A cut in the action

North Carolina struggles in competition for film business

Hollywood would call it a false ending. In 2005, the legislature passes a major incentive to lure filmmakers to North Carolina. Producers of the Sony Pictures comedy "Talladega Nights: The Ballad of Ricky Bobby" take the state up on the offer, cruise into Lowe's Motor Speedway and shoot their NASCAR spoof.

Cut to summer 2006. As redneck racer Ricky Bobby (Will Ferrell) drawls through the "Talladega Nights" trailer, the soundtrack hits an ominous note, and a flaw in the incentives package comes into focus: A corporate tax law cuts the effect of the incentive almost in half. Instead of swarming to Wilmington, Charlotte and Asheville, filmmakers are heading to Louisiana and South Carolina, which have passed more alluring come-ons.

"It's been very slow the first six or seven months of the year compared to what we anticipated," said Bill Arnold, director of the N.C. Film Office.

A recent flurry of visits from studio location scouts has brought Arnold and others to the edge of their seats. Last week, as legislators debated whether to give filmmakers the full benefit of a 15 percent tax credit, they had no idea of what they could offer.

"We don't know what's going to happen here," Arnold said. "We can't tell the studios what's going to happen."

(Hollywood would call this a cliffhanger: The Arts & Entertainment section went to press before the legislative week ended. If you want to know whether lawmakers took action, go to www.newsobserver.com, key word arts, and we'll post an update.)

Even if the legislature adjusted the tax law, the 15 percent incentive would not go into effect until January -- at best leaving 2006 a lost year and at worst heralding the end of North Carolina's long show-business ride.

The uncertainty marks an abrupt change in role for North Carolina. For the past two decades, the state has ranked third in film, TV and commercial revenue, with an average of $300 million pouring in every year. Now one of the most film-friendly states cannot compete in a marketplace that relies on escalating incentives.

This was supposed to be a big year, with "Talladega Nights" and at least one smaller project coming here to shoot. In the fall, there were signs that North Carolina might benefit from productions fleeing Louisiana after Hurricane Katrina devastated New Orleans, long a popular film location. But Louisiana quickly passed an aggressive tax credit of 25 percent -- it took effect in January -- on top of the 15 percent infrastructure and 10 percent payroll credits already on the books. The incentives, along with a sense of public obligation, kept many of those projects in Louisiana and spread them to other parts of the state such as Shreveport and Baton Rouge.

The Denzel Washington movie "Deja Vu," for example, was supposed to shoot in New Orleans. After Katrina, the producers scouted North Carolina locations, but the state wouldn't allow them to borrow one of its ferries, Arnold said. The film returned to Louisiana and began filming this year.

A piece of the action

Other states are going for a piece of the action. New Mexico will now refund 25 percent of in-state production costs and make interest-free loans of up to $15 million. In May, Illinois began offering tax credits of 20 percent on production and payroll costs. Most aggressive of all, South Carolina this month began offering cash rebates of 30 percent of supply purchases and 20 percent of payroll.

Connecticut, which offers 30 percent tax credits on goods, services and labor, may counter another North Carolina asset. Two entertainment complexes that would include film studios have been proposed for development, with the potential to lure businesses such as Frank Capra Jr.'s Screen Gems Studio in Wilmington.