“Variations on a windows theme,” near the Ford Foundation in New York City | Photo: O Palsson via Flikr (Creative Commons)

Among major foundations, impact investment is gathering new steam. The Ford Foundation announced it will commit up to $1 billion over the next ten years toward mission-related investments, the biggest commitment of its kind by a private foundation, in an effort to use part of its $12 billion endowment to impact social conditions. Initial investments will focus on poverty-reduction goals such as affordable housing and access to financial services in emerging markets. Ford is the highest-profile of a number of recent wins for impact investing advocates; in the last several months, the F.B. Heron Foundation achieved 100 percent of its mission goal for anti-poverty investments and is now committed to more “connective investing”; and the Nathan Cummings Foundation has brought in two new experts to guide its own impact investing. Though these developments are in alignment with data showing a steady rise in impact investing, it remains to be seen whether other big foundations will follow Ford’s lead. The arts have been relative latecomers to the impact investing party (perhaps because of slow returns on investments in the arts sector), but the heretofore lonely efforts of UpStart Co-Lab and Artspace have recently been joined by Fractured Atlas, whose CEO Adam Huttler recently announced a don’t-call-it-a-sabbatical to focus on the Exponential Creativity Fund, a $10–20 million venture capital initiative funding entrepreneurs who are using exponential technologies to enhance human creativity.

Culture UK extends arts participation to the small screen. The United Kingdom’s four arts councils – Arts Council England, the Arts Council of Northern Ireland, the Arts Council of Wales, and Creative Scotland – have partnered with the BBC for a $4 million initiative to commission and broadcast arts events on the network and online. The partnership will also produce three live arts festivals per year, each based on a common theme. This year highlights poetry and opera, with a TV adaptation of the Brexit-themed “My Country; a Work in Progress” at the forefront, and works celebrating the centennial of women’s suffrage planned for 2018. It may be a strategic move for Culture UK to focus on British themes while pushing equal representation across the four countries; the BBC faces new regulatory oversight from the UK government in response to complaints among pro-Brexit conservatives about the network’s alleged impartiality and commercial interests. Meanwhile arts organizations – who were predominantly opposed to Brexit last summer – laud Culture UK’s increased channels of access to arts participation for folks who may not otherwise have opportunities to take part.

European museums pressured to present nationalist versions of history. This spring, the highly anticipated opening of Poland’s Museum of the Second World War in Gdansk was closely followed by news that courts had given a green light to the right-wing government to take control of the museum, which culture minister Piotr Glinski claims will be merged with a not-yet-built museum focused on the Polish perspective of the war. Many see the merger, which included the ousting of director Pawel Machcewicz, as an attempt to shape the historical narrative to center on Polish citizens under the nationalist Law and Justice Party. Meanwhile in nearby Turkey, president Recep Tayyip Erdoğan plans a museum dedicated to the failed 2016 coup that resulted in at least 240 deaths. The focus of the proposed $2.7 million museum: the “martyrs and warriors” who defended the attempted overthrow of Erdoğan’s increasingly authoritarian regime. The move coincides with Erdoğan’s recent (and contested) narrow victory in a national referendum granting the president new, sweeping constitutional powers.

Amazon grows its translation business. AmazonCrossing, an arm of the online behemoth, was responsible for 10 percent of English prose translations in 2016 – with an announced infusion of $10 million over five years – marking a spike in translation services since the initiative launched in 2010. Relying on the huge amazon.com database, the service targets titles that are most likely to appeal to general readers than those generated by smaller high-end publishers, helping to fill a niche that many find too expensive to pursue. Thus AmazonCrossing has sparked less criticism than did Amazon’s ventures in brick and mortar bookstores – and in other physical storefronts, further threatening already-weakened department stores and malls. On the flip side of that trend, vacant storefronts and lower rent might represent opportunities for arts organizations to infuse retail therapy with cultural activities above and beyond the mall cineplex.

Tax breaks to boost music and film industries move through the legislative process. A bill supporting Georgia’s music industry has sailed through the state’s legislature with bipartisan support and now awaits Governor Nathan Deal’s signature. The Georgia Music Investment Act aims to generate jobs, attract musicians to the state and keep them there by providing tax breaks for professionals recording albums and film scores, as well as bands who kick off tours in the state; it’s modeled after a similar bill credited with boosting Georgia’s now-booming film industry. In other states, a Montana bill awarding tax credits to filmmakers passed the state’s House of Representatives despite doubts it would make it to the floor, and New York’s statewide Film Production Tax Credit program received a three-year extension, in an effort to ensure that the uptick in TV and movies produced in New York City and across the state continue. Yet for creators, the news is not all positive. Minimum spending limits and increased income tax rates may edge out local artists working on small budgets. And as Createquity reported in February, movie producers chasing incentives are straining Hollywood, with an increasing number of competing locales drawing production out of the U.S. altogether.

MUSICAL CHAIRS / COOL JOBS:

• Rene Rodriguez – the Miami Herald’s last remaining full-time film critic, having covered the genre for the paper since 1995 – recently moved to the paper’s real estate beat.
• Creative placemaking industry leader Jason Schupbach departs the National Endowment for the Arts to head the Design School at Arizona State University’s Herberger Institute for Design and the Arts.
• The Utah Division of Arts & Museums has named a new director, Victoria Panella Bourns, who for 12 years directed arts programming at the Salt Lake County Zoo.
• Australia’s International Federation of Arts Councils and Cultural Agencies (IFACCA) is seeking a new executive director to replace Sarah Gardner, who has filled the seat since the agency’s founding in 2001.
• The William Penn Foundation is in search of a program director for Creative Communities, responsible for leading a grantmaking team focused on arts and cultural organizations, arts education, and public spaces in the city of Philadelphia.

NEW RESEARCH OF NOTE:

• The Art Newspaper’s annual surveys revealed a marked shift toward contemporary art at U.S. museums in recent years, with 44 percent of exhibits emphasizing work produced since 1970, rather than historic shows. And a newly published analysis of every piece of art acquired by the New York Metropolitan Museum of Art categorizes the collection by type, size, country of origin and year acquired. The data came out about the same time the Met announced it was releasing 375,000 images of its artwork for free, unrestricted use under a Creative Commons Zero license.
• Modeled after the carbon footprint, a new project assesses urban spaces to give cities a “creative footprint” as a measure of cultural impact.
• A series of studies by Columbia University indicate that maintaining intercultural romantic relationships can boost creativity. And frequent readers make the best lovers, say the users of the My Bae dating app. Academic research supports the claim, stating reading improves brain function, empathy and reductions in depression and dementia.
• Social dance has a stronger anti-aging effects on cognition than walking or light stretching, according to research out of the University of Illinois at Urbana-Champaign. In a randomized controlled trial, participants in a social dance intervention were the only group that did not experience loss of white matter after six months, despite no apparent cognitive impairment.
• Data from the League of American Orchestras confirms homogeneity among board members and organizational leadership, but notes that orchestras with smaller budgets tend to be more diverse.
• Researchers Christina Starmans, Mark Sheskin, and Paul Bloom say that economic unfairness resulting from inequity bothers people more than inequality itself.
• Artfinder, an online website that sells artwork by independent artists, claims its sales are at a 50/50 balance comparing men and women, while men still dominate sales of high-end art at auction. In the U.S., men also continue to outnumber women in media, though the gender gap is narrowing.
• Evidence suggests a voting bias in Euro-zone song competitions, with voters gravitating toward culturally similar contestants. The same appears to be true for national TV music competitions within a particular country.
• Research indicates that for cultural institutions, dedicated mobile apps may not be worth the investment in terms of visitor usage and satisfaction.
• A case study on non-profit organization The Princess of Asturias Foundation illustrates how nonprofits can efficient despite functioning outside the market.
• Updated data from the Arts & Cultural Production Satellite Account (ACPSA), a collaboration of the National Endowment for the Arts and the U.S. Department of Commerce’s Bureau of Economic Analysis, tracks U.S. arts and culture jobs by state. Meanwhile, Nesta in the U.K. analyzed job postings to identify the skill needs for creative jobs.
• The NEA also summarized research based on the Survey of Public Participation in the Arts (SPPA). The Nation’s Report Card indicates that 63 percent of 8th graders took music classes, and 42 percent took art in schools in 2016, but out-of-school arts activities have trended downward since 2008. Across the pond, a report titled “Every Child: equality and diversity in arts and culture with, by and for children and young people” provides insight about arts participation and the diversity profile of arts and culture in Britain.
• A paper from Southern Methodist University’s National Center for Arts Research indicates that 42 percent of operating expenses at arts organizations are allocated to personnel, with wages growing faster than the pace of inflation between 2011 and 2015. The authors make no claim, however, as to whether or not artists are making a living wage.
• Golden oldies from even numbered decades (1940s, ’60s, and ’80s) are more likely to be favorites among young listeners, according to psychologists at Cornell University.
• If you had any doubts, Nielsen figures confirm that music streaming is still on the rise, up 35.2 percent compared to the first quarter in 2016. The same goes for podcasts, with a 4 percent increase in listeners since just last year, according to an annual report from Edison Research and Triton Digital. Despite the rapidly climbing use of digital technology, data indicates that more young Brits are visiting libraries, though it can’t say whether it’s for books or free wifi for music and podcast streaming.

It’s a crisp spring evening in Philadelphia’s East Passyunk neighborhood, and the avenue is coming alive. Market lights cast a warm glow over a restaurant patio where groups of people dine at picnic tables and a band does a quick sound check on stage. A little further down the block, shops and boutiques begin to close up for the evening, dimming their display window lights as a nearby gallery begins to fill with people out for an opening and a cafe prepares for open mic night. Pedestrians meander the sidewalks and through a small public square, chattering as they pass sandwich boards advertising restaurant week and lampposts plastered with flyers for upcoming film screenings and art shows.  A cyclist darts past a couple hailing a slow moving cab on the narrow street, and a group of twenty-somethings crack open the door of a crowded bar before stepping in.

Summer night on East Passyunk Ave. in Philadelphia. Photo credit: Christopher Woods (Flickr user: ChrisinPhilly5448)

If Passyunk Avenue sounds like a place you would like to be on a Friday evening, you are in good company. Known for their bustling pedestrian-oriented streets, repurposed historic buildings, inviting public spaces, diverse cuisine and retail offerings and the presence of the arts, informal or “Naturally-Occurring Cultural Districts” (NOCD) such as East Passyunk are highly desired by those vying for an apartment in the hippest area in town, budding entrepreneurs seeking space for new venues, not to mention urban planners and policy makers around the country. The term “cultural district” has been used to refer to a variety of different types of urban neighborhood, and there are even some cultural districts in rural areas (note: for the purposes of this post, arts, entertainment, and cultural districts are collectively referred to as cultural districts). NOCDs evolve without any government intervention, which is the ideal scenario from an urban planning and economic development perspective—due to a fortuitous combination of circumstances, a particular neighborhood turns into a hotbed of cultural vitality without any effort or public spending. Indeed, studies have shown that the benefits of successful cultural districts go beyond their nightlife; these areas are often home to ethnically, educationally and economically heterogeneous populations, and also offer residents a variety of services, making them convenient and distinctive places to live and work.

Designating Cultural Districts

Many cultural districts seek to replicate the success of NOCDs through careful planning and policy, with varying degrees of success. Since the 1980s, cities across the country have tried to foster the development of these planned cultural districts in areas that share many characteristics of NOCD, but where cultural life remains somewhat isolated from the rest of a community, or is just beginning to emerge as a significant factor. The idea is that with a little extra help these neighborhoods could turn into the next cultural hotspot. The development of these districts typically begins with identification of a neighborhood’s potential, often through the nomination and application by local stakeholders. If selected, an official designation is awarded, sometimes accompanied by a suite of government incentives targeted specifically at artists and other cultural producers. Usually positioned as economic development strategies, these programs are designed to encourage artists, entrepreneurs, institutions and potential developers to build on and organize around existing arts- and culture-based assets. If successful, the initial effort to designate a district will eventually result in increased tourism, tax revenue and outside investment in the designated areas.

A concert in a vacant lot in the state-designated Station North Arts & Entertainment District in Baltimore. Photo credit: Theresa Keil, courtesy of Station North Arts & Entertainment, Inc.

Mere designation of neighborhood as an officially recognized cultural district can by itself provide several benefits, including:

• Credibility: Though the designation process and standards vary from state to state, designating a cultural district recognizes the arts and cultural resources as defining characteristics of an area. A state-level review process and subsequent designation also lends credibility to this recognition.
• Catalyst and Organizing Principle: Cultural district designation at the state level can function as an organizing principle amongst artists, residents, business owners, and community development professionals to establish cooperation and consensus as a neighborhood undergoes redevelopment or creates a neighborhood vision plan.
• Marketing Potential: Given the cachet of cultural districts, designation can be a powerful marketing tool for a neighborhood undergoing active development. Designation offers the opportunity to change or influence the narrative about a given neighborhood in a positive way, as well as influence future investment.
• Leverage Funding: In addition to some states enabling designated cultural districts access to specific loan funds, state designated cultural districts are uniquely positioned to attract regional and even national funding that might not otherwise be possible in the absence of designation. As an added bonus, the inherently place-based nature of a cultural district draws funding toward defined geographies.
• Formalizing Relationships: Designated cultural districts offer the opportunity to strengthen state and local partnerships, strengthening relationships between agencies at these levels. Depending on the district’s management model, designated cultural districts can also link artists and informal arts collectives and bolster working relationships across the nonprofit, private and public sectors.

There are currently 13 state-designated cultural district programs, with designation criteria and process varying by state. Statewide programs are usually administered by the program’s respective state arts council, or in some cases by a state Main Street program, another economic development strategy that leverages local assets and emphasizes local heritage and historic character in its approach. Management strategies vary at the local level as well: some are volunteer-led organizations, others are fused with a Main Street program or community development corporation, and a few are autonomous nonprofit entities.

Of the 13 states that have designated cultural districts, only five (Iowa, Louisiana, Maryland, New Mexico, and Rhode Island) offer tax incentives for activity occurring within districts. These tax incentives can take the form of income tax exemptions, property tax incentives, sales tax credits or exemptions, preservation tax credits, or admissions & amusement tax exemptions. Other benefits for state designated districts include technical assistance programs or small grants offered directly to organizations, artists or other entities that are either located in designated districts or partner with the districts’ managing body.

A street view of Central Avenue in Albuquerque’s Arts & Cultural District. Photo credit: Kent Kanouse (Flickr user: KentKanouse)

Evaluating State-Designated Cultural District Programs

With the earliest state-designated cultural district programs now more than a decade old, it’s time to ask whether they are working effectively. To date, unfortunately, limited research evaluating state designated cultural districts exists. The National Assembly of State Arts Agencies (NASAA) produced a 2012 overview of state cultural district policy and programs. The topic of cultural districts, designated and not, has also been addressed by Americans for the Arts, and was the focus of a 2013 AFTA preconference.

Several states have attempted to shed some light on the broad impact of their cultural district programs. The Maryland State Arts Council provides a yearly report on the economic and fiscal impacts of its arts & entertainment districts. According to the analysis, which uses the IMPLAN software and input/output methodology, an estimated 5,144 jobs were supported by arts & entertainment districts along with $458.2 million in total state GDP and $38.3 million in total tax revenues.

The Texas Cultural Trust used interviews, case studies, census data and tax records from Texas cultural districts to measure economic impact based on five indicators: population, employment, property tax base, taxable sales, and annual operating budget of the cultural district. The document also attempts to forecast the three-year impact of Texas’s designated cultural districts based on increased marketing and promotion, and changes in property value/property tax base increase.

The Iowa Department of Revenue evaluated its three-tiered state historic preservation tax credit program, one part of which is specifically applicable for the renovation of historic properties in designated cultural and entertainment districts. Using tax credit recipient surveys and Iowa Department of Revenue tax data, the study compares the Iowa historic preservation tax credit to similar programs in other states and evaluates the economic impact. It claims that every dollar awarded in state tax credits leveraged an additional $3.77 in federal and private investment.

Overall, the reports present the presence of a designated cultural district as a benefit and driver of economic development. Data on the number of people taking advantage of the tax incentive programs and the economic impact of these programs is missing from these reports, however, and from other state-designated cultural district programs with yearly reporting mechanisms. While the Iowa report provides an analysis of its historic preservation tax credit, it does not provide an analysis of those used specifically in its cultural and entertainment districts. This may be because certain data is difficult to locate: cultural district income tax benefits for artists, for example, are filed with an individual’s yearly tax forms and are therefore not publicly accessible.

Challenges

If better data on cultural district tax incentives were available, there’s a good chance it would show that the incentives are of little consequence for the artists, organizations, and developers catalyzing revitalization in designated cultural districts. Several sources, including the NASAA policy overview, a Johns Hopkins University report, and anecdotal evidence from conversations with district managers, suggest that even where tax incentives are available, not many people or organizations take advantage of them.

This is likely a function of the limitations of state cultural district incentives. Specifically,

• Stringent definitions of “qualifying artist” and “artistic work” significantly reduce the number of individuals eligible for the incentives. This is particularly true of the income tax and sales tax incentives offered by several state programs. The definitions often require art to be made and sold within district boundaries, which does not reflect contemporary art-making, marketing, and sales practices. “Industry-specific work” such as graphic design or commercial photography does not qualify for most state incentive programs, which prevents many creative professionals from using the incentives.
• Unclear guidelines for administration of incentives make it difficult for comptrollers or other government officials to determine eligibility for the incentives and to administer the programs consistently. In turn, this lack of an established protocol makes it difficult or impossible to use the credits, causing artists to seek alternatives.
• Insignificant amounts of eligible income derived from the sale of art, tickets, or other work that does qualify for the incentives further limit the potential pool of applicants. In a time when many artists derive their primary income from other jobs, proceeds from the sale of work might not meet minimum thresholds for reporting, or might go unclaimed on an annual income tax form due to complicated documentation requirements.
• A lack of promotion highlighting the availability of tax incentives leaves them relatively unknown to the public. Simply put, the existence of cultural district incentives is not widely advertised.

Given the hurdles for using districts’ incentives and the fact that most state programs do not offer incentives at all, it appears the success of cultural districts primarily stems from designation itself and the opportunities to market, program and organize that the designation provides. However, even the components of the programs that do not provide direct financial assistance still require funding and a management structure through which to administer the program. This brings us to another challenge for cultural districts: sustainability.

Regardless of management structure, dedicated staff time is vital to realizing the goals and reaping the benefits of a designated cultural district. Beyond small technical assistance grants, only two states offer operational support for the management of districts at the local level. The minimal funding available for this purpose seems disproportionate to the economic impact that cultural districts are expected to yield.

Perhaps the greatest challenge of cultural districts lies in maintaining affordability for the artists, entrepreneurs, and other longtime residents and businesses of designated districts, ostensibly those catalyzing the economic impact of the neighborhoods. While many NOCDs are celebrated success stories, some, like New York City’s SoHo or Miami’s Wynwood District are criticized for becoming victims of their own success, having experienced rapid commercialization, rising rents and displacement of the artists and longtime residents of the neighborhoods.Policies for state-designated cultural districts do little to consider the long-term sustainability of cultural districts whose “assets” are in large part reliant on individuals who are vulnerable to economic shifts and rising cost of living. Existing cultural district policy does not address issues of affordability, putting the creative clusters that rely on affordable live and workspace options at risk of displacement.

Conclusion

State-designated cultural districts benefit communities across the country, serving as a organizing principle, lending credibility to creative communities at the local level and boosting marketing potential in the neighborhoods in which they are initiated. With some programs now more than a decade old, however, it seems the policy and incentives programs accompanying some of these programs lag behind. While steps are being taken to increase advocacy efforts and expand the applicability and usefulness of these credits, including an expansion of geographic limitations for eligible artists in both Maryland and Rhode Island, progress remains slow. As arts organizations, researchers, and policymakers continue to explore cultural districts and make decisions about the creation of new districts, several key pieces of data need to be added to the equation.

First, data on cultural district tax incentives should be collected and compared to the expectations of policymakers at the time of their creation. Specifically, how many individuals are using the incentives, and how much is being claimed as a benefit of these programs? In addition to providing a clearer picture of the costs and benefits of designated districts, this data would enable more strategic decision-making for promotion of incentives.

Secondly, policymakers and researchers should adjust programs to better support and sustain artists, administrators and organizations. Where incentives for artists and creative professionals are offered, policymakers need to consider how art is marketed and eventually purchased. For example, the relatively recent emergence of Etsy, Kickstarter and other online platforms has changed the way artists and creative professionals seek visibility for their work, network, and sustain their business. Furthermore, increased connectivity between major urban areas makes it common practice to live in one city as a practicing artist and participate in exhibitions in another metropolitan area. Existing policy incentives do not align with these practices.

Finally, cultural district programs need to consider and promote affordability when it comes to residential and work space within districts. Whether at the policy level or local district level, administrators need to consider how to incentivize property owners to continue developing and maintaining safe and affordable studios, galleries, venues and living spaces. Another aspect to consider is adjusting policies and programs to incentivize renters to remain in cultural districts.

At their best, designated cultural districts provide a policy framework that leverages existing creative energy to foster the type of asset-based economic revitalization observed in NOCDs. However, as designated cultural district programs age and additional states create similar programs, it is vital that administrators delve more deeply into the research and evaluation of these programs to monitor the success of these districts, as well as some of their unintended consequences and areas for improvement.

In the recently released federal budget for fiscal year 2015, President Obama proposes a meager increase in allocations for the arts compared to last year. Federally-backed museums will enjoy the bulk of that increase, while funding for NEA and NEH is essentially unchanged after factoring in inflation. Speaking of those agencies, President Obama also announced his plan to appoint William “Bro” Adams as head of the National Endowment for the Humanities. Adams is currently President of Colby College; he is also a member of the Board of Directors of the Maine Film Center and the Maine Public Broadcasting Corporation.

Democratic Congressmen have introduced a revised version of a droit de suite bill that would require payment of royalties to the creators of visual art when it is resold at public auction. The bill, American Royalties Too (ART), is less generous than its stalled predecessor – reducing the rate from 7% to 5% and adding an overall cap of $35,000 – but may gain momentum from a December report from the Copyright Office supporting resale royalties. California’s royalties bill, recently declared unconstitutional in federal court, may offer useful lessons for how not to implement the policy.

STATE AND LOCAL

Tom Finkelpearl, head of the Queens Museum and former director of NYC’s Percent for Art program, will be the city’s next cultural-affairs commissioner. Among his innovations at Queens, Finkelpearl hired a community organizer to build ties between the museum and the borough. Mayor de Blasio used the announcement to wax lyrical about the importance of access and the power of the arts to strengthen neighborhoods; we’ll get a sense of how this translates into arts policy when his capital budget is released in a few weeks.

The city of Atlanta has proposed an ordinance that would make it much more difficult to display public art on private property- or “areas of private property which are visible from the public right of way or other public spaces.”

And how’s this for a nonprofit/for-profit smackdown? Maryland’s General Assembly, eager to keep production of Netflix’s political drama House of Cards in the state, tried to swipe $2.5 million from the state’s arts fund to secure additional tax credits for filming. Lawmakers argued the decision came down to simple economics, claiming the show “contributed $250 million to the economy and 6,000 jobs during the past two seasons.” (Too bad the research on the economic impact of tax incentives for film and TV suggests those benefits are less attractive than they seem.) In the end, the legislators held firm – or maybe they just didn’t have their act together – and now, we’re all waiting to see whether a change of venue is in the cards for House of Cards.

(Update: According to an email newsletter from Americans for the Arts, the $2.5 million did end up getting transferred from the arts fund after all. “Governor O’Malley originally allotted $7 million in his budget proposal, which then grew to $11 million.  The amount proved to not be enough….To raise more money, the General Assembly authorized applying the Special Fund for the Preservation of Cultural Arts, a fund of $2.5 million on reserve for supporting local arts organizations, toward film incentives. The Senate pushed for the amount to be raised to $18.5 million and requested $3 million from the general fund, which the House rejected. The final agreement stood at $15 million.”)

INTERNATIONAL

Lots of news from Britain this time around: Maria Miller, the UK Culture Secretary whom some accused of not being especially interested in culture, has resigned amid a scandal over her expenses. She will be replaced by Sajid Javid, the current Treasury Financial Secretary. As the EU eases copyright law to make it easier to transfer purchased music from one of your personal devices to another, most countries are simultaneously levying a tax on device manufacturers; the money would go to a fund to support young musicians. In Britain, the potential tax is being fought strenuously by manufacturers. Meanwhile, the UK has closed a tax loophole on domestic music, book, and app purchases; the move could raise as much as half a billion dollars, which retailers may pass on to consumers. In more local news, the Mayor of London has released a revised cultural strategy, which includes support for smaller arts organizations and your friendly neighborhood busker.

Italy has pledged to spend €135 million to restore 46 heritage sites in the southern portion of the country, following an earlier distribution of €222 million last September. On the other side of the Adriatic in Athens, the Greeks are not so lucky: their cash-poor government is thinking about selling off public landmarks near the Acropolis to private investors. Protestors have been staging angry demonstrations to tell the pols to leave their built heritage alone.

Good news for Dubai’s 137 million metro riders: now they can add a little culture to their wait.  Thanks to a new public art project launched by the Prime Minister of UAE, four metro stations throughout the city will be transformed into museums.

And the government of South Korea is digging a little deeper into cultural exchange through a new project set to introduce Korean culture into emerging markets around the world. The NEXT Project to Dispatch International Cultural Exchange Experts by Region sends staff abroad as both representatives and students of the host cultures and are responsible for managing each regional Culture Centre.

JUST ABOUT EVERYWHERE

Finally, the entire Anglophone world suddenly seems to be slashing taxes on live performance. New York State passed a theater tax credit to induce Broadway producers to prepare for touring shows upstate. (Producers and tour operators had lobbied for the incentives, which are already offered in states like Illinois, Louisiana, and Rhode Island.) Within days, Senator Charles Schumer proposed a more ambitious national tax rebate of up to $15 million per production – benefits already extended to film and TV. Both initiatives appear to be driven by the Broadway League. Meanwhile, the UK opened a consultation period for its own plan to provide generous credits for live performing arts; the exact policy objectives of the subsidy remain unclear. This last plan opens out into the world: as long as at least a quarter of the expenditures are in Europe, costs may be incurred in any country.

Photo by vancouverfilmschool. Some rights reserved.

About a year ago the New York Times ran a series of articles on corporate tax breaks, complete with a web-accessible database of state tax incentives for businesses. All in all, the Times discovered 1,874 state and local incentive programs that give out a combined $80.4 billion to corporations each year. To put those figures in perspective, the tax breaks doled out by Oklahoma and West Virginia are worth about one third of those states’ entire budgets. Manufacturing is the most highly subsidized industry, receiving about $25.5 billion in tax breaks annually, followed by agriculture and oil, gas, and mining. Fourth on the list? Surprisingly, it’s the motion picture industry, which nets about $1.5 billion in state and local tax credits per year.

What’s behind this $1.5 billion tax rebate for filmmakers? While industries such as agriculture have been subsidized for decades, state and local tax credits for film productions are relatively new. Louisiana was the first state to introduce such an incentive in 1991, and other states were slow to follow suit. Only four states offered incentives to movie producers in 2002, but once the idea caught on it spread like wildfire, and by 2010 forty-four states offered some form of incentive to filmmakers. The specifics vary from state to state, but typically the financial incentives (for which TV productions, industrial videos, commercials and sometimes even video games are eligible) consist of some combination of tax credits, cash rebates, employment rebates, sales tax and lodging exemptions, and fee-free use of shooting locations. In order to qualify, productions must generally satisfy certain conditions, such as spending some percentage of their total budget locally, shooting a certain percentage of the footage in-state, employing a certain quota of local residents, or exceeding a minimum amount of in-state spending. In addition, some states require that the action of the films take place in a local setting or even demand that the film depict their state in a positive light in order to qualify for tax credits.

To be clear, the film industry isn’t supported out of any particular concern for cinematic art, nor are politicians incentivizing the production of films because they think we’d be better off as a society if we had more movies and TV shows to watch. As is the case with many other corporate tax breaks, the main reason for offering tax credits for filmmakers is simply jobs, jobs, jobs. State officials don’t particularly care if a company is making movies, auto parts, or toothpaste—if it has the potential to create a lot of jobs for local residents, officials want those jobs in their legislative district rather than someone else’s. They are willing to dangle tax breaks as bait on the assumption that the jobs created by the firm will bring more money into the local economy than the government will lose by providing the tax break.

So how effective are the tax incentives for film and TV productions in generating jobs and/or revenue? That depends on whom you ask. Or who funds the research you’re looking at.

The ROI of film tax credits

Reports funded by the Motion Picture Association of America (MPAA), the main lobbying arm for the movie industry, consistently show a positive return on investment for state treasuries. For example, a recent study of the New York State Film Production Tax Credit commissioned by MPAA found that “for every $1.00 of credit distributed, the State and City received a combined $2.23 in taxes.” In Florida, a research firm that was hired by MPAA found that $118.7 million in tax credits yielded $140.44 million in 2011/12, for a more modest return of $1.18 to the dollar.

By contrast, a recent report on Louisiana’s Motion Picture Tax Credit by the State Auditor found that the state supported the film industry with $196.8 million in tax credits and only received $27 million in additional taxes in return (about $0.14 for every dollar spent), and the Massachusetts Department of Revenue found its return to be only marginally higher at $0.16 per dollar spent. A 2011 article by the Tax Foundation lists several other studies by state agencies and a few that were funded by MPAA exhibiting the same discrepancies.

How do these studies arrive at such vastly different numbers? To get some insight into this question, we can take a look at two conflicting reports on Massachusetts’ Film Industry Tax Incentives that were published this year: one by the Massachusetts Department of Revenue (mentioned above) and the other by HR&A Advisors for MPAA.

* This is not explicitly reported as the number of jobs created, but is implied by the statement, “Massachusetts motion picture production employment increased 46.1 percent from 1,630 jobs in 2006 [the year the tax incentives were introduced] to 2,380 jobs in 2011.”

As far as I can tell, the disparity, most notably in the estimated economic impact, results primarily from the following differences in the models and their underlying assumptions:

• Opportunity costs: Since the state is required to maintain a balanced budget, the Department of Revenue assumes that any incentives that are provided to the film industry have to be paid for by saving money somewhere else in the budget. So instead of just calculating the positive effect that the tax credits have on creating jobs, their analysis factors in the number of jobs that will be lost in other areas of the state’s budget due to cuts. Of course, these cuts have negative ripple effects throughout the economy just as the newly created jobs have a positive impact. By contrast, the MPAA report only looks at the positive effects of the new jobs that are created.
• Wages paid to non-residents: Both reports acknowledge that some of the jobs that are created by film and television productions in Massachusetts will be held by people whose primary residence is in another state; however, the manner in which the studies correct for that varies considerably. The MPAA report merely exempts “individual employee salaries over $1 million, as it is assumed the majority of these employees are non-residents, so multiplier effects associated with this spending are not realized within the Commonwealth.” The Department of Revenue similarly excludes all payments to recipients earning more than $1 million per production, but in addition it excludes 95% of all other wages paid to non-residents. The rationale is that most of the lodging, food, and incidental expenses for non-resident employees are paid for by the production company, so that only a small portion (estimated at 5%) of the non-resident workers’ paychecks gets spent in-state.
• “New” spending vs. total spending: The Massachusetts Department of Revenue is careful to exclude the production of TV shows and commercials that would have been produced in-state even in the absence of the incentives. This wasn’t of great consequence in 2011 (the latest year included in the study), since $174.6 million of the $176 million spent on TV and movie productions was deemed to be “new” (i.e., induced by the tax credit). However, in 2010 41% of the total film production spending ($29.5 million out of $71.6 million) would have been expected to take place in Massachusetts even if no tax credit had existed. (The large difference between 2010 and 2011 was attributed to the discontinuation of some long-running TV programs that were produced locally). The MPAA study doesn’t factor pre-existing film production into the equation, preferring to attribute all of the current film production activity to the incentive.

Despite the considerable differences between the studies’ findings and their disagreement about whether the incentives produce a net benefit for the state treasury, everyone agrees that the tax credits have a positive impact on the economy. For example, the 2013 audit in Louisiana found that every dollar of film tax credits resulted in $5.40 in economic output. However, that’s not really saying much, since almost any form of government spending is likely to have a positive impact on the economy. The question is how the impact of the tax credits compares to other things the state could have done with the money.

What about those jobs?

As mentioned above, in most cases the objective of these tax incentives isn’t necessarily revenue generation but job creation. Are film tax credits efficient means of creating jobs? One way to consider that question is how many tax dollars are being spent for each job that is created. According to the Department of Revenue, Massachusetts’s taxpayers had to fork out $128,575 in tax credits for each job that was created in the film industry in 2011. Seeing as the median wage for jobs created by the film industry in Massachusetts was $70,657, that doesn’t seem like a very good deal. The state could have employed almost twice as many people at the same income level if it had simply hired those people directly, instead of subsidizing motion picture companies. The picture looks somewhat better if one uses MPAA’s numbers, but it’s still not great. Assuming (generously) that all of the jobs that were created by TV and film productions between 2006 and 2011 can be attributed to the tax incentives, 750 jobs were created in 2011 at a cost of $37.9 million. That comes out to $50,533 in state spending for each new job. So even using MPAA’s more favorable numbers, it seems that the state paid more than two thirds of the wages for the film industry’s new employees.

Film-induced tourism

One factor we haven’t considered yet is the effect that film and television may have on tourism and the public perception of the locations where they are produced. There are certainly a number of cases in which blockbuster films have led to significant increases in tourism, as The Lord of the Rings trilogy did for New Zealand. And once local residents get past the street closures, traffic delays, and general nuisance that come with a major movie shoot, I’m sure many would agree that there’s some excitement in spotting Hollywood celebrities at local restaurants. There’s also some satisfaction to be gained from recognizing familiar landmarks on the big screen when you see movies that were shot in your hometown. In that sense, local film productions may promote a sense of pride in and attachment to a location, so that tax credits could be justified on the basis that they improve the quality of life for local residents. If nothing else, they give them something to talk about.

Both the tourism and public opinion arguments are valid reasons to support tax incentives for movies. It therefore seems appropriate that MPAA includes film-induced tourism in its recent reports on state tax incentives (in Florida and Massachusetts); however, the measurement of this effect remains problematic. Having consulted twelve representatives of Florida’s tourist industry, MPAA figures (conservatively, it claims) that 5% of all tourism in the state can be considered film-induced tourism and can therefore be added to the economic impact of the film tax incentives. The MPAA-commissioned study of Massachusetts’s film tax incentives uses a different methodology that was employed to assess the value of New Zealand’s exposure in the Lord of the Rings and Stockholm’s exposure in the Millennium trilogy. This approach equates each recognizable shot of the location where the film is set with the publicity that is achieved by a 30-second paid advertisement for the destination on primetime television. The cost of purchasing enough airtime on television to reach an equivalent number of viewers is then assumed to be the value of the advertising that the film provides for the location.

However, if tourism is the objective, the tax credits shouldn’t be granted to all movies indiscriminately. Only those that showcase the location prominently and identifiably should be eligible. I wouldn’t doubt that ABC’s Nashville is having a positive effect on the psyche of that city’s residents as well as on tourism and the local economy. As the assistant commissioner of communications and creative services for the Tennessee Department of Economic and Community Development noted, “You’re not only getting the 20-plus episodes per season”: every advertisement and preview for the TV show is essentially advertising Nashville. By contrast, it’s hard to imagine how shooting Homeland in Charlotte, NC, would do much to increase public awareness of North Carolina’s attractions, given that the show is supposed to be taking place in Washington, DC.  Incentive programs that require films to be set in-state and/or depict the location in a positive light make a lot of sense from this perspective (though the latter condition may seem dangerously close to censorship).

So where does that leave us?

In December, the Bureau of Economic Analysis, which among other things is responsible for determining our nation’s Gross Domestic Product, for the first time released a calculation of the economic value of the arts and cultural production in the United States. According to the BEA, arts and culture contributed $504 billion to our GDP in 2011. To put that in perspective, that’s almost twice the $289.9 billion generated by mining (which includes all oil and gas extraction). The motion picture industry alone added $83.2 billion to the US economy, which, believe it or not, is more than the total value added by automobile manufacturing. The motion picture industry has long been touting its economic significance to argue for more favorable tax treatment, and these latest numbers will only bolster its case.

Yet critics of film tax credits claim that these policies do nothing to stimulate the economy and merely pit states against each other in a race to the bottom. Even some people within the movie industry acknowledge that if the tax credits are the only thing that a certain location has going for it, business will likely move somewhere else as soon as the financial incentives are rolled back or some other state offers even bigger tax breaks. Once the states have foregone all tax revenue from movie producers in the rush to compete with other locations, the playing field will once again be even and the industry will settle where it was to begin with—the only difference being that the production companies no longer pay taxes and state budgets are even tighter than before.

I haven’t found any data to indicate whether or not the incentives are increasing due to competition between states, but from a theoretical perspective the race-to-the-bottom argument is compelling. Even if one believes the MPAA studies that show a positive return on the states’ investment, if the states keep raising their tax incentives to compete with their neighbors, the public benefits of attracting motion picture productions will eventually approach zero.

In the material I’ve reviewed for this article, there is little to suggest that the current incentives offered by state and local governments are optimal in any sense. I have yet to come across calculations that show that a certain level of tax incentives creates the greatest number of jobs per tax dollar forgone. So why do some states offer 15% tax rebates while others offer 20%? Are the expected returns really higher in some states than others, justifying the additional investment? Or are the higher tax incentives necessary in states where the conditions for filmmaking are otherwise so poor that no producers would go there if the rates were any lower? Since I haven’t been able to find a convincing rationale for the levels of the tax credits, I assume the levels are indeed set according to inter-state competition, which is consistent with the race to the bottom scenario. If that’s the case, I’d say it’s a poor justification for public spending. (This situation isn’t unique to the motion picture industry, by the way. The same doubts about inter-state competition and the race to the bottom hold true for all sorts of corporate tax breaks that try to bribe corporations into setting up shop – or keeping current plants open – in particular locations.)

So how might we improve the current system of incentivizing film and TV productions? Even if the economic argument offered up by MPAA doesn’t hold—and, personally, I’m inclined to believe the governments’ internal audits that show a net loss for the states—I don’t think one must abandon the idea of incentivizing motion pictures entirely. The system might just need to be improved to target those productions that are likely to generate the greatest public benefits.

The fact is, the current tax credits already target specific types of motion picture productions. Minimum requirements for the production budget and/or the amount of money that is spent in-state are presumably designed to ensure that the tax breaks go to big-budget productions that will employ a lot of people. The large corporations behind those productions are the ones most likely to respond to incentives, moving their operations to whichever state offers the lowest costs, whereas a small film production company in Massachusetts is likely to work in Massachusetts whether or not the state offers any incentive. However, for that same reason one might argue that the large corporations are precisely the wrong place to invest public money: they operate nationally (or internationally) and will fly in people from around the world to work on the production, so relatively few of the jobs created will go to local residents. Furthermore, as soon as another state offers bigger tax rebates, they’ll pack up shop and move there. Any spike in economic activity from a big-budget production coming to town is therefore likely to be short-lived. Wouldn’t it be better to give the tax breaks to smaller firms whose production budgets are too modest to fly in talent from out of state? Those productions might not hire a whole lot of people, but at least the paychecks will be going to local residents, and if the production does well and the company grows, that growth will happen in-state.

The one argument that does work in favor of giving tax breaks to big budget productions is their ability to reach a wide audience and potentially increase tourism or improve public opinion of a certain location. In order to fully endorse this approach, I’d need to see more credible research on the economic value of the exposure that shooting locations receive, preferably coupled with a greater capacity to predict which films are going to have a significant impact in that regard. As tempting as it is to reduce the conversation about film tax credits to a simple thumbs-up or thumbs-down, it would be smarter to consider how to determine which productions to incentivize with tax credits and where such tax expenditures would be wasted. That’s speaking from the perspective of job creation, of course. If the objective were to improve the quality of cinematic art, an entirely different set of selection criteria would be necessary.

The internet just got a little less friendly for pirates. A new “Copyright Alert” system, the product of a voluntary agreement between internet service providers such as Comcast and AT&T, Hollywood movie studios, and major record labels, will inconvenience persistent illicit downloaders first with warnings and then stronger measures such as slowed service. The Future of Music Coalition (consistently the smartest folks in the room when it comes to the arts and copyright issues) is wary but hopeful.

STATE AND LOCAL

Governor Rick Snyder of Michigan is pushing to cut in half the state’s generous subsidy to film producers, which currently gives up to $50 million a year in credits for qualifying expenses to firms that set up shop in the state. Michigan had one of the most aggressive film incentive programs in the country just a few years ago, which attracted such productions as “Gran Torino” and “Up in the Air,” but Snyder has since put on the brakes (even as he supported a rebound last year in the state’s arts council budget).

INTERNATIONAL

My goodness, the stream of news flowing out of the United Kingdom just gets fatter and faster. First, the embattled Arts Council England has a new head in Peter Bazalgette, a former TV executive and chairman of the English National Opera. Local governments continue to cut arts budgets in the face of financial pressures: Newcastle went through with eliminating its £2.5 million culture budget despite intervention from national Labour party leaders, and is attempting to move towards a privatized model instead; Westminster (part of London) has confirmed that it’s cutting its annual £350,000 subsidy out of the picture; and Scotland’s Moray is ditching its more modest £94,000 culture budget. At least Belfast is increasing its local arts support by 27%, to £1.4 million. A survey of UK theater companies suggests that many are cutting back on productions, commissions, and cast sizes due to the cuts, though small sample size should be taken into consideration. In this environment of austerity it’s a great time for university tuition fees to be tripling for artists, but the British government is hoping that the Creative Employment Programme, a rapidly expanding paid apprenticeship system in the creative industries for youths aged 16 to 24, will offer a smooth pipeline for new grads. (Joe Patti has more.)

The combination of the eurozone crisis and austerity policies has decimated Spain’s system of public support for the arts, with funding dropping as much as half since 2009 according to a recent report. The litany of second-order impacts cited in that article includes 100 employees laid off at a single opera house in Barcelona, a cancelled Lucian Freud show at the Museo Nacionale del Prado in Madrid, and a cancelled three-year collaboration between Madrid’s Teatro Real and the Berlin Philharmonic. The Orquestra Girona is down to one concert a year. But depending on who you talk to, there are opportunities lying in wait amidst the upheaval.

Australia’s government is out with a new cultural policy, and Ben Eltham (author of A Cultural Policy Blog) declares it a hit for artists. (Annoying registration required, but it’s free.) The policy commits $236 million in Aussie dollars in mostly new money over five years to various federal arts and culture agencies and programs. The government has also chosen to adopt many of the recommendations made in an independent review of the Australia Council last year, including a controversial proposal to do away with the Council’s discipline-based system of funding. (NEA, take note!) The package even includes $4 million for a “data collection program to inform research for the sector and to  track public value of investment.” More here. And they’re considering a media reform package while they’re at it Down Under.

In other news, Russia may adopt a restrictive rule shutting out small concert promoters, China is considering royalty rights (droit de suite) for visual artists, and UNESCO has pledged to raise an $11 million fund to restore the destruction in Timbuktu, Mali, but at least one observer is skeptical that the money will be used wisely.

FEDERAL

Beyond the official departure of Rocco, it’s been a slow news season at the federal level for the arts. One series of developments, however, has involved the Internet Radio Fairness Act, or IRFA. If you listen to Pandora (as I do), you might have heard advertisements in the fall urging action on this bill, which would lower what Pandora claims are high rates it has to pay to rightsholders in order to broadcast their music. Trouble is, the royalties that artists actually receive from Pandora and other streaming services are already extremely shitty, so as you can imagine artists aren’t a huge fan of this one. After a hearing that didn’t go well for IRFA, the bill is shelved for now – but may be re-introduced under a new name this year.

STATE AND LOCAL

Appropriations season has begun for state arts councils, and we are getting an early look into how things might go this spring through the stories that are developing now. Overall, there’s some of the usual attempts to cut budgets, but they don’t seem to have the same teeth as in previous years. Two years after Kansas temporarily zeroed out the budget for its arts council, a proposal to gradually eliminate funding for the state arts council in neighboring Oklahoma is thankfully dead in the water. In South Carolina, Governor Nikki Haley is trying to mess with the state arts commission yet again, though she has given up on doing away with the agency’s grant budget and only wants to get rid of its staffing (how she expects the grants to get awarded without a staff is anyone’s guess). And the California Arts Council is set to lose about $160,000 per year it was getting from donations via California taxpayers’ tax returns.

Meanwhile, as we know, states support the arts through other means besides direct funding. For years, many states have offered tax credit to lure film studios; now, several are trying to do the same with Broadway productions. Illinois passed a law just over a year ago allowing shows such as the Cyndi Lauper musical “Kinky Boots” to receive a tax credit for previewing in the state before hitting New York. Louisiana and Rhode Island have similar legislation on the books. Now Massachusetts wants in on the act as well, though Jeff Jacoby sees trouble down that road.

On the local front, after a millage (property tax) measure to support public art in Ann Arbor failed in November, the city council has voted to suspend the existing public art program so that it can be retooled, hopefully to allow more flexibility in how the funds are spent. At Oregon Arts Watch, Barry Johnson gives an incredibly in-depth account of how Portland’s more successful ballot initiative came to pass (literally) – a must-read for anyone involved in arts advocacy. And ticket sellers take note: Maryland’s highest court has ruled that Ticketmaster’s annoying service fees amount to scalping – in violation of a Baltimore ordinance outlawing the sale of tickets above their face value.

INTERNATIONAL

Great news coming from Toronto, as a billboard tax that advocates have long sought is now going to be diverted toward the city’s arts funding. The tax will eventually bring in $22.5 million per year, boosting the city’s cultural budget by nearly 50% over current levels. It probably doesn’t hurt that arts funding enjoys overwhelming support in Canada, with 87% of respondents to a recent poll saying that government should place a “moderate amount” to a “great deal” of importance on the arts.

Over in merry England, though, things remain chaotic. Arts Council England’s budget will fall £11.6 million between now and 2015, on top of much more drastic cuts enacted in 2010. Meanwhile, multiple cultural leaders in the UK are under fire from the arts community there, including British Culture Secretary Maria Miller. A backlash against the policies of Creative Scotland got so bad that its head, Andrew Dixon, resigned in disgrace. Through it all, England’s cities are facing crushing budget crises: Somerset has already cut its entire culture budget and Westminster is threatening to do the same. The biggest city to contemplate 100% cuts to arts funding was Newcastle, but shadow culture secretary Harriet Harman has stepped in at the 11th hour to prevent that from happening.

Further afield on the Continent, the Netherlands’ arts scene is reeling from budget cuts totaling €470 million, a huge amount for this tiny country. According to the article, “about 40 of the 120 cultural arts organizations in the country became ineligible for federal grants this year. Some of them have been able to secure financing from other sources, but at least two dozen had to fold at the beginning of the year.” Head-scratching policies include a rule that no more than one dance company can be supported per city, leading to the closure of the country’s premier modern dance group, Dansgroep Amsterdam. But hey, at least a tattooed composer and performing arts professor ran fifth in the presidential election of the country that brought you Vaclav Havel!

Recently, Brazil made headlines by promoting a new government policy that gives workers earning up to five times the minimum wage the equivalent of $25 a month to spend on cultural purchases. Ninety percent of the bill is footed by the employer, with the remaining 10% coming out of the worker’s pocket, so it’s like one of those Groupons where you pay $2.50 for a $25 gift card. (The employer expenses are offset 1:1 by tax credits, so it’s still effectively a government subsidy.) The workers really do get a card, which is controlled so that it can only be spent on cultural purchases. Joe Patti wonders why something like this couldn’t work in the United States, although Maria Vlachou isn’t convinced the measure is solving the right problem. For my part, the idea reminds me of my old proposal for income-sensitive tickets (that I think is perhaps worth a revisit).

Finally, we’d written previously about the ongoing tragedy in Mali as Islamist militants took over much of the northern part of the country, threatening artists and destroying cultural heritage sites. Thanks to France’s military intervention, the rebels were driven out of the ancient city of Timbuktu last month, but not before they set fire to two libraries containing thousands of manuscripts from medieval times. The materials presumed destroyed include an ancient history of West Africa and texts on astronomy, poetry and medicine dating back to 1204. There are lots of items that survived the conflict because they were hidden away from the rebels, but it’s still a terrible loss. Meanwhile,  UNESCO has announced that it will help to rebuild Timbuktu’s destroyed mausoleums using local mud-based materials and the buildings’ original plans.