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F I S C A L I M P A C T R E P O R T

SPONSOR Griego

ORIGINAL DATE

LAST UPDATED

1/31/06

HB

SHORT TITLE State Investment Officer Film Company Loans

SB 535

ANALYST Geisler

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

FY08

$1,000.0

$1,000.0 Recurring Severance Tax

Permanent Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates: HB 591

Relates to: HB 358, HB 359

SOURCES OF INFORMATION

LFC Files

Responses Received From

State Investment Council (SIC)

SUMMARY

Synopsis of Bill

Senate Bill 535 clarifies existing statutory language that allows the State Investment Council to

make short-term loans to film & television productions, based on estimated tax-credit rebates

qualified for under state law.

Currently, there is a minor conflict between this program and the State Film Investment program,

capping the total of both combined programs at $15 million per production. This new language

would allow a film to receive both the film production tax-credit loan, in addition to a separate

investment/participation loan of up to $15 million.

Both loans are drawn from the Severance Tax Permanent Fund (STPF) as administered by the

State Investment Council.

Senate Bill 535 – Page

2

FISCAL IMPLICATIONS

Tax Credit Production Loans are offered to film productions at a rate of a one-year US treasury

note plus 100 basis points (1%), for an overall annual return of roughly 5%. The SIC anticipates

an increased number of projects applying for these loans, with an estimate of $20 million in

loans per year. Such an amount would earn an estimated $1 million per year for the STPF.

SIGNIFICANT ISSUES

Tax credit production loans can be made up to 80% of the anticipated tax credit. The tax credit

rebate is for up to 15% of a film’s total expenditures in New Mexico. Currently this program has

only two projects receiving Film Production Tax Credit Loans, Bordertown and The Flock. The

films, with budgets of $21 million and $32 million respectively, both received loans of $2.3 mil-

lion based on the projects’ direct expenditures in New Mexico. Both loans will be repaid, with

interest, during calendar year 2006.

PERFORMANCE IMPLICATIONS

SIC notes that the loans will draw from an available pool of 3% of the STPF, or about $116 mil-

lion. However, the loans are short-term, by statute, no more than 12 months, and the pool will

recycle its capacity often. As a whole, and using preliminary performance data, the STPF for

calendar year 2005 returned 6.8%, while the S&P 500 index returned 4.9%. In contrast, this

program’s US Treasury note + 100 basis points will return approximately 5% to the fund. Obvi-

ously the difference in performance will vary from year to year based on overall market condi-

tions and rates.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Duplicates HB 591. Relates to HB 358 and HB 359, which seek to increase the film production

tax credit.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

The State Investment Council views Film Production Tax Credits as a valuable tool in New

Mexico’s film incentive package. SIC believes failure to enact SB 535 will put New Mexico at a

distinct competitive disadvantage to other states that currently use tax credits to create incentive

to attract film and TV productions.

GG/mt:yr