production services? How many local companies were hired? What percentage of each projects budget was spent locally? What was the payroll of native production workers?
Qualitative Factors
What goods and services are being purchased locally? What goods and services are being purchased from outside the state? What kind of effect have local businesses seen from the entertainmentindustry?
Are there services that are available locally but are being purchasedoutside of the state?
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Research Methods
Economic impact data will be collected from submitted tax credit applications.
We will also seek to gather data from local service providers to gain information on
changes in revenue during the time that the credit has been offered. Additional sources of
data will include trade associations and local and state tax receipt figures. One way that
the data could be more easily collected is to incorporate a survey into the tax credit
application. This method would allow for a high response rate and would require a much
lower cost than administering a separate survey. Surveys could be completed
confidentially or not depending on input from vendors and production companies.
Benchmarking of Return on Investment
By comparing the return on investment for entertainment industry tax credits to
the return on investment of other state incentive programs that seek to attract business we
will be able to get a more complete picture of whether this is the best use of state
resources. Specifically we would like to benchmark the entertainment industry compared
to the manufacturing industry. Although other incentives are offered in areas such as
research, small business, and commercial and residential restoration we feel that the
entertainment industry and manufacturing industry are the two that most closely match up
for comparison. By looking at the manufacturing industry as a whole we would like to
compare incentives offered, jobs created and net economic impact with the goal of
picking a clear winner in regards to which is a better investment based on economic
factors. Data would be gathered from 10 manufacturing industry projects, which have
received tax incentives. While 10 projects only gives us a small snapshot into the
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industry we believe that taken both individually and as a whole that sample size can give
us an accurate benchmark comparison for return on investment.
Infrastructure
One of the major obstacles to establishing an entertainment industry in the state
was the absence of both a physical and educational infrastructure that allowed content to
be completely created and produced within the state. We feel that in order for the
entertainment industry to become sustainable there must be a movement towards creating
a substantial physical and intellectual infrastructure base that creates an incentive, outside
of a monetary one, for content to be produced completely locally.
Physical Infrastructure
Physical infrastructure for the media industry includes studios, live performance
venues, access to necessary resources and materials, as well as access to capital. When
evaluating physical infrastructure we would attempt to compile a list of all resources that
are locally available for the entertainments industry. Our major source for data on
physical infrastructure would be Louisiana Entertainment, which maintains an up to
date and comprehensive list of resources for the entertainment industry. Other sources of
data would be local chambers of commerce and business association, which maintain lists
of available resources.
Research Questions
Has there been an increase in physical infrastructure since the start ofincentive programs?
What infrastructure needs have been completely met?
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What infrastructure needs still need to be met more fully? What infrastructure needs have not been addressed at all? Is there a significant enough amount of infrastructure to support theindustry if tax incentives were reduced or eliminated?
Human Infrastructure
Perhaps even more vital to the sustainability of the industry than physical
infrastructure is trained entertainment workforce that desires to produce siginificaltly
local content. Human infrastructure can be divided into three main categories;
performance, production and vocational trades. Traditionally Louisiana has had a
sufficient amount of human capital in the vocational trades areas but has struggled to
develop performance and production capital. In order to evaluate the levels of potential
for entertainment skill capital we will look at programs being offered at the high school
and college level.
High School Programs
One way to increase the available skilled workforce needed for the industry is
through implementation of high school programs that emphasize creative arts and
technical careers. We will sample 30 schools from throughout the state with the goal of
measuring the availability and size of programs that are available. We intend to take a
weighted sample that samples more heavily schools located within major entertainment
centers but also completely sample the state. The survey will seek to answer two
fundamental questions:
1. What programs are available to students that closely relate to the mediaindustry?
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2. What level of interest is there in existing programs and is their support forexpansion?
College and Vocational Programs
In order to properly utilize any interest in the industry created at the high school
level there must be sufficient college and vocational programs that allow students to
visualize and work towards a career in the entertainment industry. Along with measuring
what programs are currently available, there also needs to be a measurement of the
amount of students from these programs who remain in state once they graduate.
Quantitative Factors
How many schools currently offer programs geared towards the entertainmentindustry?
How many students are currently enrolled? How many programs does each school offer? What percentage of students remains in-state after graduation?
Qualitative Factors
What programs are currently offered? Are there any partnerships between schools and the entertainment industry? Where are students getting employment? Are different universities offering repetitive programs of study? What other programs would the entertainment industry like to see offered?
Research Methods
In order to gather information about the educational offering at the university
level related to the entertainment industry we will use a combination of surveys and focus
groups. Our surveys will be distributed to production companies and university
administrators and will be geared towards gathering mostly quantitative data on the
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amount of students currently studying industry related courses, the amount of students
who are placed locally, and the availability of programs for students. Additionally we
will ask industry respondents on the input for programs that they feel there is a need for.
Focus groups will be conducted with university students and will be a combination of
students who are studying industry related coursework and those in outside programs.
From these focus groups, we hope to discern interest levels for careers in the
entertainment industry, where students plan to look for employment and what would
make entering a career in the industry more attractive for students.
Community Support
Another factor that we would like to measure when gauging the effectiveness of
entertainment incentives on the state is the amount of public and political support that the
initiative has statewide. The key research question that we hope to answer here is, Is
their widespread support that the entertainment industry is something that the State of
Louisiana desires and feels is the best use of their tax resources?
Research Methods
We hope to gather information from legislatures and local government officials
with an emailed survey. We feel that this is the most effective and efficient way to reach
them because there is a finite number that we know that we need to reach, they are
geographically spread out, and completion rate and any follow-up issues can easily be
managed with survey software. When designing or survey we are using a Likert Scale of
1-10, which forces respondents to make a choice positively or negatively. Although we
will hire a professional survey, instrument designer to design and administer all of our
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surveys, our sample survey would most likely ask respondents to rate the following types
of questions.
Rate the effectiveness of tax and local incentives in attracting the media industryto Louisiana
Rate the sustainability of the media industry in Louisiana Attraction of the media industry benefits the state as a whole Attraction of the media industry is the best use of taxpayer resources The media industry creates local permanent jobs I would support the continued investment in the media industry in the state of
Louisiana
When analyzing the data gathered we would not only look at the data as a whole
but would look at with potential interest for any differences in responses between
respondents from areas that have received large influxes of media industry
participation and those of areas not as closely related to the industry.
We would like to use focus groups instead of surveys in order to gather the
opinions of taxpayers as a whole. We feel that focus groups while significantly more
expensive will allow us to gather the most complete information about taxpayer
opinions about tax incentives. We would hold nine focus groups of between 10-15
participants. Four of these focus groups would focus on residents of Baton Rouge,
Shreveport, Lafayette, and New Orleans, which have been the most active markets for
those utilizing tax incentives. The remaining five focus groups would meet
throughout the state to gather the opinion of those outside of the major markets. We
also feel that this division of focus groups should give us a diverse population sample
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that is representative of the state as a whole. Focus group participants would be
selected randomly based on census data. Potential questions would be:
What is your opinion on the use of tax incentives to attract theentertainment industry to Louisiana?
Do you feel that a robust entertainment industry benefits the state as awhole?
Do you feel that entertainment incentives benefit the state as whole andare the best use of our resources?
What do you think would happen to the entertainment industry if taxincentives were stopped or scaled back?
Do you support the continued use of incentives to attract the industry tothe state?
What would you rather the state spend your tax revenue on?The use of focus groups allows for a more open ended discussion of the
nuances of the incentive system and public opinion about it. In addition, focus
groups allow you to have a captive audience and to evolve the conversation as the need
arises.
Benchmarking
A final component of our analysis of the tax incentive program will be to attempt
to benchmark the states incentive program as it compares to states which have offered
similar incentive programs or which have mature entertainment industries. For film,
music, and digital media we will attempt to benchmark Louisiana compared to New York
and Los Angeles. Attempting to find a true comparison for Louisiana within the
entertainment industry is difficult because although Louisiana does not have the maturing
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of New York or Los Angeles they have made a much larger and more comprehensive
attempt at incentives than any other state. We also feel that it is important to benchmark
Louisiana against industry leaders to allow us to get the most accurate measurement of
where Louisiana stands as a market competitor.
In the area of live entertainment we will seek to not only benchmark Louisiana as
it compares to the outside markets of Austin, Houston, and Nashville but also to
benchmark internal amongst Baton Rouge, New Orleans, and Lafayette. By doing both
internal and external benchmarking we will be able to see where the state compares as a
whole as well as how the various media markets in Louisiana compare against each other.
Conclusion
We feel that a comprehensive analysis of the entertainment incentive program
from a program analysis perspective is a valuable tool that the state can use to make
decisions going forward for the various incentive programs. Although some may argue
that there is a much better use for $1 million than another government study, we feel that
this would be a wise investment for the state. When compared to the millions of dollars
that have already been committed to the incentive program and the potential for millions
more to be committed in the coming years having a clear picture of the benefits and
challenges positions the state to best use its limited resources.
Bibliography
Development, O. o. (2010).Building a Permanent Entertainment Economy. Baton
Rouge: Louisiana Economic Development.
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Can Louisiana Bethe Creative Capital
of the South?
Amount of Return
on Investment
Amount of
Community Support
Infrastucture
Available
Benchmarking of
Industry
Return on
Investment
Amount of
Investment
Local
Enticement
State Tax
Incentive
Jobs Created
Temporary
Construction
Short Term
Work
Permanant
Native Workers
Talent
Production
Transplanted
Workers
Total Economic
Impact
Tax Revenue
Consumption of
Local Services
Consumption of
Local Goods
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Community
Support
General Public
Within
EntertainmentCenters
Interest in
Industry
Opinion on
Return on
Investment
Possible
Alternative Usesof Resources
Outside
EntertainmentCenters
Interest in
Industry
Opinion on
Return on
Investment
Possible
Alternative Usesof Resources
Political
Within
EntertainmentCenters
Interest in
Industry
Opinion on
Return on
Investment
Possible
Alternative Usesof Resources
Outside
EntertainmentCenters
Interest in
Industry
Opinion on
Return on
Investment
Possible
Alternative Usesof Resources
Infrastructure
Physical
Infrastructure
Educational
Infrastructure
Vocational
Programs
Entertainment
TradesConstruction
College
Programs
Performance
Programs
Production
Programs
High School
Programs
Creative Arts
Programs
Vocational
Programs
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Market Benchmarking
Digital Media
British
Colombia
New York
Los Angeles
Live
Entertainment
Baton Rouge
New Orleans
Lafayette
Austin
Houston
Nashville
Digital Media
Indicators
Tax Incentives
Number of Productions
Revenue Generated
Jobs Created
Available Infrastructure
Live Entertainment
Indicators
Tax and Local Incentives
Attenance Levels
Revenue
Venue Capacity
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