published Tuesday, January 29th, 2013

Audit blasts Tennessee's film incentive boondoggle

A pointed Free Press editorial that appeared in November warned against continuing a ludicrous state welfare program that handed cash to the rich Hollywood executives who produce the ABC drama "Nashville." At that time, state leaders had already given away $7.5 million in handouts to the producers to film portions of the show in Music City, and the producers were pushing the state for millions more.

The editorial argued that state giveaways to movie and television projects did little to benefit taxpayers.

It turns out that the editorial wasn't nearly critical enough of the state's Hollywood handouts.

On Monday, the state's Comptroller of the Treasury released an audit of the Tennessee Film, Entertainment and Music Commission -- the agency that passes handouts from the Departments of Revenue and Economic and Community Development to the entertainment industry. It was one of the most damning state audits in recent memory.

In fact, in their recommendations, auditors hinted that the Commission should be shut down -- and called for sweeping overhauls to the laws and policies related to the Film Commission and film incentive program if the bureaucracy survives.

What did state auditors find that was so bad?

For starters, the Film Commission authorized $12.5 million in state taxpayer-funded giveaways to film projects that did not meet the requirements necessary to receive the subsidies.

The Department of Revenue then sent as much as $7.5 million in handouts for TV and movie projects that were supposed to go to Tennessee-based businesses to out-of-state companies.

The audit also revealed that Perry Gibson, the former Tennessee Film, Entertainment and Music executive director, failed to disclose serious conflicts of interest which allowed her to direct more than half a million dollars to her husband's law firm. Auditors discovered "communication between the former executive director and her spouse that clearly demonstrates the spouse working for a law firm involved with at least three productions that received incentive payments."

According to the audit, "The communication suggests the connection [between Gibson and her husband] was advertised as a selling point to at least one or more producers."

In describing the actions of the Film Commission, the Department of Economic and Community Development, and the Department of Revenue, the audit used phrases such as: "exercised poor management and administrative oversight," "disregarded their statutory responsibility," "misrepresentation of ... information" and "general lack of due diligence."

What did Tennessee taxpayers get for the more than $20.5 million in tax money that state auditors determined was spent improperly?

Nothing at all, according to auditors.

The audit states, "We found little or no support that the headquarters incentive has led to new permanent film-producing facilities or new permanent and professional Tennessee jobs in the film industry."

This audit proves once and for all that there is no value to taxpayers in bribing rich movie and television executives to film their projects in Tennessee. The scheme fails to create jobs, does little to stimulate the economy and costs taxpayers tens of millions of dollars.

There is no doubt that the state should stop giving taxpayer-funded handouts to Hollywood. Film incentives were a bad idea from the start, and the audit proves it has been a much worse catastrophe than even staunch opponents of the plan expected. Now the question is, are state lawmakers wise enough to say "that's a wrap" on the state's failed experiment in film incentives.

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carolfraz said...

Drew, it's obvious by your article that you are very much negative on incentives to begin with and so prejudiced that you did not even do your investigatory homework, so shame on you and your inflammatory rhetoric, intended to be clever. As a member of the Film Community based here in Nashville and Tennessee,and making a living in that industry, along with hundreds of others just here in Nashville, I really wish you had dug deeper into this story and to find out the facts-- You don’t even mention how many people are being employed in these endeavors all across the economical spectrum, not just solely in the entertainment/production field. I urge you to visit the set of Nashville for instance and see how money just on that one show flows in and out of our community. And there have been buildings bought and film stages constructed just on this one production within the 6 months.

One very obvious flaw in your editorial is the little buried fact that in the audit report were statements included by the Dept of Economic & Community Development (ECD) and Dept of Revenue that any issues had been addressed in a new film incentive program that took effect in 2012 and that the incentive programs addressed in the audit were shelved LAST JULY. Plus, it looks like you have absolutely no knowledge, nor do you want to know, about how the finance money flows from California companies (or other places) and here and then back for accounting purposes. Frankly, this story seems designed to rile tax payers up, but then you knew that. There may be forces at work in Tennessee that do not want a film incentive program here, and I guess that you are right up at the head of the pack. You will find a lot of push back from this and all the facts will come out. Please try to use investigatory skills to write a more complete and accurate assessment of the situation instead of just sounding like a Glenn Beck clone. And I'm sorry, but I can't be respectful of such a disrespectful editorial.

Carol Makeup/Hair Stylist Member Local 798>

daytonsdarwin said...

Sound like Carol got her hair in a knot. Must have missed her cut of the pie.

Isn't "Chattanooga's Film Industry" another one of the Missy Crutchfield's duties in Chattanooga? Talking fast, saying nothing, spending money, movie acting? No wonder the money's mismanaged, lost, stolen, missing, misappropriated, vanished — that's par for her business acumen.

January 29, 2013 at 9:02 p.m.
gjuster said...

It's time to stop incentivizing companies - it almost never pans out. I love VW, but will $600,000,000 ever truly be repaid to the taxpayers? Carol - it might be good if your business could make it without taxpayer money

January 30, 2013 at 7:14 a.m.
aae1049 said...

Carol, it is obvious that you don't have a clue or knowledge of tax incentives or abatement that are deemed corporate welfare. These incentives cost working class people fold in taxes, more than work or job creative.

You should do a little homework and attempt to educate yourself on the financial impact to the taxpayers.

What's wrong, are your clients Crutchfields? Your post is very uninformed about the magnitude of waste and fraud that parallels incentives.

January 30, 2013 at 2:25 p.m.
carolfraz said...

aae1049 gave exactly no facts about the program, only tea party rhetoric. Do you know anything about this issue, or is it all black and white to you? 1. The previous administration made mistakes in oversight of the incentives available. 2. The sitting Director of the Film, Entertainment & Music Commission along with the leadership of Economic & Community Development have resolved those issues by eliminating the incentive offered by the Department of Revenue and revamping guidelines for use of incentive funds overseen by the Commission and ECD. 3. Elimination of the film commission would only be harmful to an already beleaguered industry and to those in the administration who have worked hard to make the appropriate corrections.

The audit was very lengthy and difficult to grasp if you don't understand the methodology for distribution of incentive funds, so reporters are grabbing what they believe are the salient points. Since incentives are a VERY complex topic, I have found over the years that most reporters don't get it right even if you explain it as best you can.

January 30, 2013 at 6:19 p.m.
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