Bill Highlights
- Requires no appropriation from the general fund or bonds
- Pours $50 million into Delaware's economy, mostly in labor
- Creates over 1,000 direct, indirect and induced jobs within the first year
- Provides instant "shovel ready" jobs at $46,400 a year average
- Veteran Hollywood producers and film financiers acting as advisors
- Called “the smartest state film incentive program” by industry experts
- Already attracted many A-list stars and their film projects
Modeled after New Mexico's Film Production Loan Program
New Mexico's program has successfully loaned $198 million in more than 6 years, with every loan repaid. This was in part because they limited selection to films made for North American distribution in US theaters.
Funding the Program with “Stand-in” Collateral
This incentive program does not require an appropriation from the general fund or from the bond bill.
However, the law requires the state provide collateral for any loan guarantees.
Since the loan has all monthly payments set aside, the state could use state property as collateral without risk of default for 3 years.
Loan Guarantee covered by Tax Revenue
During that time, a portion of the tax revenue generated by this legislation will be deposited into a “Film Finance Guarantee Fund.” This Guarantee Fund would replace the state property as collateral before the end of the loan.
Thus, the state property is only “stand-in” collateral. If a loan were not repaid within 3 years, then
the tax revenue generated by the film industry would cover the unpaid debt.
Job Creation
New Mexico's Film Office recently released a report on the job growth created by their film incentive program.
They found that jobs were created in three primary industries: film, construction, and tourism:
If the state provided $15 million of “stand-in” collateral, funding $50 million in projects, it would create a total of 1,820 jobs based on New Mexico's numbers. The Film Tourism jobs would not be created until after the film's release, so initially those job creation numbers would be 1,064.
Tax Revenue
We are conservatively estimating the 1,820 jobs created will pay $46,400 per year, generating $3.05 million in personal income tax. Additionally, House Bill 490 requires all stars, producers and directors to pay Delaware W2s, generating another $1.91 million dollars, for a total of $4.96 million in personal income tax.
When personal income tax increases, related taxes increase in proportion.
Scenario: A loan defaults
House Bill 490 creates a fund that tax revenue can be deposited into. The Guarantee Fund will replace the “stand in” collateral of state property as the loan guarantee. The loan repayment of a hypothetical film which “bombed” at the box office might play out as follows:
The film's debt is paid out of the Guarantee Fund, reducing it to $4 million. No state property is at risk.
Projects for Delaware
The greatest safety against potential default is selecting films with stars that have the ability to generate sales on name recognition alone.
Below are the stars whose movies have been offered to Delaware. In each case, the gross sales generated by their films are far greater than the budgets of the films offered.
