On Monday December 7, the Albuquerque City Council voted unanimously to approve funding for its contribution to the Netflix $1 Billion massive expansion at Mesa Del Sol. On November 23, it was reported that Netflix will be expanding its presence in New Mexico by more than 10 times as it already exists by adding 300 acres to its existing 30-acre property located at Mesa Del Sol at the South border of the City. Netflex said it intends to make Albuquerque its North American production headquarters. The expansion comes a mere two years after the media giant purchased the ABQ Studios.
New Mexico Economic Development Secretary, Alicia Keyes, said the Netflix deal is going to build an ecosystem and solidify New Mexico as the place to be for film and television. The Netflix expansion will break ground in 2021.
Keyes laid out the New Mexico Film Office’s top priorities for the expansion and said:
“Our priorities for the next few years are really to train our crew base, and make sure that they can upskill so that they’re moving up the ladder within the industry,” she said. “We would like to enroll more small businesses in New Mexico within the vendor program for the state film office where lumber companies, restaurants, glass companies can register themselves in order to service the industry. Also, we need to focus on above the line talent and really how to build an ecosystem so that we’re not only a crew destination, but we’re creating our own content.”
“One part of the deal that we’re really excited about is that Netflix is going to put a trainee center here and also a post-production facility. … “They also will have programs for underrepresented filmmakers—so below the line for the Black, Latino and also Native communities.”
“I think it’s an exciting time for students here in New Mexico, to be able to train and live and work and stay in their state with their families and also be involved in such an amazing thriving industry in which they can be paid well and get benefits. .. I really think that New Mexico is the place to be for film and television now.”
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MASSIVE PHYSICAL EXPANSION AND FINANCIAL INVESTMENT
According to Netflex, in addition to the 300-acre expansion, it will add up to 10 new stages, post-production services, production offices, mills, backlots, and training facilities, wardrobe suites, a commissary to support meals and craft services, and other flex buildings to support productions.
Netflix said the expansion includes job creation over the next 10 years of upwards of 1,000 “project based” production jobs in New Mexico. An additional $1 billion in production spending and $150 million in capital expenditures is expected over the 10 years. The capital investment is expected to create upwards of 1,467 construction jobs needed to complete the expansion of the studios.
The State of New Mexico will be allocating up to $17 million in Local Economic Development Act (LEDA) funding. The city of Albuquerque for its part is committing up to $3 million in local LEDA funding to the project. In the 2018 , Netflix purchase, the company received a total of $14.5 million LEDA funds combined from both the state and city.
According to the State Land office, 130 of the total 300 acres will be leased from the State Land Office. The remaining 170 acreage is private property that will be either purchased or leased by Netflix.
As part of the financing for the expansion, the City of Albuquerque will issue an Industrial Revenue Bond (IRB) to partially abate property and other taxes over a 20-year term for the first $500 million investment by Netflix to build out the production facility.
All the City incentives are pending the approval of the Albuquerque Development Commission and the Albuquerque City Council. The project has been reviewed by the Mesa del Sol Tax Increment Development District Board and it is going before the Albuquerque Development Commission on Monday, November 30. The Albuquerque City Council will review the project during its December 7 regularly scheduled meeting. Once approved by both entities, the funding will be disbursed following “benchmarks” set out in the Public Participation Agreement agreed to by the parties.
The Netflix expansion plan with Local Economic Development Act (LEDA) funding is on the same lines as the deal that occurred in 2018 requiring benchmarks that must be met to secure the city and state funding. In 2019, Netflix reached its benchmark of a $75 million direct spend within nine months. The new expansion agreement calls for Netflix to spend $1 billion over the course of a decade. In addition, Netflix will be adding 1,000 jobs per year.
In the proposed investment deal, Netflix has agreed to provide training programs for crew and production team employee positions in partnership with the New Mexico Film Office, local universities, labor and industry organizations. In partnership with the New Mexico Film Office, Netflix has also committed to supporting New Mexico’s Native American, Latino, Black and other underrepresented groups’ content creators and filmmakers.
Netflix Co-CEO Ted Sarandos had this to say in a statement:
“New Mexico provides an outstanding production and business environment in close proximity to Los Angeles with some of the best crews and creative talent in the world. … The expansion will bring many new high-tech and production jobs to the region, while allowing us to be more nimble than ever in executing production plans for so many series and films enjoyed by our members all over the world, while cementing the status of the region as one of the leading production centers in North America.”
Since 2018, Netflix has filmed “Army of the Dead,” “El Camino,” “Godless,” “Daybreak,” “Chambers” and “Messiah” in New Mexico. It is currently filming “The Harder They Fall” and “Intrusion”. Netflix will soon begin filming season four of “Stranger Things.”
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Governor Michelle Lujan Grisham had this to say about the Netflix expansion:
“My administration has expanded our state’s competitive film incentives, facilitating more opportunities for rural communities and high-wage employment for New Mexicans all across the state. … 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.”
New Mexico State Land Office Commissioner Stephanie Garcia Richard for her part had this to say:
“Netflix’s expansion to state trust land is great news for our state. Because of this partnership, New Mexico will benefit from new jobs and more revenue flowing into communities that become filming location. … Netflix has already been delivering on those promises, but by moving onto state trust land, an estimated $24 million will be going to the University of New Mexico, the beneficiary of the state trust land onto which they will expand their studios.”
Alicia J. Keyes, Secretary of New Mexico Economic Development, acknowledging the pandemic, had this to say:
“This expansion secures New Mexico’s future as the place to make movies. Because of COVID, people and businesses are looking for alternatives outside of big cities. It was important for us to jump off with this expansion. We’re seeing other companies from different industries seeking out New Mexico. … Part of our job is to help local businesses and get through the pandemic. … The other part of our job is the future of New Mexico. We need a secure and diversified economy. We can’t rely on oil and gas, retail and tourism as much. We have to have things like aerospace and film to strike that balance.”
Keyes reference to the aerospace industry is an obvious reference to the Orion development. It was on Thursday, November 12, the City of Albuquerque Environmental Planning Commission approved the new site plan for the “Orion Center.” It is an aerospace and technology facility that will be built on the 122-acre plot of land located between Kirtland Air Force Base and Albuquerque International Sunport. “Group Orion”, the developer, is a subsidiary of Theia Group Inc., a Washington D.C. based, privately held aerospace company. The Theia Group is attempting to develop a network of satellites to digitally image and collect data on the physical world, providing solutions in areas from logistics to biology.
The Orion Center Development is truly and exceptional development using the city property and resources to expand the city’s economy, especially during the time of a pandemic. There is no doubt that the success of the project will fit squarely into the long-term need for the city to expand its economy and recruit in a targeted and expanding global aerospace industry. Surprisingly, the Group Orion has not requested any economic development incentives from the Local Economic Development Act funds.
NEW MEXICO’S EVER-EXPANDING FILM INDUSTRY
Over the last 20 years, the film and television industry has steadily grown and been one of the few bright spots for the state, especially during the great recession, when it comes to economic development and diversifying the state’s economy which is very dependent on federal spending. The New Mexico Film Office reports that in in 2003 the industry had direct spending in New Mexico was $7 million. In fiscal year 2019, direct spending reached a record high of $525.5 million. According to state estimates, Netflix will generate an estimated $344 million in taxes to the state, local school districts, and other local governments.
It was in 2019 that the film industry began to seriously emerge to be one of the biggest hopes for Albuquerque and New Mexico to diversify both the city and states economies. The unmistakable evidence was the immense investment in the city and state by NBC Universal and the Netflix purchase of Albuquerque studios as the site of a new production hub. Both announced NBC and Netflix announced opening film production facilities in Albuquerque.
On June 14, NBC Universal announce it would open a studio in Albuquerque as part of a 10-year venture with Garcia Realty and Development. The media giant took over and renovated and created sound stages at a now vacant industrial building south of I-40 on Commercial Street, north of downtown in the vicinity of historic Martinez town. The media giant is expected to provide more than 330 full-time jobs year-round at the film studio.
NBC Universal employees earn about $58,000 a year which is a far cry from the minimum wage jobs the city is use to announcing with the arrival of new businesses. The studio operation is projected to generate an economic impact of $1.1 billion over a 10-year period.
The state’s Economic Development Department is providing $7.7 million through the Local Economic Development Act (LEDA) to the redevelopment and production commitment. The City of Albuquerque will provide another $3 million from its LEDA fund which was approved by the Albuquerque City Council on June 17, 2019 by a unanimous vote.
On October 8, 2018, it was announced that Netflix was buying Albuquerque Studios. The State contributed $10 million of Local Economic Development Act funds. The City of Albuquerque contributed another $4.5 million of Local Economic Development Funds. Albuquerque beat out other places such as Denver, Salt Lake City, Austin, New York, Georgia and Los Angeles. The Albuquerque site will be Netflix’s first hub purchased in the United States. Albuquerque Studios is an enormous complex that includes 9 sound stages, a backlot and management offices. New Mexico’s other 4 production studios are I-25 Studios, Garson Studios, Santa Fe Studios and Las Cruces Studios as other productions seek studio space for their projects.
Originally it was estimated that at least 1,000 well-paying jobs per year will be created. The jobs will run the gamut of film and TV production work, most of which is project-based contract labor. Many of the jobs are expected to pay $70,000 a year. The purchase deal also calls for $1 billion worth of production spent over 10 years which will have a dramatic effect on the City and State economies.
TAX CREDITS FOR FILM AND TELEVISION PRODUCTION
On March 29, 2019, Governor Michelle Lujan Grisham signed into a law legislation expanding tax credits for film and television productions in a bid to bring more business to New Mexico’s studios as well as its cinematic mesas and small towns. Governor Michelle Lujan had called upon the legislature to abolish the annual $50 million cap on film rebate spending cap, but the legislature instead more than doubled it. The enacted legislation also pays off up to $225 million in tax credits already owed to the film and television industry. The film and television industry has hit the $50 million annual cap on tax credits in recent years, leaving the state with a backlog of $382 million through fiscal year 2023.
The enacted law more than doubled the original cap of $50 million to up to $110 million in in tax credits for film and television productions each year. That cap does not apply to production companies that have purchased or signed a 10-year lease for facilities, like Netflix, which is setting up shop in Albuquerque. The new law also provides an additional 5 percent credit for productions more than 60 miles outside of Bernalillo and Santa Fe counties, a measure that proponents argued would promote the industry in cities like Las Cruces as well as in rural areas of the state. The law also requires the state to collect additional data on how the credits are used.
It was on July1, 2019 that the current film tax incentive package went into effect. It raised the cap on what can be paid to film and TV productions in a single year to $110 million. Film production companies receive a 25% rebate on goods and services expenses for most of their projects in New Mexico. Some TV shows get up to a 30% rebate. An additional 5% tax credit is given to companies that take their film productions to rural areas.
COMMENTARY AND ANALYSIS
The one industry that represents the future of New Mexico and a major hope for expanding New Mexico’s economy is the film industry. Simply put, the film industry creates jobs for New Mexicans. The New Mexico film industry expands each year in large part because of the tax credits. With the incentive subsidies, the State economy will continue to benefit from continued millions in direct spending that will improve the economy. Jobs will also be created in ancillary or supportive industries such as food catering, cleaning and maintenance and security.
With the Nextflix original purchase and now the expansion, the State has a major production and distribution company hub that will produce projects on a consistent time line for 10 to 20 years. Last year alone, the film and TV production industry brought in over $180 million of direct spending to the city and state.
The City and the State need to continue with efforts that will ensure that our education institutions such as the New Mexico Community College continue to offer a trained work force for the film industry. Both the City and the State need to create more incentives to build and guarantee that the industry continues to prosper in New Mexico.
The film industry with both the NBC deal and the Netflix expansion is clearly in the future of Albuquerque and New Mexico. The film industry and the aerospace industry are the best hope at this point in diversifying our economy and wean the state off of federal government reliance. Albuquerque and New Mexico need to pursue with a vengeance the growth industries of healthcare, transportation, the film industry and the aerospace industry to diversify our economy. Public-private partnerships in the growth industries where ever possible should be encouraged and developed.
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