By Janet Frankston Lorin
Posted June 4rd 2007

NEWARK, New Jersey: Canada could have easily stood in for New Jersey in the new movie, "Gracie."

It doesn't matter that the film is about a New Jersey girl who wants to play soccer on a boys' team, or that part of the story line involves a trip to the famous Jersey shore.

For the right price, Canada can become New Jersey - or any other location, for that matter - thanks to the magic of Hollywood. But New Jersey offered millions in incentives for the film company to shoot in the Garden State.

The "Gracie" courtship illustrates the fierce competition for a piece of the lucrative film and television production business. When a major studio shoots a big budget film on location, that can mean $225,000 per day to the local economy, according to the Motion Picture Association of America. Even a brief shoot creates local jobs and generates waves of positive publicity.

"It isn't surprising that states are doing everything they can to attract film production to their areas because of the impact they can have on the local economy," said Seth Oster, a spokesman for the group. "The movie industry wants to keep production here in this country whenever possible."

Incentives range from breaks on hotel room taxes to actual cash back in a few states. Often the biggest carrot states can offer production companies are breaks from paying state taxes, usually income or corporate business taxes.

For production companies or networks that have permanent facilities in a state, the tax credits can offset their own tax liabilities. But film companies working in the state for a single production can sell their tax credits to companies based in that state.

To land "Gracie," New Jersey forked over a tax credit of more than $1 million, a $1.5 million loan guarantee on a $4.5 million loan - in addition to a $500,000 loan that does not have to be paid back until November 2008.

The independent film's budget was $9.5 million. Andrew Shue, the former "Melrose Place" heartthrob and lead producer for "Gracie," said the producers used the tax credit money to shoot two extra days and pay for music rights for the soundtrack, including a Bruce Springsteen song.

The competition for film and TV production is so heated that some states have gone back to their legislatures a second or third time to sweeten their financial incentive packages, which have become every bit as important as a state's physical environment.

"In the past they would call and say, 'Do you have 1940s general store, a 1930s lighthouse, an ultramodern office building, a Victorian train station?' " said Steven Gorelick, associate director of the New Jersey Motion Picture and Television Commission, referring to production companies.

"Now the location takes a back seat to the economics."

According to the National Conference of State Legislatures, more than three dozen states have some form of incentive for the film or TV industry or are looking to pass them.

One new player is Connecticut, which last year began its 30 percent tax credit program for productions that spend at least $50,000.

Louisiana, which has seen $2 billion in production activity in the past five years, increased its tax credit to 25 percent from 15 percent and offered other incentives, said Chris Stelly, executive director of the state's film commission.

"Other states have had incentive programs, but nothing like we're seeing now," he said.

Last year, New Mexico increased its package to a 25 percent rebate on state taxes. The state legislature has approved three tweaks to the original 2002 law, said Jennifer Schwalenberg, deputy director of the state's film office.

"Everyone's upping the ante every year so we have to stay ahead of the pack," she said.

Not to be outdone, New Jersey - where Thomas Edison invented the first motion picture camera and projector and created the first studio - wants to increase its annual pot of tax credits to $30 million from $10 million.
The Garden State's year-old program offers a 20 percent tax credit, more than its high-profile neighbor, New York, which offers 15 percent.

Producers seeking the New Jersey credit must spend 60 percent of all expenses in the state, less post-production costs.

That requirement disqualified New Jersey's most high-profile TV show, "The Sopranos." It receives incentives from New York, where much of the mob drama is shot on a soundstage in Queens, along with location scenes around Jersey, said a spokeswoman for HBO.

The first film to use the New Jersey credits and appear in theaters is "Gracie," a feel-good soccer tale that opened Friday.

Not everyone is happy, though. State Assemblyman Joe Pennacchio shudders at the idea of increasing New Jersey's incentive pot to $30 million in a state with the nation's highest property taxes and a huge budget deficit.

"Is this a good use of money? They think it's sexy," he said. "But the taxpayers are getting whacked.