A still from Atlantis Down, a film that received public funds from Virginia.

Ethan Marten's history in the Virginia film industry goes back a quarter century, when his family moved down here from New York City, where he was born and raised, and built a movie production studio in Suffolk. Gov. Gerald Baliles came out for the ribbon cutting, and Atlantic Studios got at least one major Hollywood client — Navy Seals starring Charlie Sheen — but the company stayed afloat for only a couple of years, collapsing as a result of the savings and loan crisis.

Marten stuck around, though, and now, as the director of business development for London-based MaXam Productions, he's still finding ways to get films made in his adopted home state. "We were going to be shooting in California, in Hollywood," says Marten about sci-fi thriller Atlantis Down, for which he's the executive producer, "but it's very important to me to build the film industry in Virginia, because I think we have an incredible infrastructure and great untapped potential."

It also helped that Virginia was offering him money to shoot there: $15,000, for a film with a budget under $1 million. "It's not that big of a chunk, but then again, it's money that didn't have to go into [publicity and advertising]," says the Virginia Beach resident. "Fifteen thousand is still fifteen thousand."

The amount of money films like Atlantis Down get from the state is likely to increase with Gov. Bob McDonnell's signing, in June, of legislation creating a film tax credit program. The law, which takes effect in January, is funded with $2.5 million over the first two years, then $5 million in subsequent bienniums. McDonnell, a Republican, also increased the state's existing film incentive fund, which provides rebates rather than tax credits, from $200,000 to $2 million for the current fiscal year.

"It's safe to say that we have moved in a very positive direction in terms of budgets," says Marten.

Maryland, meanwhile, has been moving in the opposite direction. The state's film incentive program, which provides rebates, began in fiscal year 2006 with $4 million and increased to nearly $7 million for the subsequent two fiscal years. But this fiscal year, like the last, the program is funded with just $1 million — an amount that gubernatorial candidate Robert Ehrlich has pledged to raise to $7 million.

Atlantis Down director Max Bartoli, left, and
executive producer Ethan Marten. (Publicity photo)

And in D.C., the situation is even more dire, owing in part to an annual budget that's roughly a third of Maryland and Virginia's. Its incentive fund, also based on rebates, was established in 2007 and funded with $1.6 million. Of that, $183,606 went to State of Play in 2008 and $1.4 million to How Do You Know in 2009, though the latter film received an additional $600,000 from "a separate fund available to the mayor to target economic development priorities," writes Josh Friedman, spokesman for D.C.'s film office. The fund has been ignored by the District Council since then and currently has just $16,394 in it, according to the office of the chief financial officer.

According to the National Conference of State Legislatures, 45 states have film incentive programs of one kind or another, but is it even worth spending taxpayer dollars on movie productions? State film offices have long claimed that the investment is well worth it. The Virginia Film Office points to a 2005 study [pdf] by Virginia Commonwealth University which concludes that the $10 million in public money spent on film productions had an impact approaching $30 million. But Robert Tannenwald, a senior fellow at the Center on Budget and Policy Priorities, a think tank in D.C., says film incentives are "big bucks, low bang," citing a Massachusetts Department of Revenue report [pdf] that shows many states only making back a fraction of their investment.

"The amount of jobs you get per tax dollar spent is very low," says Tannenwald, who's working on a report himself. "The legislators have gotten caught up in the heat of competition."

That competition began within the past 10 years, as increased film incentives in Canada drew productions north of the border, and has become rabid in the last few years, with states doling out tens of millions of dollars a year to films and sometimes, as in Michigan's case, not even capping the annual amount they can spend. The result: Producers are less interested in finding the best location for their film than securing the most public dollars for it.

"It's a continuing process, so once you're on the bandwagon, you're on it," says Terry Stroud, chairman of the Virginia Production Alliance, which lobbied for the tax credit legislation. But other states' funds dwarf Virginia's: "My read is that, with the incentives in Massachusetts or Louisiana or Michigan, I can't imagine why a big film would come here for what our incentives are."

Tom Trigo, a location manager in the region, agrees. "Certainly other states have offered up a lot — some would say they're giving up the store," he says. "Virginia and Maryland, they're not even close to that kind of money." Hollywood studios, he adds, aren't "going to blink" at an incentive fund as small as Virginia's.

Mary Nelson, spokeswoman for the Virginia Film Office, doesn't dispute any of this. "We're not going to be bringing in the huge budget films with incentives like that," she says, "We're not talking about a lot of movie stars, but we're talking about a lot of people generating a lot of income."

In other words, Virginia is less interested in reeling in the occasional, flashy production — like, say, Transformers 3 — than in funding a number of smaller films, thereby laying the groundwork for a stable independent film community that will pay dividends, both economically and artistically, into the future.

And it seems to be working. Erica Arvold, a producer for House Hunting, a sub-$250,000 film that received $8,000 from Virginia, says, "Any amount helps, even a dollar." She moved to Charlottesville from L.A. six years ago, and has been busy ever since — "busier than I thought I could be in Charlottesville." According to Arvold, there's a strong crew base in the area, from cinematographers to cameramen to wardrobe designers. Now, with the increased incentives, it's no longer Hollywood or bust for local filmmakers.

"I think with the film incentives, it really helps," she says. "Not only can we attract moderate-level budgets to the state, but I think it will really help filmmakers in the state and students graduating. I think it can help them realize they can start their careers here, and they don't have to go to L.A."