Hollywood Succeeds Where Amazon Failed When It Comes to N.Y.’s Handouts

(Bloomberg) -- Amazon.com Inc.’s decision to abandon a second headquarters in New York City was supposed to herald a new, public backlash against corporate welfare. But behind closed doors, it’s business as usual in the Empire State.

As part of the $175.5 billion budget deal struck during a weekend of negotiations at the start of this month, Governor Andrew Cuomo and the Democratic-controlled legislature approved $840 million in refundable credits for television and movie producers over the next two fiscal years. The state’s already handed out $7.3 billion of incentives to the industry since 2004, according to the Citizens Budget Commission.

“That’s almost two new Tappan Zee Bridges that we’ve spent just on subsidizing the film industry,” said David Friedfel, director of state studies for the CBC, a business-backed watchdog, referring to the new span over the Hudson River. The sum is “twice as much as Amazon would have gotten and they would have created 25,000 jobs.”

The glamour of Hollywood has long exerted an allure over officials in U.S. states, more than half of which actively subsidized production last year. In the case of New York, the two-year extension underscores the persistence of government aid to industries that are generous political patrons or haven’t antagonized labor unions, as Amazon did. New York Democrats and Republicans have collected millions of dollars in campaign contributions from Hollywood moguls like Steven Spielberg and Jeffrey Katzenberg, as well as from media companies and New York City film studios.

In 2018 alone, Cuomo, a Democrat, received more than $150,000 from the television and film industry, according to campaign finance records. Democratic Party committees got at least $209,500, while Republican Party committees received at least $88,000.

Cost Recovery

Cuomo, historically a strong supporter of the film tax credits, didn’t include them in his executive budget, though they were part of the final agreement.

Established in 2004 with $25 million, the program was expanded to $420 million annually in 2010, one year before Cuomo took office, and is among the most generous film-incentives offered by U.S. states. The program was expanded further under Cuomo to cover relocated talk or variety shows and an additional 10 percent credit was given for certain upstate counties. New York’s program allows companies to recover as much as 40 percent of costs on eligible production and post-production expenses, excluding spending on actors, directors, and writers.

Since Cuomo took office, the credits have generated an estimated $24.5 billion in spending, according to the Empire State Development Corp.

“Blacklist,” the James Spader-led crime thriller from Sony Pictures Television, has received $72.3 million in tax credits, according to state filings. CBS Corp’s “Blue Bloods,” a drama about a multi-generational family of New York cops, was awarded $79.2 million. NBC’s “Saturday Night Live,” in its 44th season in New York, reaped at least $42.7 million. Even Amazon has shared in the spoils, getting $26.5 million, including $2.8 million for the pilot of its show “The Marvelous Mrs. Maisel.”

Public Outcry

Amazon was set to receive some $3 billion in tax breaks from the city and state for choosing Long Island City, just across the East River from Manhattan, for a satellite headquarters. That project held out the promise of 25,000 to 40,000 new jobs and as much as $27.5 billion in revenue, according to Cuomo.

But it prompted an outcry from local elected officials and activists who objected to a deal that was hashed out in secrecy and used tax dollars to lure a company run by Jeff Bezos, the world’s richest person. In February, Amazon scuttled its plan.

New York’s film subsidies haven’t garnered the same attention. Even so, opponents say television and movie productions would film in New York without the tax incentives. Amazon critics made the same argument, pointing to Google, which didn’t need subsidies to expand in New York City.

New York officials disagree. The incentives have brought jobs and investment that would have gone elsewhere, supporting “hundreds of thousands” of caterers, production assistants and other workers, said Adam Kilduff, a spokesman for the Empire State Development Corp. Television and film-related jobs increased to 48,490 in May 2018 from 25,170 in May 2004, according to Bureau of Labor Statistics data.

“The film tax credit program has proven to be a worthwhile investment, generating thousands of jobs and billions of dollars each year and, much like the tax credits that would have supported Amazon’s expansion in New York, the program increases our ability to compete with other states,” Jason Conwall, a Cuomo spokesman, said in an email.

The average annual wage among jobs supported by the tax credits is $90,000 and membership in New York film industry unions has increased, according to Richard Bamberger, a spokesman for the Motion Picture Association of America. When renewal of the tax credit was up for debate in New York in 2009 the number of television pilots fell to zero from 20, he said.

“TV pilots are the seed, the life blood of episodic television. In previous years we had double digit pilots. I have zero doubt that if the New York Film Tax Credit program was to go away, these production jobs would go away as well,” said Tommy O’Donnell, president of Theatrical Teamsters Local 817 in an emailed statement.

After Amazon’s decision, State Senator Michael Gianaris, who represents Long Island City and who led the opposition to Amazon, said on Bloomberg TV he hoped it “would begin a long overdue conversation nationally about whether these corporate subsidy programs are worth it.”

But Gianaris has remained a strong supporter of film tax credits. Both Silvercup Studios and the Kaufman Astoria Studios are in his district. They studios and their founders have donated $30,500 and $80,250 to his campaigns, respectively. Gianaris said his record of fighting for campaign finance reform, including authoring bills to lower contribution limits, “speaks for itself.”

“Incentives are smart and useful when created with appropriate oversight and targeted to industries that need them to succeed in New York,” Gianaris said in an email. “It is also important that these incentives specifically target the creation of blue-collar union jobs. The film credit meets these standards where the Amazon deal failed them.”

To contact the reporter on this story: Martin Z. Braun in New York at mbraun6@bloomberg.net

To contact the editors responsible for this story: James Crombie at jcrombie8@bloomberg.net, William Selway, Michael B. Marois

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