Largest public subsidy in state history makes legislative debut

Yahoo

28-02-2025

A Howard Hughes Corp. image of the proposed project site.
Two film industry giants, along with one of Las Vegas's most prolific developers, are asking Nevada lawmakers for what would be the state's largest ever public subsidy: $1.8 billion over 15 years.
Sony Pictures and Warner Brothers Discovery are promising to build a 31-acre film and tv production campus, which would anchor a 100-acre mixed use area being developed by the Howard Hughes Corporation. But the project, currently known as Summerlin Production Studios, is entirely dependent upon the approval of generous tax incentives for the industry, the developers emphasized.
Sponsored by Assemblymembers Sandra Jauregui and Daniele Monreo Moreno, Assembly Bill 238 would establish $120 million in film tax credits annually for 15 years — $95 million for productions at the Summerlin studio and $25 million for productions not tied to the studio. That's a twelvefold increase over the state's current film tax credit program, which is capped at $10 million annually.
The bill received its first hearing Thursday in the Assembly Committee on Revenue. Monroe Moreno told the committee that when conversations about the project started 'years ago' she was 'very much against tax credits but very much for the industry.'
She continued, 'We had to get this legislation right for this state. As a fiscal leader in this body, the numbers had to be right for this state.'
Jauregui and Monroe Moreno pitched Summerlin Production Studios as a way to diversify Southern Nevada's economy by bringing in a new industry that is not prone to the same boom and bust cycle as the dominant gaming and tourism industries.
Executives from Sony and Warner Bros said they believe Las Vegas has existing labor talent they can pull from and help grow. They pointed to the lighting and sound crews who work Strip productions or conventions as a prime example. Las Vegas's close proximity to Los Angeles is also seen as a benefit because it would allow talent to more easily travel home on weekends.
But they say financial incentives are also needed in order to make Nevada competitive with other states and countries who are actively pursuing the industry. Jauregui described it as a 'transformative' investment.
A fiscal and economic analysis by PFM Group Consulting for the project estimates a 20% fiscal return to the State of Nevada, meaning that the expected tax revenue over the 15-year period would be $335 million compared to the cumulative $1.65 billion in new film tax credits (the total $1.8 billion number includes the $10 million annual tax credit already in state law).
Put more simply, for every $1 in tax credits the state gives, the state would receive 20 cents in tax revenue.
That return on investment increases to 46% — or 46 cents in for every $1 in film tax credits — once tax revenue at the local level is considered.
As for the broader economic impact, PFM estimates construction would generate $2.874 billion and then $3.038 billion once stood up.
The construction phase, which presenters indicated would last seven to eight years, would support approximately 12,600 direct jobs and the studio itself would support 9,300 direct permanent, non-construction jobs.
Altogether that would result in nearly $25 in economic impact for every $1 in film tax credits, PFM concluded.
PFM's presentation notes that only $1.4 billion of the estimated $3.038 economic impact is a direct result of the studio. The rest is indirect, such as the drycleaners and caterers used by productions, or induced, which includes assumed household spending based on employee's labor income.
Without those indirect and induced impacts, the return on investment is $11.50 for every $1 of film tax credit.
A parade of construction and skilled trades unions have already thrown their support behind the project. They include the Southern Nevada Building Trades Union, which has already signed a project labor agreement for the studio, and Laborers Union Local 872.
Committee members largely stayed away from broader questions about the effectiveness of tax incentives as an economic driver. Instead, they asked the studio heads and lobbyists about the mechanics of the lengthy bill, and they sought details on partnerships or programs the studios would undertake related to education and workforce development.
The bill would require the construction of a vocational studio for use by UNLV and other institutions of higher education and K-12 schools. Investments in workforce development programs would also be required.
'The next Denzel Washington could come from Nevada's students,' added Monroe Moreno.
Sony and Warner Bros leaders said they expect to fully use the campus for their own productions, meaning they would be the companies earning annual $95 million in studio-related tax credits. Both companies are considered part of the 'Big Five' major movie studios.
If greenlit by the Legislature, construction on the studio would begin almost immediately, said Matt Walker, a lobbyist for Howard Hughes, but tax credits would not be given out until the second half of 2028. That start date is notable because it is not within the upcoming fiscal biennium the Legislature is currently budgeting for.
When asked what would happen at the end of the 15 years of tax credits, Walker replied that the state's film tax credit program would snap back to the $10 million annual cap currently in place.
Walker did not mention the possibility of requesting a continuation or expansion, but that has typically been what has happened in states and countries that have introduced incentive programs for the industry.
Critics of corporate tax breaks contend they pit states against one another in 'a race to the bottom.'
Democratic Assemblymember Venicia Considine briefly touched on that sentiment, noting in the hearing that California Gov. Gavin Newsom recently proposed a massive expansion of his state's incentive program, from $330 million annually to $750 million.
'Makes me wonder if some gamesmanship is going on between the states,' she said.
A labor-led initiative 'Keep California Rolling' to support expanding tax credit programs in the state launched the same day as Nevada's hearing and two days after two bills on film tax credits were introduced into the California State Legislature. The Keep California Rolling website states that 'increasing competition from other states and countries, compounded by economic downturns, and devastating natural disasters, have put California's entertainment workforce at risk.'
With a 15-year price tag of up to $1.8 billion, the Summerlin Production Studios project would be the largest public subsidy ever approved by the State of Nevada, topping the $1.25 billion in incentives over 10 years approved for Tesla Motors in 2014.
More recent mega deals approved by the state over the past decade include: $380 million for the Oakland A's to relocate to a new baseball stadium on the Las Vegas Strip, $412 million for a second Tesla facility in Northern Nevada, and $750 million for Allegiant Stadium.
The Nevada State Education Association, which strongly opposed the baseball stadium subsidy and attempted to fight it in court and as a ballot measure, came out in strong opposition to the film tax credit bill, calling it a 'Hollywood handout.' Representatives urged lawmakers to instead focus on funding proposals outlined by the Nevada Commission on School Funding.
The Nevada Policy Research Institute, a libertarian group, testified in opposition, arguing the return investment was poor and noting the state sometimes struggles with properly forecasting the use of transferable tax credits. AB 238 specifies that earned transferable tax credits can be used for broad business tax or for industry-specific ones like the gaming and insurance tax.
One woman, who identified herself only as Stephanie Cruz during opposition testimony, singled out Warner Brothers as being largely known for union busting, shelving projects for tax write offs, and engaging in market manipulation.
'These are parasitic corporations that we should not be inviting, let alone funding,' she said.
Cruz continued to say that the film tax credit proposal would benefit 'Californians trying to flee' their state's higher taxes. They could sell their homes and destabilize the housing market, similar to what many believe happened in Northern Nevada after Tesla's arrival.
At no point in the hourslong Assembly committee Thursday was the dueling film tax credit proposal in the Senate mentioned. Senate Bill 220, sponsored by state Sen. Roberta Lange, was introduced two days after Jauregui's bill last week, would support a film studio called the Nevada Studios Project in the southwest part of the Las Vegas Valley, on land owned by UNLV.
Lange sponsored a film tax credit bill in 2023 which included the Nevada Studios Project and the Summerlin Production Studios, which at the time had only Sony Pictures attached. She has said the two film tax credit bills should be combined.
That bill, which has been referred to the Senate Committee on Revenue and Economic Development, has not been scheduled for a hearing.