Tens of thousands of attendees are expected to descend on the Cucalorus Festival next week. But while area venues will screen more than 300 films during the five-day festival, the action is at a standstill elsewhere in Wilmington with no major productions rolling cameras on city streets.

It’s the first time in years that both the region and state has had no major projects going, without some sort of a green light for future production, according to Guy Gaster, director of the N.C. Film Office.
With recurring funding lined up through the state’s Film and Entertainment Grant and with the recent lift of the grant’s 2020 sunset date, recruiters are seeing opportunities on the horizon as they work to resuscitate North Carolina’s industry that fell off significantly when the state dropped its previous film tax incentives program.

The thriving film action in Wilmington is what sparked the inaugural Cucalorus Film Festival in 1994, executive director Dan Brawley said.

Construction of EUE/Screen Gems Studios and the boom of the film scene in the 1980s and ’90s paved the way for many young filmmakers in Wilmington, he said. Working on big-budget projects, local crew members were afforded the resources to make their own independent films.

“It wasn’t so much that anyone chose Wilmington [for the festival]. It was more that this was a homegrown event with the significant economic development in the city of Wilmington,” Brawley said. “Cucalorus in many ways is the legacy of the film industry’s heyday in the early ’90s. Now Cucalorus has grown and kind of has a life of its own. But Cucalorus has always been linked to what’s happening on 23rd Street [Screen Gem’s location].”

The state’s film 25 percent refundable tax credit program began in 2010. Two years later, the Wilmington area saw major feature films in production, such as Iron Man 3, We’re the Millers, Safe Haven and The Conjuring. That same year across the state, cameras rolled in the mountains for the big-budget movie Hunger Games.

The state’s film impact that year hit a direct spending of $377 million – a high point for North Carolina in the past decade – and resulted in more than 19,000 jobs, according to numbers provided by the state’s film office.

That action took a downturn after the state’s tax credit incentive ended on Dec. 31, 2014. The state legislature replaced the incentive in 2015 with the Film and Entertainment Grant, which offers a rebate on qualified expenses in the state. The legislature started out with a one-time $10 million allocation to lure filmmakers for the first six months of that year. Then funding was bumped up to $30 million in both the 2015-16 and 2016-17 fiscal years.

Film spending dropped to $111 million in 2015, with job impacts of a little more than 3,600. Last year spending reached $140 million with nearly 11,000 jobs.

The state now has $34 million in the 2017-18 fiscal year budget, which rolled over about $18 million from the previous year’s film grant appropriation – left on the table because of a lack of applications. In addition, appropriations in the amount of $31 million, is set to recur each year, which local and film officials say helps their efforts because producers won’t have to worry about the funding levels having to be approved annually.

But with major competitors such as Georgia, which offers up to a 30 percent refundable tax credit, North Carolina remains hard-pressed to compete for big-budget projects, said Johnny Griffin, director of the Wilmington Regional Film Commission said. Those within the industry say it’s not likely Wilmington will see another Iron Man-sized project anytime soon.

Instead, recruiters are targeting efforts on projects in which the incentives position the state to compete. The grant’s 25 percent rebate program includes a maximum payout of $5 million for feature films and $9 million for television productions.

“We look at what tools we have ... And with what we’ve got, television series, especially those that are 10-12 episodes a season, that is a sweet spot for us,” Gaster said. “That is where we are putting our efforts. But it doesn’t mean we’re not talking to feature films because there are some that are being produced at a level that works for us.”

The incentive change and House Bill 2, the state’s 2016 law on transgender rights that ended up being repealed this year, is what many within the industry attribute to the shortlist of projects in recent years.

“HB2 hurt us for a year,” said Bill Vassar, executive vice president of EUE/Screen Gems Studios in Wilmington. “Things are looking better ... and we are having active discussions with people about real projects.

“It’s the most optimistic I have been about business in two years,” he added.

The studios are not completely empty, Vassar said. While projects are slow, the studio’s lighting and grip business and tenants are still housed at the 50-acre studio lot on North 23rd Street.

“We are long-term owners … we’re committed long term,” Vassar said of the studio. “We know how to adapt to the marketplace. We are slow, but we are going to be busy.”

Vassar predicted that the facility would be full by April.

“The money that’s in the grant and offering recurring funds, a major studio can come here now,” said Vassar.

Some within the state, however, oppose tax incentives to film industries and say the grant program may not be a better replacement.

Becki Gray, senior vice president of the John Locke Foundation, said the Raleigh-based think tank’s position on incentives has been consistent for not just film, but any industry.

“These special carve outs, these special breaks for particular industries are just not the best way to go about encouraging economic growth. A much better way is with lower taxes, fewer regulations, investments in infrastructure and providing a skilled workforce,” Gray said. “We have been opposed to this whole notion of government picking winners andlosers at the cost to other taxpayers and other businesses.”

Her most recent concern is the lift on the grant program’s sunset date, which Gray said would have allowed the state an opportunity to “re-evaluate the program.”

“What we’ve gone to now is a grant program … so it makes it more transparent as we have the film companies applying for that money and also from a [state] budgeting standpoint, there’s a limit on it,” Gray said. “That’s not ideal, but it’s better than just these big cash giveaways that we used to see and that some states still do.”

Gray said economic studies have shown the money given to the film industry is “actually a drain on the economy and a net loss for the taxpayers.”

Adam Jones, regional economist based at the University of North Carolina Wilmington, said that total film spending per capita in the state between 2005-14 showed that southeastern North Carolina was a large beneficiary of the tax credits and film industry. Concentrated benefits make it difficult to maintain political support, he said.

“When considering incentives to businesses there are a few major issues, one of which is whether the incentive is a good use of taxpayer money,” Jones said. “While film undeniably had a positive effect on the region, the discussion about its statewide benefits and long-term benefits is a little less clear.”

Film is a mobile industry, while companies that make a significant investment, “tend to have larger returns to incentive dollars over the long term because once they are here they stay,” he added.

“This is a difficult issue because some industries add more to a town culturally than others, a benefit that does not show up in traditional economic analysis,” he said.

Though feature films come and go, Griffin said focusing efforts on longterm clients such as a Dawson’s Creek (1998-2003) or a One Tree Hill (2003- 12), provides a steady job market for local crew, business to local vendors and attracts outside tourism, Griffin said.

TNT’s Good Behavior (set photo shown below), which recently wrapped filming in Wilmington on its second season, is one target for recruiters.

“At this point, we are hopeful that Good Behavior will be renewed for a season three and that it will return here. So, we’ve got that option that’s just sitting there and we’re just waiting to see how it develops,” Griffin said.

Developing technology and introduction of original series produced by streaming services such as Netflix, Hulu and Amazon, are also opening up new avenues for business.

“Those clients did not even exist five years ago. Now those are clients that we talk to,” Griffin said. “We are always looking for that, new opportunity that changes the landscape.”

In its third-quarter letter to shareholders, Netflix said it plans to spend between $7 billion and $8 billion on content in 2018.

Wilmington was eyed for Netflix’s original drama Stranger Things, Griffin said. The project, however, ended up going to Georgia for its incentives. Though budget numbers didn’t match Wilmington with that project, Griffin said it’s likely the area could be considered for another Netflix project.

“It’s a business decision. Even with a television series, we have to find those series that fit within our budget range,” Griffin said. “They’ve got a lot of stuff they are putting in the pipeline… so we always got to keep an eye on that and keep up with what trends are in the industry.”