Expiration of film tax credit could take a bite out of “Z Nation,” other productions

Keeping the zombies away from Spokane might not take heavy weaponry or plucky heroes. The Legislature could accomplish it by doing nothing.

The state tax incentive for film productions in Washington is set to expire at the end of the month, and its chances of being renewed are uncertain. Without it, the series “Z Nation,” along with other television productions and movies that see an economic advantage of coming to the state are likely to seek a better deal elsewhere.

“I’m frustrated,” Rep. Marcus Riccelli, D-Spokane, said Friday. “It’s going to cost us jobs.”

Not just jobs for zombie extras, which the series hires each year for shooting on location in Spokane, or actors and directors, he said. Z Nation and other productions also employ a wide variety of local labor, including makeup artists, drivers, construction workers and caterers.

Riccelli sponsored a bill to extend and expand the tax incentive that the state has had in some form since 2002. That House bill, with 34 cosponsors that include some of the Chamber’s most conservative Republicans and most liberal Democrats, currently sits in the Finance Committee. The companion Senate bill, also with strong bipartisan support that includes Democrat Andy Billig and Republican Mike Baumgartner, waits in the Ways and Means Committee.

Those bills, and many others tied to changes in the tax system, await an agreement on the state’s 2017-19 operating budget. The Legislature is in its second special session trying to reach an agreement that will pass a House narrowly controlled by Democrats and a Senate narrowly controlled by Republicans.

Recently, some 30 Democrats wrote a letter to House Speaker Frank Chopp, D-Seattle, asking him to bring the film incentive bill to the floor for a vote. Riccelli said he’s confident the proposal would pass the House easily if that happens.

It’s not unusual for a group of bills with changes to the state’s tax system to be held in reserve until the budget is settled, Billig said. If they are part of the massive spending plan, they become NTIB, or necessary to implement the budget; if the budget passes, they usually do, also.

“It’s definitely NTIB. It’s part of the (budget) mix,” House Appropriations Committee Chairman Timm Ormsby, D-Spokane, said. Bigger elements of that two-year operating budget, which will top $43 billion, will need to be settled first, including the court-ordered overhaul of the state’s public education system, improvements to mental health and homelessness programs, a possible restructuring of agencies that handle programs for children and families.

The film production incentive is structured different than most tax breaks, Billig said. It sets up a special fund that provides a credit against the business and occupation tax a film production company would owe the state for operating in Washington. It can’t pay out more than $3.5 million in any year, and no more than $1 million to any business.

The fund also provides the budget for Washington Filmworks, a nonprofit corporation that processes application for the incentive payments and provides information and assistance to any film production seeking to work in the state.

Z Nation, which shoots a 13 episode season in Spokane, is is the biggest beneficiary of the incentive payments this year, Amy Lillard, executive director of Washington Filmworks, said. But the nonprofit also serves as the clearing house for anyone looking to film or photograph in the state.

“If you’ve got a camera in your hand, we help you,” she said. Last year the office generated some $7.2 million in business for the state, for everything from catalog shoots to television commercials. Washington’s varied terrain is particularly popular for car commercials, she said.

If the tax incentive goes away, the fund goes away and with it the Filmworks office. That would make Washington the only state without an office to help land coveted film projects, she said.

Z Nation, which will start shooting this summer and continue through September or October, employs about 200 people with family wage jobs, Rich Cowan, a partner in North By Northwest productions which manages the series’ filming in Spokane.

“If the incentive goes away, it will be the last season for that show, or any show, in Spokane,” Cowan predicted.

Most states that want to reap the benefits of visiting film productions offer more lucrative incentives than Washington, he said. The state doesn’t need to match the bigger tax breaks because it has some built-in advantages on labor costs, a wide variety of landscapes and architecture, and, in Eastern Washington, lighter traffic than Los Angeles and many other cities.

“It doesn’t need to be a totally level playing field. It needs to be something,” Cowan said.

In 2016, a year before the incentive program was scheduled to expire, Riccelli sponsored a bill to expand the incentive program over time to $10 million by 2020, and extend it through 2023. That bill bill died in committee. This year, with the program’s “sunset” in sight, House Bill 1527 proposed keeping it at the current level for 10 years, broadening eligibility a bit and offering a credit for “a major motion picture that portrays a significant historical event in Washington.”

Knowing the incentive program will be available for more than just a year or two could prompt North By Northwest to build a sound stage in Spokane and bring even more productions, and the jobs they support, to the community, Cowan said.

But now supporters might settle for something less than 10 years to make sure the incentive doesn’t expire on June 30. That could cause production companies looking at Washington to scratch the state off their list, Riccelli said.

“We need to include it in anything that moves out as the (tax) measures,” he said. Even if those talks stretch into July, the state needs to be able to assure the film industry legislators have a deal. “It’s not going to help us to say “We can come back in January to fix it.’”