Government Incentives-New Mexico

This Oct. 8, 2018, file photo shows the entrance to ABQ Studios in Albuquerque, N.M.

(The Center Square) – Netflix’s latest New Mexico deal to expand its facilities in Albuquerque – including $1 billion in production spending – isn’t all it’s made out to be, critics say.

Officials announced late last month that Netflix plans to add 10 stages, offices, backlots, mills and additional post-production services to its existing production hub in Albuquerque. The project will add about 1,500 temporary construction jobs as well as about 1,000 production jobs over the next 10 years, officials said.

For New Mexico Gov. Michelle Lujan Grisham and Albuquerque Mayor Tim Keller, it’s a big win.

In a news release announcing the deal, Lujan Grisham said her administration “has expanded our state’s competitive film incentives, facilitating higher-wage employment for New Mexicans all across the state, and increased opportunities for rural communities. I am glad Netflix has chosen to double-down on its commitment to our state, and our partnership will continue to grow for the benefit of New Mexicans across the board.”

While it’s good news on the job front in a state that carries an 8.1 percent unemployment rate, significantly higher than the U.S. average of 6.9 percent, what’s missing is what it will cost the state and the state’s taxpayers under a variety of tax credits, said Paul Gessing, president of the Rio Grande Foundation, an economic policy think tank in Albuquerque.

Only six states have higher unemployment rates than New Mexico – California, Louisiana, New York, New Jersey, Nevada and Hawaii, as well as Washington D.C.

With the credits figured in, the deal is a net negative, he said. For the Los Gatos, Calif.-based Netflix, it’s an even sweeter “sugar daddy” deal, because the company is not facing any caps to its credits.

“As far as Netflix is concerned, this sugar daddy deal can go on and on in a state that doesn’t have the wherewithal to sustain it financially,” Gessing said.

In a statement critical of the deal, the foundation pointed out that Netflix gets a 25 percent film “tax credit,” which is actually a rebate of 25 percent of the costs of production. The company gets another 5 percent since it is a qualified production facility.

Taxpayers, Gessing said, will end up reimbursing Netflix for 30 percent of its spending in New Mexico – which in the latest deal amounts to about $300 million.

On top of that, he said, New Mexico provides $17 million in LEDA incentives, while Albuquerque provides an additional $7 million in LEDA. That’s not to mention an industrial revenue bond to ease property tax obligations over 20 years for the first $500 million investment to build out the facility.

New Mexico has annual cap on film tax rebate expenditures, but companies that purchase or sign a 10-year lease like Netflix for a qualified production facility are exempt.

Gessing said that if the entertainment industry is seen as a solution to the drop in oil and gas revenues and apparent move away from those sources to solar and wind, it’s yet another mistake.

There’s a certain cachet with bringing in the film industry, he said, “but in no way will it replace oil and gas in the state’s budget.”

Larry Behrens, Western States Director for Power The Future, said the governor’s push for jobs has had its successes, but taxpayers pay the price.

“It's welcome news any time there are new jobs in New Mexico,” he said. “However, Hollywood’s jobs come with a hefty price tag for the taxpayers.

“It’s a simple equation, the energy industry delivers around 40 percent of the money for the state budget, Hollywood does not,” Behrens said. “In 2019, movie subsidies cost the state hundreds of millions of dollars, while only returning 40 cents for every dollar spent. It’s another example of Santa Fe politicians picking economic winners and losers in our state.”