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"Arkansas Nickel" attracts cameras.

"Arkansas Nickel" Attracts Cameras

In 1983, the Arkansas Legislature passed the Motion Picture Incentive Act, guaranteeing production companies a 5 percent rebate on expenditures of at least $1 million when it is deposited in Arkansas banks and paid to Arkansas residents and business. That fall, "A Soldier's Story," filmed entirely in Arkansas, became the first motion picture to collect on the "Arkansas Nickel."

When the curtain rose on the trend for filmmakers to run away from California cinematic locations, Arkansas found itself in a "Catch 22" situation. The state's authentic location sites and right-to-work status - allowing use of non-union labor and permitting an extension of the five-day work week imposed by California union regulations - were a plus. But a shortage of trained technicians discouraged the very business needed to develop an experienced crew base.

Joe Glass, first director of the Motion Picture Development Office, got the idea of offering producers a financial break for choosing Arkansas locations. He went to Dr. Frank Troutman, then chief of regional economic analysis at the University of Arkansas at Little Rock, who analyzed expenditures proposed by a prospective film company, based on a sample budget of $1 million.

Troutman found that about half of the expenses went to local employees of the movie company - actors and crew members - as personal income. The other half was spent on goods and services, such as hotels and rental cars; about 20 percent of that, or $100,000, became personal income for Arkansas.

Next, Troutman applied what economists call the "multiplier effect" - based on the spending and respending of income. At least part of the money received for goods or services will be spent. That spending generates income for others, who in turn spend their share. The total income arising from this continual spending and respending will be larger than the original amount invested.

"We have found that on average in Arkansas, our income multiplier is about 1.67, but for convenience, most people say 1.65," says Troutman.

Thus, the $600,000 ($500,000 for professional services plus $100,000 for goods and services) shown by Troutman's model budget as personal income to Arkansans, translated to roughly $1 million when multiplied by 1.65. That meant that when a production spending that amount took its dollies and went home, Arkansas residents would be richer by just about a million bucks.

Reasoning that around 7 percent of total personal earnings goes into the state's general revenue, Troutman says, "I felt the simplest way to this was to keep track of what they spend and rebate a portion of our tax revenue to them. I said, Let's make it simple; let's give them 5 percent back.'"

The ripple effect continues to be felt when bringing ins scouting expeditions which beef up the economy even if the state loses out on the project. And the Incentive Act has made good on its goal of creating a local base of experienced actors and crew personnel.

Since 1983, 20 feature films, six television movies, and 40 television series or special have been filmed wholly or in part in Arkansas, all of them using local talent. Five movies have been rebated a total of more than $300,000 based on expenditures of $6.8 million. "The Brotherhood," filmed this year, will be the sixth.

Companies are allowed 12 months to fulfill the $1 million requirement. Vista Films just missed the minimum with 1986's "Three For the Road," but returned in 1987 with "Pass the Ammon."

Thomas C. McRae, former president of the Winthrop Rockefeller Foundation, claims to have seen no data to prove the rebate's success and believes that, lacking tax research, the Incentive Act's passage was based on hearsay. However, he adds, "Any industrial incentive has to be evaluated in terms of what the gains and losses are, and so long as it's a net plus for the state, you don't want to do anything the negates that."

Natalie Canerday, acting director of the MPDO, puts the nickel rebate in third place, after locations and trained personnel, as a factor in attracting production companies. "If they're going to film on the Great Pyramids of Egypt, if they can find them in Iowa, then they're going to go to Iowa. But if they don't have crews, talent, equipment and services then there's no sense in going there."

Since 1986, Arkansas has been getting competition from Kentucky's Take Five incentive, which has no minimum and rabates the sales and use tax of on-location companies. "So if we could get the rebate lowered to $500,000, it would be a godsend," says Canerday.
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Title Annotation:Films; Arkansas Motion Picture Incentive Act
Publication:Arkansas Business
Date:Dec 17, 1990
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