The Ohio Motion Picture Tax Credit: ‘Avengers’ save the day in Wilmington

Some of the hidden improvements in the Ohio economy are from sectors most often statistically ignored, but are actually quite important. Many wondered why Glenn Beck came to Wilmington, Ohio during Christmas of 2010 when the town was on the decline after the DHL facility left taking most of the town’s jobs with it. CLICK HERE FOR A REVIEW. When Glenn Beck put Wilmington on prime time television with his popular television show he knew what many didn’t, that was inadvertently people who were movers and shakers in the world would learn of the resources available in such a small town and would be tempted to make investments in the community. A few years ago, quietly Republican Senator Tom Patton and Mike Dovilla introduced the Ohio Motion Picture Tax Credit to the legislature hoping to lure more motion picture development to Ohio, and sure enough film scouts for The Avengers gave the DHL facility in Wilmington a look finding the location ideal for filming the upcoming blockbuster in August of 2011.

Now in hind sight The Avengers is one of the most successful movies of all time. It has generated over one and a half billion dollars in worldwide sales with a production budget of well over $200 million and an additional quarter million dollars in advertising. In total The Avengers as a film production cost a half a billion dollars to create, but it made more than double that in profits which is a wonderful business venture. It would seem unlikely that such a large production would come to little old Wilmington, Ohio, but when film scouts learned that the DHL facility had it’s own airport, a fenced in area great for security, huge buildings that could be converted over into film sets easily all set in a community where hotel rates were not through the roof, plenty of restaurants for the cast and crew to eat at, and the locals were polite and easy to work with, Wilmington, Ohio was suddenly a very attractive option. But even more attractive were the tax rates in Ohio which caused the production company of The Avengers to pull from their previous locations in Michigan and to replace them with sites in downtown Cleveland, the NASA facility in Sandusky, and of course Wilmington. The deal closer was tax rates, and because Ohio has one of the most attractive tax packages in the whole country currently thanks to the two Republican senators, Ohio is winning film development projects. The Avengers production alone poured over $2 million dollars into the local economy during their three-month lease of the largest DHL building and their stay in Wilmington.

Now, progressive leaning people will utter that The Avengers has made over a billion dollars in ticket sales and it hasn’t even been released to home video yet. The Disney Company who owns Marvel Comic Motion Picture division and the distributors in Paramount Pictures will make well over $2 billion dollars on just this one movie, so why was the production company of The Avengers worried about a few percentage points of tax shelter? Well, because you never know what will happen and when investors are required to spend over $200 million up front to produce a movie, it is important to keep the budget tight in case the film goes bust and nobody shows up to see the film. Not all movies make as much money as The Avengers which has decades of built up fan base to tap into in order to recover their investment.

When local Cincinnati native George Clooney brought his film Eyes of March to Ohio and filmed around Cincinnati and Miami University he did so not just because it was in his home town, but because he wanted to take advantage of the Ohio Tax Credit. Clooney politically is a progressive stuck to President Obama’s hip, but when it comes time to produce a film, he knows how to think like a businessman, so he brought his film to Ohio to keep the production costs down because films like that do not make billions of dollars. Most of the time production companies are happy if they break even on the initial investment. Just because a movie is made does not guarantee that it will be profitable.

The gigantic epic John Carter made by the Disney Company just a few months before the release of The Avengers cost well over $250 million to make but American audiences completely rejected it. The film only made $73 million domestically. Many people lost their jobs over that production, you can bet on that. Disney was not happy, and they had every right to be. Lucky for them foreign audiences liked the film giving it an additional world-wide take of $200 million, which just barely put Disney over the top on their front end investment. Disney needed desperately for The Avengers to do well, to make up for their profit forecasts in 2012 and John Carter did not get them anywhere close. Just because a film makes nearly half a billion dollars, that does not mean much. When you watch a movie, look at the credits that usually go on for over six minutes and contain tens of thousands of names. All those people were employed by the film and they all get paid from the money generated at the box office. When a studio like Disney makes a profit, it allows them to take chances on movies that are risky on their investment, and that really helps producers create films that benefit the unique tapestry of American culture that we broadcast to the rest of the world.

When The Avengers came to Ohio they spent $25 million dollars and employed 3,800 residents on the economy. If during the filming of the movie a stunt man died, or a law suit came up over intellectual rights, the production would be put on hold and the investment money spent would end up in limbo. In many cases the money for a film is financed two years before a film ever ends up on the big screen, so the invested money is tied up for a long time leaving investors on pins and needles until the box office receipts begin to roll in. So tax rates are a big deal in film production.

California has priced themselves right out of the film business. Production companies used to love to leave their homes in the morning work all day then go home at night. But due to the tax rates around Hollywood, it’s cheaper to leave town to make a film in a place like Ohio than to make it at the traditional sound stages in California. Dark Knight Rises is another 1 billion dollar world-wide moneymaker and was filmed in Pittsburg. In fact, Heinz Field was the football stadium that was blown up in that movie. The Midwest is learning that by lowering their tax rates, they are able to lure Hollywood to the Midwest which is great for the economy of the fly over states. Not good for California that has one of the largest economies in the world, due in part to the movie business.

But it is taxes that drive the economy, or rather the lack of them. As much as advocates on the political left beat on their chest for tax increases, businessmen who run the movie business are not willing to toss money into a black hole that will cost thousands of people their jobs. So they take the path of least resistance just like every businessman with any sense. The higher the taxes the lower the business activity, it’s a very simple formula.

The formula has worked so well in Ohio that legislators have now DOUBLED their tax incentive in the wake of the overwhelming success of The Avengers. Click the article below to read more.

http://taxfoundation.org/blog/ohio-doubles-film-tax-credit-program-wake-hype-over-%E2%80%9Cavengers%E2%80%9D

Because of this movie The Avengers filmed in Ohio, there will be more high-profile films that will come and spend hundreds of millions of dollars they won’t be spending in high tax states and cities. That is a wonderful thing for places like the DHL facility in Wilmington who is likely to see a major increase in activity at their small, sleepy town. The DHL facility could easily become the new Elstree Studios in England where the remote location, tax rates and facility usage are heads and shoulders above other locations. Not many film studios have their own airport, and the DHL facility does, which is unprecedented. Wilmington, Ohio could easily become the new Hollywood because of the Ohio Motion Picture Tax Credit, which would be far more valuable than the type of business that left the DHL facility in the first place and would restore to that town a greatness it has never known.

It was for reasons like that which drew Glenn Beck to Wilmington over two years ago, hoping that people who move money would take notice of the great attributes the small town in Ohio offered. What the production company making The Avengers was able to do within a week of filming at the DHL facility word will get out and many more films will follow. And that is the name of the game, where competition drives down the costs while productivity increases. Ohio is the example of how it’s done right, and the task for the rest of the world is to follow to the benefit of everyone else. And it all started with two Republican Senators who thought forward enough to offer the Ohio Motion Picture Tax Credit to an industry in Hollywood that is desperate to reform its costs for a changing marketplace.

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