4-Economic-Impact-of-Utahs-MPIP Study 01.17.22.pdf

Economic Impact of Utah’s

Motion Picture Incentive Program

A Study for the Motion Picture Association of

Utah by Olsberg•SPI

17th January 2022

Economic Impact of the Utah Motion Picture Incentive Program

© Olsberg•SPI 2022 17th January 2022 ii

CONTENTS

1. Executive Summary

1.1. Introduction

1.2. Context

1.3. Production in Utah and Related Incentive Use

1.4. Economic Impact of Production and the Tax Credit

1.5. Film Tourism

1.6. Recommendations for Future Development

2. The Global Screen Production Deluge and Utah

2.1. The Global Screen Production Deluge

2.2. An Opportunity for Utah

3. Utah Film Production Incentives

3.1. Background to Production Incentives

3.2. The Utah Motion Picture Incentive Program

3.3. Comparison With US State Competitors

4. Utah Production and Incentive Use

4.1. Production Expenditure

4.2. Projects

4.3. Rural Activity

4.4. Distribution of Spend

4.5. Cast and Crew Earnings and Employment

5. Economic Impact of Incentivized Film and Television Production in Utah

5.1. Overview of methodology

6. Wider Strategic impacts of the Tax Credit

6.1. Impacts on Rural Locations and Communities

6.2. Film Tourism

6.3. COVID-19 Recovery

7. Opportunities and Challenges for the Development of the Screen Sector in Utah

7.1. Production Lost to Competitor Markets

7.2. Adjusting the Incentive

7.3. The Production Opportunity and Utah

8. Appendix 1 – Economic Impact Methodology

9. Appendix 2 – About Olsberg•SPI

© Olsberg•SPI 2022 17th January 2022 1

1. EXECUTIVE SUMMARY

1.1. Introduction

The Motion Picture Association of Utah (the “Client”), with support from the Utah Film Commission, has commissioned creative industries consultancy Olsberg•SPI (“SPI”) to undertake an independent evaluation of the economic impact of Utah’s Motion Picture Incentive Program (the “Study”).

This analysis covers standard economic impact measures, such as Gross Value Added (GVA), full-time equivalent (FTE) job creation and economic Return on Investment (RoI), as well as effects of incentivized activity on the screen production supply chain, the geographic impact of in-state production spending, and effects on tourism. Incentive and production data were sourced from the Utah Film Commission, and a range of confidential consultations were also undertaken with producers of supported projects, vendors, and other state stakeholders.

The Study examines seven years of production data in relation to the Motion Picture Incentive Program (MPIP) and provides a multi-year economic impact analysis, as well as considering wider strategic benefits of film and television production for the state of Utah.

The Study also includes a range of recommendations for the future of Utah’s film and television incentive, as well as related modelling and forecasts.

1.2. Context

In recent years, there has been a deluge of film and television production on a global basis. This is driven by voracious demand for all types of screen content from consumers and investors alike – which include newer entrants, as well as established broadcasters and studios.

Governments and legislators in jurisdictions of all sizes have increasingly recognized and valued the considerable economic and other benefits delivered by this global growth sector, especially as they look to diversify their economies and recover from the economic effects of the COVID-19 pandemic.

A key policy intervention to stimulate production activity in this global growth sector is an automatic incentive. The MPIP is one of 101 programs active globally, and one of 34 in the US.

Despite its long history as a production destination and its highly attractive filming locations, Utah’s growth has been constrained by the comparatively limited incentive allocation. The state’s current incentive offer is outlined in the following table.

Table 1 Overview of the Utah Motion Picture Incentive Program

Utah Motion Picture Incentive Program: Key Elements

Type Rebate / tax credit

Value

Rebate: 20% for projects spending between $500,000 and $1 million Tax credit: 20% for projects that spend between $500,000 and $1 million;

25% for projects that spend above $1 million and if additional criteria are met.

A 5% increase may be reached by hiring 75% Utah cast and crew (excluding extras and five principal cast) or undertaking 75% of production days in rural Utah.

Annual Cap $8.29 million

© Olsberg•SPI 2022 17th January 2022 2

Alongside the MPIP, Utah also offers the Community Film Incentive Program. Designed to foster new and upcoming local film-makers and productions, this is a post-performance incentive worth 20% for projects spending between $100,000 and $500,000. The impacts of the Community Film Incentive Program have not been examined as part of this Study.

1.3. Production in Utah and Related Incentive Use

1.3.1. Overview

Analysis of annual film and television production spend in Utah between FY2005 and FY2021 shows that while spend is often uneven due to the nature of film and television production there has been overall growth since FY2005.1 Since FY2017, growth has levelled off somewhat, which relates to the underlying incentive budget in Utah. A decline occurred in FY2020 in relation to the COVID-19 pandemic: while spend reached $64.0 million in FY2019, this decreased to $46.9 million in FY2020, with a similar level of $47.9 million in FY2021. It should be noted that the latter fiscal year does include a significant proportion of 2020, the first year of the pandemic, and that the global film and television sector has seen a strong return to production since initial disruption from COVID-19. According to reports, Utah was the first state in the US to resume film and television work and is well placed to continue to benefit from the high volume of production being undertaken in the sector.2

The overall number of projects accessing Utah’s incentive has increased significantly since 2005, but by a smaller proportion than the increase in production spend. This means that projects have been spending larger amounts in Utah over time, and likely relates to a broader industry trend towards higher budgets, as well as a development in the film and television sector in Utah which enables more spend to take place in the state. In FY2021, 30 projects accessed the MPIP including 22 features and eight episodic projects.

Overall, analysis of the type of projects utilizing Utah's incentive between FY2019 and FY2021 shows more impact from episodic projects than feature films. This is in line with broader sector trends.

1.3.2. Rural Activity

Rural production is significant in Utah. Over the past five years, around a quarter of filming days were undertaken in rural locations. This pattern is driven by a small number of productions and therefore the total number fluctuates significantly year to year. This underlines the interest among producers in using Utah’s natural locations.

The total number of permits granted in rural areas between FY2017 and FY2020 (the last year with available data) exceeds that for urban areas.

1.3.3. Distribution of Spend

As a kind of specialized manufacturing activity, film and television production in Utah involves purchases and payments to a wide variety of industries and individuals including equipment hire, hotels and transportation. The supply chain impacts of such productions therefore benefit a large number of workers and vendors beyond those working solely in the film and television sector.

Analysis of projects in Utah shows that a significant 29% of all production costs were spent on food, accommodation, transport, and incidental purchases and equipment costs.

1 Note on usage: the Utah state fiscal year runs July 1st to June 3oth, across two calendar years. This Study therefore uses the convention of FY2005 (for example) to denote the 2004-05 fiscal year 2 Lights, Camera, Covid: How The Utah Film Industry Beat The Odds Amidst The Pandemic. 19th December 2020.

ABC4 Utah. Accessible at: https://www.abc4.com/news/lights-camera-covid-utah-film-industry-on-the-rise/

© Olsberg•SPI 2022 17th January 2022 3

Figure 1 – Breakdown of Production Expenditure FY2019 to FY2021

Source: Utah Film Commission

1.4. Economic Impact of Production and the Tax Credit

1.4.1. Additionality

Additionality describes how much production expenditure can be attributed to the MPIP. To determine additionality, a survey that was sent to all production incentive applicants to explore what production companies would have done without the incentive. There were 34 responses out of 60 recipients, a robust response rate of 57%.

Overall, the MPIP leverages very high additionality for Utah, with particularly high additionality for productions by companies based out of Utah. Incentives were clearly identified as the most important decision factor for producing in Utah.

The rate of additionality was found to be between 83% and 100% — i.e. Utah’s incentives are responsible for between 83% and 100% of production expenditure occurring in state. In the economic impact analysis, we have chosen to use a conservative additionality assumption of 86%. All production companies based outside Utah indicated that no production would have happened in state without the incentive.

All economic impact results presented account for activity which would not have happened without the incentive and are therefore the additional impact of the incentive.

1.4.2. Output

Between FY2015 and FY2021, the incentive generated $614.1 million in net output. Nearly half (49%) was from direct spend in the industry, while a further $143.1 million was created in the supply chain and $170.3 million through the subsequent wage effects.

1.4.3. GVA

GVA is a key measure of the additional economic value created by an activity. Between FY2015 and FY2021, the total GVA created by activity incentivized by the credit was $350.1 million, an

Utah crew wages 43%

Utah cast and extras wages

7%Hotel charges 4% Transportation costs

4%

Per Diem costs 2%

Restaurant & catering expenses

2%

Equipment Purchases 11%

Retail Purchases 6%

Post Production Costs 2%

Miscellaneous Expenses

15%

Taxes paid 4%

© Olsberg•SPI 2022 17th January 2022 4 average of $50.0 million a year. This includes a total of $178.2 million of direct GVA, $77.0 million in indirect GVA and $95.0 million in induced.

1.4.4. Employment

The hiring of cast and crew for Utah productions incentivized by the MPIP generated 516 direct FTE year-round jobs in FY2021.The additional activity also leads to jobs in the supply chain (indirect effects) and moves through the economy through wage expenditure in other businesses. In total in FY2021, a total of 810 FTE jobs can be attributed to the MPIP including 164 indirect jobs and 130 induced jobs.

1.4.5. Labor Income

The total labor income for the seven years between FY2015 and FY2021 is $238.0 million. This includes income earned in the supply chain and the consequences of increased wages throughout the economy.

1.4.6. Return on Investment

RoI is an important measure of the effectiveness of a film and television production incentive.

Economic RoI uses the total value created in the economy as a result of the tax credits (GVA) and compares this with the net cost of the program (amount released in tax credits minus the additional state and local tax receipts received as a result of the credit).

The average GVA RoI between FY2015 to FY2021 is 7.0. For each $1 spent on the tax credit, $7.0 is returned to the Utah economy. RoI varies over the years due to the effective incentive rate (relationship between the incentive amount of the production values) varying over time.

1.5. Film Tourism

In addition to the economic impacts, film and television production also delivers a range of supplementary benefits, including tourism effects.

Film and television induced tourism has increasingly been recognized as an important component of tourism marketing and visitor attraction, and the economic impacts arising from screen tourism can be substantial.

Survey research undertaken by SMARInsights for the Utah Film Commission identifies Utah visitors who said a film or television series influenced their decision to visit the state or a location within the state, and that it was the main reason for their visit. These represent additional tourists into state – and their spending is wholly stimulated by film or television.

This study shows that this film tourism has delivered 2.2 million Utah trips and $6.0 billion in value for the state over the past 10 years. About 4 in 10 consumers indicate that they have chosen a vacation destination because of its link to a film or television series.

1.6. Recommendations for Future Development

Currently, Utah’s growth as a hub for film and television production is constrained by the annual budget of its incentive. SPI reviewed Utah Film Commission data on projects that seriously enquired about shooting in state but ultimately opted to shoot elsewhere.

This analysis shows that Utah lost out on productions with budgets totaling $216 million in 2018 and $207 million in 2019. This decreased to $70 million in 2020, due to the impact of

COVID-19.

The variety of states that these lost productions ultimately ended up shooting in has been broad. While ultimate shooting locations could not be found for all productions lost to Utah, alternative locations included Canada (used as alternatives on three occasions), Georgia and

© Olsberg•SPI 2022 17th January 2022 5

Louisiana (both used as alternatives on two occasions), and Illinois, New Mexico, Texas, Montana, Alabama, and Mississippi.

With Utah’s incentive allocation is one of the lowest of the US states offering film and television production incentives, the current level of allocation is usually assigned within four months of the fiscal year start.

To ensure the state retains economic and strategic impacts and builds a larger and more stable year-round production sector, an expansion of the current allocation should be considered. In addition to global production growth, Utah also has a number of unique attractions that would help attract more production alongside an expanded incentive. This includes the state’s locations and its renowned quality of life.

SPI has modelled two potential scenarios for expansion:

• Model One retains the incentive cap at its current level, but adds an uncapped element for productions undertaking a majority of their production days in Utah in defined rural counties. This is designed to drive production and associated impacts to rural parts of the state and focus on building impacts from the sector away from the Wasatch Front.

The projections in this model assume that the capped state incentive will continue to be fully utilized. Due to constraints on workforce capacity for additional productions being made rurally, it has been assumed that after an initial significant rise, production expenditure will remain steady, before starting to rise again as workforce depth increases.

• Model Two instead assumes a gradually staged increase to Utah’s overall incentive budget, on a more conservative basis than model one. In year one, the incentive has been projected to increase from its current level of $8.3 million to $15 million, followed by further increases of $5 million annually.

Projections for both models are included in the following tables, presented as net totals – i.e.

adjusted using the additionality rate identified through the survey undertaken for this study.

Gross totals are included in Section 7.2.

Table 2 – Model One Projections Related, FY2023 to FY2028 ($m) – Net Impact (2021 dollars and based on 2019 data year [pre-Covid])

FY 2023 FY2024 FY2025 FY2026 FY2027 FY2028

Total incentive budget ($m)

20.8 27.8 27.8 34.8 34.8 41.8

Related spend ($m)

83.2 111.2 111.2 139.2 139.2 167.2

GVA (direct, $m)

40.4 54.0 54.0 67.9 67.9 81.2

FTEs (direct) 895 1,197 1,197 1,503 1,503 1,799

Output (direct, $m)

71.5 95.6 95.6 120.1 120.1 143.8

GVA (total, $m)

82.0 109.6 109.6 137.6 137.6 164.8

FTEs (total) 1,406 1,879 1,879 2,360 2,360 2,825

© Olsberg•SPI 2022 17th January 2022 6

FY 2023 FY2024 FY2025 FY2026 FY2027 FY2028

Output (total, $m)

148.0 197.8 197.8 248.4 248.4 297.5

GVA RoI 5.6 5.6 5.6 5.6 5.6 5.6

Note: ‘Total’ includes direct, indirect and induced phases of economic impact

Table 3 – Model Two Projections, FY2022-23 to FY2026-27 ($m) – Net Impact (2021 dollars and based on 2019 data year [pre-Covid])

FY2023 FY2024 FY2025 FY2026 FY2027 FY2028

Total incentive budget ($m)

8.0 15.0 20.0 25.0 30.0 40.0

Related spend ($m)

35.6 66.8 88.9 111.0 133.3 177.8

GVA (direct, $m)

17.3 32.4 43.2 54.0 64.8 86.4

FTEs (direct) 383 719 957 1196 14345 1914

Output (direct, $m)

30.6 57.4 76.5 95.5 114.6 153.0

GVA (total, $m)

35.1 65.8 87.6 109.5 131.4 175.3

FTEs (total) 602 1128 1503 1878 2253 3005

Output (total, $m)

63.4 118.8 158.2 197.7 237.2 316.4

GVA RoI 6.5 6.5 6.5 6.5 6.5 6.5

© Olsberg•SPI 2022 17th January 2022 7

2. THE GLOBAL SCREEN PRODUCTION DELUGE AND UTAH

2.1. The Global Screen Production Deluge

Recent years have seen an unprecedented deluge of film and television production in response to voracious consumer and investor demand. In 2019, an unprecedented $177 billion was spent on the production of feature-length films ($42.6 billion), television films, drama series and documentaries ($134.4 billion).3

In the US in 2019, according to calculations by UBS reported in the Economist, content spending by 16 companies was roughly equal to the sum invested in America’s oil industry in the same year.4

This increase is being driven by streaming services such as Netflix, which is reported to have increased its content spend to over $17 billion in fiscal 2021.5 Other new and well capitalized investors have entered the market and investment from established studios and broadcasters has increased. Disney, for example, announced at its 2020 Investor Day that it expected its global direct-to-consumer content expense to be between $14 billion and $16 billion dollars across Disney+, Hulu and ESPN+ for fiscal 2024.6

Much of the growth has been driven by television series (Figure 2), although the production of feature film has also been increasing (Figure 3).

Figure 2 Scripted Original Series Production in the US, 2011-2020

Source: FX Networks Research

3 Global Screen Production – The Impact of Film and Television Production on Economic Recovery from COVID-19.

Olsberg•SPI, 25th June 2021. Accessible at: https://www.o-spi.com/projects/economic-impact-studies-research-and-evaluation-ly9lh 4 The future of entertainment. The Economist, 14th November 2019. Accessible at:

https://www.economist.com/briefing/2019/11/14/the-future-of-entertainment 5 Netflix Reveals $17 Billion in Content Spending in Fiscal 2021. Variety, 20th April 2021. Accessible at:

https://variety.com/2021/tv/news/netflix-2021-content-spend-17-billion-1234955953/ 6 The Walt Disney Company investor day Transcript, 10th December 2020. Accessible at:

https://thewaltdisneycompany.com/app/uploads/2020/12/Disney_Investor_Day_2020_transcript.pdf

266 288

487 495

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

S er ie s

P ro d u ce d https://www.o-spi.com/projects/economic-impact-studies-research-and-evaluation-ly9lh https://www.o-spi.com/projects/economic-impact-studies-research-and-evaluation-ly9lh https://variety.com/2021/tv/news/netflix-2021-content-spend-17-billion-1234955953/

© Olsberg•SPI 2022 17th January 2022 8

Figure 3 Worldwide Feature Film Production, 2014-19

Source: European Audiovisual Observatory

Governments of all sizes and jurisdictions have increasingly recognized and valued the considerable economic benefits delivered by screen production. As a type of specialized and fleetfooted manufacturing activity, it creates modern, highly skilled, productive, and mobile employment. It also typically delivers an attractive return on public investment alongside a variety of other economic measures. It increases inward investment, stimulates tourism, helps national branding, and enhances soft power.

These economic benefits sit alongside the many cultural impacts delivered by the screen ecosystem. These benefits have been recognized for decades and have often been the starting point for government strategies addressing the sector.

Despite initial disruption on screen production by the COVID-19 pandemic, global spend on screen production and licensing of new content by streamers, studios and independents has soared 16.4% year-on-year from $189.1 billion in 2019 to $220.2 billion in 2020. Furthermore, spend is forecast to rise to $250 billion in 2021, reflecting the resilience of the sector and significant demand for screen content.7

2.2. An Opportunity for Utah

Utah’s economic performance has consistently ranked amongst the strongest of all US states in recent years, with high levels of employment and strong wage growth. However, this has been unequally distributed between the Wasatch Front and more rural counties.

Film and television production offers a strategic ability to deliver impacts, including jobs, to more rural areas of the state. This is because productions deliver large amounts of expenditure in a relatively short production cycle. Film and television productions are also attracted to the unique locations offered in rural Utah. However, production incentives play a key role in attracting projects, and Utah’s limited incentive has seen projects opt for other states.

7 Streaming drove 16.4% rise in 2020 global production, licensing spend to $220bn (report). Screendaily.com, 28th June 2021. Accessible at: https://www.screendaily.com/news/streaming-drove-164-rise-in-2020-global-production-licensing-spend-to-220bn-report/5160937.article

© Olsberg•SPI 2022 17th January 2022 9

3. UTAH FILM PRODUCTION INCENTIVES

3.1. Background to Production Incentives

In a competitive global market where screen production spend has reached unprecedented levels, tax incentives have become increasingly recognized by governments as an efficient and strategic policy tool to attract and strengthen local production sectors and build skills, employment, and infrastructure in a future-facing global industry, as well as attract high-value inward investment.

There are currently 101 automatic national, state, or province-level systems operating worldwide. In terms of the US market, Utah is one of 34 automatic incentives.8 The MPIP’s current cap of $8.3 million makes it one of the lowest offers in the US, as outlined in Section 3.3.

Figure 4 – Screen Production Tax Incentives in the US

Source: SPI

3.2. The Utah Motion Picture Incentive Program

Production incentives for film and television were first introduced in Utah in 2004 in response to film and television productions being drawn to incentive offers elsewhere and leaving the state. Utah’s initial incentives took the form of a trial fund, with an allocation of $1 million. After this trial, a permanent fund was created with a budget of $3 million, which would ultimately be run by the Utah Film Commission. The MPIP has a budget of $8.3 million, after an increase during the 2021 legislative session from $6.8 million.

In its current form, qualifying productions are feature films; documentaries; episodic pilots, series or episodes; short films and music videos; and reality television.

There are presently two uplifts available, with both requiring at least $1 million being spent by a production in Utah. The first can be obtained by 75% or more of a production’s cast and crew being Utah residents (excluding extras and five principal cast members). In this case, the incentive rises to 25% from the base 20%. Alternatively, locating at least 75% of principal

8 Incentives based on eligible spend, rather than other discretionary elements (e.g., cultural significance or artistic value)

© Olsberg•SPI 2022 17th January 2022 10 photography days in rural Utah (outside of Salt Lake, Utah, Davis and Weber counties) will also increase the incentive available to 25%.

3.3. Comparison With US State Competitors

There is strong competition in the US to attract screen productions, with Utah as one of over 30 states offering production incentives. This section provides a high-level overview of state production incentives in order to compare Utah’s offer in two key areas: annual program cap (the annual amount budgeted for or invested by state governments on incentives), and incentive rate (the percentage-based return on eligible expenditure).

It should be noted that many international territories (including in Canada and Europe) also offer highly competitive incentive systems.

3.3.1. Program Caps

The table below outlines film and television production incentive programs in the US. The annual program budget or cap is indicated, and where no cap exists, actual government outlay on production incentives is included, where data are available.

Table 4 – Comparison of State Incentive Program Caps in the US Market

State Annual Program Cap / State Outlay

Arkansas No cap (amount unstated)

D.C. No cap (amount unstated)

Maine No cap (amount unstated)

Tennessee No cap (amount unstated)

Georgia No cap ($915m, 2017)

Illinois No cap ($420m, 2018)

California $660m9

New York $420m

Louisiana $150m

New Mexico $110m Note: uncapped for New Mexico Film Partners — e.g. Netflix and NBCUniversal

New Jersey $100m; additional €200m available for Studio Partners

Connecticut No cap ($110m five-year average between 2014-15 and 2019-20)

Kentucky $100m

Pennsylvania $70m

Massachusetts No cap ($56m-$80m annually per 2021 review)

Hawaii $50m

Ohio $40m

North Carolina $31m

Oklahoma $30m

Texas $22.5m10

9 includes $150 million tied to the construction of new soundstages. Legislature Passes Senate Bill 144, $330 Million Dollar Investment In Film & Tv Production And Soundstages. 15th July 2021. Accessible At:

https://sd25.senate.ca.gov/news/2021-07-15/legislature-passes-senate-bill-144-330-million-dollar-investment-film-tv-production 10 In 2021, the state allocated $45 million over two years.

© Olsberg•SPI 2022 17th January 2022 11

State Annual Program Cap / State Outlay

Alabama $20m

Mississippi $20m

Oregon $20m

Rhode Island $20m

South Carolina $15.5m

Maryland $12m

Montana $10m

Nevada $10m

Utah $8.3m

Virginia $6.5m

Minnesota (Tax Credit)

$4.95m

D.C. $3.5m

Colorado $0.9m

Minnesota (Rebate)

$0.5m

3.3.2. Rate

Utah’s incentive rate falls approximately in the middle of incentive systems in the US, at 20%- 25%. The table below shows incentive rates in different US markets for reference and comparison. It should be noted that in many US states, incentives are offered at different levels for different types of spend, and these are outlined in the ‘Notes’ column below.

Table 5 – Comparison of State Incentive Rates in the US Market

State Headline Incentive Rate

Uplifts Notes

D.C. 35% None 10% of personnel expenditure for non-D.C.

residents; 30% for residents;

21% of production expenditure without a tax obligation to D.C.-registered vendors; 35% of production expenditure with a tax obligation to D.C.-registered vendors

Kentucky 35% None 30% of goods and services;

35% of Kentucky-resident labor; 30% of non-resident labor

New Jersey 35% 2% Diversity Tax Credit For qualified film production expenses incurred in New Jersey, but within a 30-mile radius of the intersection of Eighth Avenue/Central Park West, Broadway, and West 59th Street/Central Park

© Olsberg•SPI 2022 17th January 2022 12

State Headline Incentive Rate

Uplifts Notes

South, New York, New York, the tax credit is worth 30% (Fort Monmouth falls outside of this 30-mile radius)

Illinois 30% Additional 15% tax credit on Illinois labor expenditure of employees who live in areas of high unemployment

Mississippi 30% 5% additional rebate for honorably discharged armed forces veterans

25% for local spend on goods/services; 25% for non-resident payroll;

30% for resident payroll

Ohio 30% None

Connecticut 30% None 10% on production costs between $100,000 and $500,000; value increased to 15% on projects with eligible spend of more than $500,000; projects of more than $1m qualifying spend get 30%

Rhode Island 30% None

South Carolina 30% None 25% on resident labor; 20% on non-resident labor; 30% on in-state supplies; 25% on out-of-state supplies

Washington 30% 35% for TV series of more than six episodes

Alabama 25% 35% for payroll to Alabama residents

Louisiana 25% Additional 5% for out-of-zone filming;

additional 10% for a Louisiana screenplay on expenditures between $50,000 and $5m;

additional 15% for Louisiana payroll;

additional 5% for visual effects

Maryland 25% None 25% for film production;

27% for TV production

Massachusetts 25% Spending more than 75% of total budget or filming at least 75% of the principal

© Olsberg•SPI 2022 17th January 2022 13

State Headline Incentive Rate

Uplifts Notes photography days in Massachusetts makes the project eligible for a 25% production credit and a sales tax exemption, in addition to the 25% base payroll tax credit

Minnesota (Tax Credit)

25%

Montana 25% Additional 5% on expenditure in a high-poverty county;

additional 5% for Montana screen credit

25% of compensation for Montana resident crew; 15% of compensation for non- Montana resident crew; 30% of compensation paid to students; 20% of above-the-line compensation per production or television series, with ceiling; 10% of payments to Montana colleges or universities; 10% of all in-studio facility and equipment rental expenditure

New Mexico 25% Additional 5% for television series productions; additional 5% if certain criteria are met regarding the use of qualified production facilities; 5% for production expenditures in the state at least 60 miles

15% for non-resident industry crew wages when certain criteria are met

New York 25% Additional 10% credit available on qualified labor expenses (direct hires only) in most upstate counties

North Carolina 25% None

Pennsylvania 25% 5% for productions that meet the minimum state filming requirements at a qualified production facility; 5% for eligible post-production expenses incurred at a

© Olsberg•SPI 2022 17th January 2022 14

State Headline Incentive Rate

Uplifts Notes qualified post-production facility

Tennessee 25% Additional 5% on resident labor for scripted TV series that include ‘Film in TN’ logo

Utah 25% None Rebate: 20% for projects spending between $500,000 and $1m Tax Credit: 20% for projects that will spend $500,000- $1m; 25% for projects that spend above $1m and if additional criteria are met

Arkansas 20% 10% bonus for below-the-line Arkansas residents

California 20% None 20% for non-independent feature films, TV projects;

25% for independent films

Colorado 20% None

Georgia 20% Additional 10% for including Georgia promotional logo in final production

Hawaii 20% None 20% for Oahu productions 25% for other islands

Minnesota (Rebate)

20% 5% additional rebate for productions with more than $1m qualifying spend, or 60% of days outside metro area

Oklahoma 20% 3% Rural County Uplift;

2% Small Municipality Uplift; 5% Soundstage Uplift; 2% / 5% TV Uplift; 5% Multi-Film Deal Uplift; 3% Post- Production Uplift

Oregon 20% Additional 6.2% Greenlight labor rebate for qualifying projects spending more than $1m

20% on goods and services;

10% on labor

Texas 20% 2.5% for underused or economically distressed areas

Base rate of 5%-20%: 5% for projects of $250,000-$1m;

10% for projects of $1m- $3.5m; 20% for projects of $3.5m+. Based on eligible in-state spending

© Olsberg•SPI 2022 17th January 2022 15

State Headline Incentive Rate

Uplifts Notes

Nevada 15% None Above-the-line: 15% resident, 12% non-resident Below-the-line: 15% resident Production costs: 15%

Virginia 15% 5% bonus for filming in an economically-distressed area of Virginia; 10% bonus for Virginia resident payroll if total expenditure in Virginia of $250,000- $1m, or 20% for Virginia resident payroll if total expenditure in Virginia of $1m+; 10% bonus for Virginia resident payroll for Virginia residents employed for the first time as actors or members of a production crew

Maine 12% None Rebate: 10% on non-resident wages; 12% on resident wages Tax credit: 5% on other eligible spend.

© Olsberg•SPI 2022 17th January 2022 16

4. UTAH PRODUCTION AND INCENTIVE USE

4.1. Production Expenditure

Examination of annual expenditure patterns in Utah between FY2005 and FY2021 shows that while spend is often uneven due to the nature of film and television production there has been overall growth since FY2005. Since FY2017, growth has levelled off somewhat, which relates to the underlying incentive budget in Utah. A decline occurred in FY2020 in relation to the COVID-19 pandemic: while spend reached $64.0 million in FY2019, this decreased to $46.9 million in FY2020, with a similar level of $47.9 million in FY2021. It should be noted that the latter fiscal year does include a significant proportion of 2020, the first year of the pandemic, and that the global film and television sector has seen a strong return to production since initial disruption from COVID-19. According to reports, Utah was the first state in the US to resume film and television work during the pandemic and is well placed to continue to benefit from the high volume of production being undertaken in the sector.11

Figure 5 – Utah Production Expenditure, FY2005 to FY2021 (£m)

Source: Utah Film Commission / SPI analysis

4.2. Projects

The overall number of projects accessing the incentive has increased significantly since 2005, but by a smaller proportion than the increase in production spend. This means that projects have been spending larger amounts in Utah over time, and likely relates to a broader industry trend towards higher budgets, as well as a development in the film and television sector in Utah which enables more spend to take place in the state.

11 Lights, Camera, Covid: How The Utah Film Industry Beat The Odds Amidst The Pandemic. 19th December 2020.

ABC4 Utah. Accessible at: https://www.abc4.com/news/lights-camera-covid-utah-film-industry-on-the-rise/

7 7

47 48

2…2 year moving average

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Figure 6 – Number of Projects Accessing the Utah Production Incentive, FY2005 to FY2021

Analysis of the type of projects utilizing Utah's incentive between FY2019 and FY2021 shows more impact from episodic projects than feature films. This is reflective of global sectoral trends, with series production driving growth in many production markets.

Such projects can also be particularly impactful, with longer production processes than features and potentially more effects on areas such as screen tourism.

Figure 7 – Expenditure per Type of Project Accessing Utah’s Incentive, FY2018 to FY2021 ($m)

4 5 6

21 21 23 22

27 26

130.3

45.0

Episodic Feature

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Since 2011, there has been a significant shift in the pattern of expenditure in Utah from feature films to series production. In FY2011, only 3% of production expenditure was associated with series production, rising to 87% by 2021.

Figure 8 – Episodic Expenditure as a % of all Production Expenditure in Utah, FY2011 to

FY2021

Source: Utah Film Commission / SPI analysis

4.3. Rural Activity

4.3.1. Filming Days

Rural production is significant in Utah. Over the past five years, around a fifth of filming days were in rural locations. This pattern is driven by a small number of productions and therefore the total number fluctuates significantly year to year. This underlines the interest among producers in using Utah’s natural locations.

Figure 9 – Rural Production by Filming Days, FY2017 to FY2021

3%

27%

36% 38%

65%

37%

72%

86% 85%

40%

87%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Episodic

92 83

0%

10%

20%

30%

40%

50%

60%

FY2017 FY2018 FY2019 FY2020 FY2021

Rural filming days Rural filming days as a % of all shooting days

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4.3.2. Permits Granted

The total number of permits granted in rural areas between FY2017 and FY2020 (the last year with available data) exceeds that for urban areas. This reflects the significance of rural areas for location shooting in Utah – including for commercials, which are counted in the data below.

Figure 10 – Number of Permits Granted by Location Type (FY2017 to FY2020)

4.4. Distribution of Spend

As a kind of specialized manufacturing activity, film and television production in Utah involves purchases and payments to a wide variety of industries and individuals including equipment hire, hotels and transportation. The supply chain impacts of such productions therefore benefit a large number of workers and vendors beyond those solely active in the film and television sector.

Analysis of projects in Utah show that a significant 29% of all production costs were spent on food, accommodation, transport and incidental purchases and equipment costs.

4.5. Cast and Crew Earnings and Employment

Analysis of detailed expenditure information for one example project provides an insight into earnings and employment generated by film and television production activity in Utah.

The median hourly wage for a worker on this production was $29.7. On average, they worked for around 600 hours on the production and their overall earning from the production was around $26,000. The median hourly wage on this production ($29.7) is higher than the Utah state median hourly salary of $15.7.

Table 6 – Key Employment Impacts from Production Case Study

Metric Total

Total hours worked on production 218,633

Average hours worked (mean) 628.3

Total Utah payroll for production $9,035,182

Median Utah wages for production $12,493

Urban Permits Rural Permits

© Olsberg•SPI 2022 17th January 2022 20

Metric Total

Mean Utah wages for production $25,963

Number of Utah workers on production 323

Median Utah hourly salary on production $29.7

Mean Utah hourly salary on production $35.6

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5. ECONOMIC IMPACT OF INCENTIVIZED FILM AND TELEVISION PRODUCTION IN

UTAH

5.1. Overview of methodology

The economic impact methodology is set out in full detail in the Appendix. The approach uses production expenditure data collected by the Utah Film Commission from companies as part of the registration and application process for the MPIP. Data on cast and crew and hours worked are also collected, allowing for a direct estimate of FTEs to be determined.

The total economic impact of the incentive is the sum of the direct, indirect and induced effects:

• Direct impacts are the economic uplift in terms of value created (GVA), labor income and employment within the screen sector resulting from the increase in production and postproduction expenditure.

• Indirect impacts are the GVA, labor income and employment effects observed in sectors that supply goods and services into the screen production sector.

• Induced impacts are the GVA, labor income and employment uplift created as a result of the wage effects of those working in the production sector.

To calculate the direct GVA and all indirect impacts, IMPLAN economic modelling software has been used.

Note: where annual figures are presented, these are nominal – i.e. in prices corresponding with the data year. Where aggregated figures are reported, these use 2021 prices.

5.1.1. Additionality

Additionality describes the extent to which an observed change or impact can be attributed to a particular intervention. In this case, it describes how much production expenditure can be attributed to the MPIP. To determine additionality, a survey that was sent to all production incentive applicants to explore what production companies would have done without the incentive. There were 34 responses out of 60 recipients, a robust response rate of 57%.

Overall, the MPIP leverages very high additionality for Utah, with particularly high additionality for productions by companies based out of Utah. As outlined in the following figure, respondents were asked to rank the importance of six factors in the decision to produce Utah with incentives clearly identified as the most important decision factor identified.

Figure 11 – Decision Factors for Producing in Utah – Average Rank (6 most important, 1 least important)

Source: SPI additionality survey, n=34

3.7

2.9 2.9 2.7

1.8

0.8

Tax Credit Incentives

Locations Cost Base Crew Facilities and Infrastructure

Cast

4.1

3.1 2.7

2.3 1.8

0.9

Tax credit incentives

Locations Crew Cost base Facilities and infrastructure

Cast

Most important

Least important

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Respondents were also asked how important the incentive was in their decision to develop, produce or co-produce in Utah on a scale of 0 (not a factor) to 10 (the only factor). Again, the results show that the incentive was very important to most company’s decisions to produce in Utah. The most frequent response was that that the incentive was the most important factor, with 13 indicating a score of 10. The median response was 9, with the mean 8.8.

Figure 12 – Importance of Incentive to Production Location Decision, frequency

Source: SPI additionality survey, n= 34

Survey respondents were also asked about how much of their productions would have happened in Utah without the incentive. The average (median) response was that there would be no production without the incentive (21 out of 34). The mean response was that 17% of production would have happened without the incentive.

The rate of additionality is therefore between 83% and 100% — i.e. Utah’s incentives are responsible for between 83% and 100% of production expenditure occurring in state. In the economic impact analysis, we have chosen to use a conservative additionality assumption of 86%.

All production companies based outside Utah indicated that no production would have happened in state without the incentive, indicating how important the incentive is for attracting investment into the state.

0 0 0 0 0 1 0

0 1 2 3 4 5 6 7 8 9 10

0 = not a factor 10 = only factor

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Figure 13 – How Much Production Would Have Happened in Utah Without the Incentive?

Frequency of score

Source: SPI additionality survey, n= 34

5.1.2. Additional Output

Between FY2015 and FY2021, the incentive generated $614.1 million in net output. Nearly half (49%) was from direct spend in the industry, while a further $143.1 million was created in the supply chain and $170.3 million through the subsequent wage effects.

Figure 14 – Additional Output, FY2015-FY2021 ($m, nominal prices)

Source: SPI calculations, based on Utah Film Commission data

5.1.3. Additional Employment

Overall, the tax credit led to 515.8 direct year-round FTE jobs in FY2021.

The additional activity also leads to jobs in the supply chain (indirect effects) and moves through the economy through wage expenditure in other businesses. In total in FY2021, a total of 810 FTE jobs can be attributed to the MPIP including 164 indirect jobs and 130 induced jobs.

2 2 2 2 1 1 0 2 0 1

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

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Figure 15 – Additional FTE Employment, FY2015 to FY2021 (nominal)

5.1.4. Additional Gross Value Added

GVA is a key measure of the additional economic value created by an activity. Between FY2015 and FY2021, the total GVA created by activity incentivized by the credit was $350.1 million, an average of $50.0 million a year. This includes a total of $178.2 millions of direct GVA, $77.0 million in indirect GVA and $95.0 million in induced over the seven years (FY15 to FY21).

Figure 16 – Additional GVA, FY2015 to FY2021 ($m, nominal)

5.1.5. Additional Labor Income

The total labor income for the seven years between FY2015 and FY2021 is $238.0 million. This includes income earned in the supply chain and the consequences of increased wages throughout the economy.

© Olsberg•SPI 2022 17th January 2022 25

Table 7 – Labor Income, FY2015 to FY2021 ($m)

Labor Income

Direct $137

Indirect $51

Induced $50

Total $238

5.1.6. Return on Investment

RoI is an important measure of the effectiveness of a film and television production incentive.

Economic RoI uses the total value created in the economy as a result of the tax credits (GVA) and compares this with the net cost of the program (amount released in tax credits minus the additional state and local tax receipts received as a result of the credit).

This is the best measure to use to assess this type of credit as it matches closely with the aims of the credit, which was established to:

a. Encourage the use of Utah as a site for the production of motion pictures, television series, and made-for-television movies;

b. Provide financial incentives to the film industry so that Utah might compete successfully with other states and countries for filming locations

c. Help develop a strong motion picture industry presence in the state that will contribute substantially to improving the state's economy

The average GVA RoI between FY2015 and FY2021 is 7.0. For each $1 spent on the tax credit, $7.0 is returned to the Utah economy. The RoI varies over the years due to the effective incentive rate (relationship between the incentive amount of the production values) varying over time.

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6. WIDER STRATEGIC IMPACTS OF THE TAX CREDIT

In addition to the economic impacts generated by the MPIP outlined in the previous section, incentivized film and television production in Utah also delivers a range of supplementary benefits. These include impacts on rural locations in state, as well as tourism outcomes. This section outlines these wider strategic benefits.

6.1. Impacts on Rural Locations and Communities

As outlined in Section 4.3, a considerable amount of film and television production takes place in Utah’s rural areas. The state’s range of natural locations are a significant draw for film-makers – though the attractiveness of Utah’s locations is underpinned by the availability of an incentive, as the results of the additionality survey undertaken for this Study demonstrate.

With the total number of permits granted in rural areas between FY2017 and FY2020 exceeding those for urban areas, Utah has already seen a significant impact on rural locations and communities resulting from film and television production.

The example project analyzed in Section 4.4 shows that the distribution of production spend benefits a wide range of areas. This includes Utah crew, with 43% of spend. While a state crew base may not be developed in all locations being utilized, producers will bring in human resources necessary for production, creating impacts in state on transport and hotels and restaurant services locally.

6.2. Film Tourism

Film and television induced tourism has increasingly been recognized as an important component of tourism marketing and visitor attraction, and the economic impacts arising from screen tourism can be substantial.

Film tourism has been a key area of growth and strategic focus in some destinations, given its power and the fact that it aligns with some key tourism sector trends – such as the focus on experiential travel.

Utah has been featured as a location in many well-recognized films and television shows that have been produced in-state – from Stagecoach to Butch Cassidy and the Sundance Kid to High School Musical.

Survey research undertaken by SMARInsights for the Utah Film Commission identifies Utah visitors who said a film or television series influenced their decision to visit the state or a location within the state, and that it was the main reason for their visit. These represent additional tourists into state – and their spending is wholly stimulated by film or television.

This study shows that this film tourism has delivered 2.2 million Utah trips and $6.0 billion in value for the state over the past 10 years. About 4 in 10 consumers indicate that they have chosen a vacation destination because of its link to a film or TV series.

6.3. COVID-19 Recovery

As highlighted, screen production creates on average higher paid jobs, significant expenditure with vendors along their supply chain, as well as valuable skills development. In 2021, global production spend is forecasted to surpass that of 2019. For this reason, screen production has been seen as a strategic investment for economies looking to bounce back from the effects of

COVID-19.

Incentivized productions also supported businesses to service their projects during COVID-19 state lockdowns.

Utah’s response to COVID-19 has been very effective in the film and television production sector. Soon after the outbreak, COVID-19 compliance officers were trained and protocols

© Olsberg•SPI 2022 17th January 2022 27 were put in place to maximize safety on sets. Protocols included provision of PPE masks, gloves being worn on set, increased hygiene and sanitization, strict social distancing measures, and on-set testing of cast and crew. Such protocols contributed to Utah being the first state in the country to start film and television work amid the pandemic.

© Olsberg•SPI 2022 17th January 2022 28

7. OPPORTUNITIES AND CHALLENGES FOR THE DEVELOPMENT OF THE SCREEN

SECTOR IN UTAH

This Study also considers the development of the film and television production sector to date, and the role of the MPIP in growing the sector in Utah – as well as its potential to continue driving expansion for the future.

7.1. Production Lost to Competitor Markets

While film and television production is a significant growth sector, there is also global competition to attract projects.

As outlined, Utah’s MPIP is one of 101 automatic incentives on offer, and one of 34 in the US.

In comparative terms, the incentive’s annual budget is one of the lower offers in the US market

– at $8.3 million in the current fiscal year. This level has limited Utah’s ability to continue to increase production impacts year on year, as producers opt to take productions to alternative destinations that have more incentive availability.

To consider this further, SPI reviewed Utah Film Commission data on projects that seriously enquired about shooting in state but ultimately opted to shoot elsewhere. It is assumed that a lack of available incentive was a key reason for the projects undertaking production elsewhere.

The lost productions included a mixture of episodic and feature length productions, as well as being from a range of different producers, including both in-state and out-of-state. This analysis shows that Utah lost out on productions with budgets totaling $216 million in 2018 and $207 million in 2019.