WILMINGTON — The status of the North Carolina film incentive, currently without money to make new grants until 2029, is now on the radar of the state’s top leaders, though they have yet to work out a solution.
Gov. Josh Stein and Secretary of Commerce Lee Lilley made an appearance at Wilmington’s Cinespace Studios Tuesday to talk with local industry leaders, along with elected leaders Rep. Deb Butler (D-New Hanover), Mayor Bill Saffo and school board member and House of Representatives candidate Tim Merrick.
“In the budget this year, there was some language that neither the secretary nor I requested that changed the way that the program operated, so that it’s only based on a certain dollar amount per year,” Gov. Stein said. “But that’s just not the way the industry works. The industry doesn’t operate on a fiscal year basis the same as the state.”
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ALSO: NC film grant incentive allocated $15M, likely won’t fund new production grants
Port City Daily asked Stein and Lilley to clarify what language existed in the budget; Lilley clarified the Department of Commerce, which oversees the distribution of film grants, submits a study to the General Assembly on projections for the film program, but this study was not reflected in the budget this year.
Additionally, Lilley said the General Assembly’s budget team instructed commerce to run the program in line with strict annual appropriations.
Port City Daily asked the secretary what he would need to go back to operating as it did before the budget.
The answer: both House Speaker Destin Hall and Senate President Pro Tempore Phil Berger would need to grant permission for commerce to return to the old system.
Over the last few weeks, Port City Daily has been talking with or attempting to reach legislators, state staffers and industry insiders, including Hall and Berger, both of whom did not respond to Port City Daily’s request.
The goal has been to understand how the film program reached the current situation, where the department is unable to make new grants until 2029, as well as what can be done to open the state back up to grants.
Of those who Port City Daily interviewed, no one has been able to provide a definitive answer on whether more funding or changes are coming. What’s resulted has been a lot of finger pointing, including from the governor and secretary on Tuesday.
How the film grant and rebate program works
The North Carolina General Assembly allocates $31 million a year to the film incentive, with unused funds rolling over as surplus. It operates as a grant program; the Department of Commerce approves productions before they begin filming, but disburses funds only after filming completes and the production submits an audit of qualifying expenses.
Nearly everyone Port City Daily has spoken to attested the Department of Commerce was told in 2019, when the program became recurring, to run it on a “cash-flow basis,” in line with how the department’s other economic incentives are managed.
Essentially, the department has been allowed to approve grants as they come in, not based on cash available at that time, rather the projected amount the program will have in the account when the payout becomes due — which could be months to years later.
This mode of operation was not explicitly sanctioned in law, thus the department was relying on the interpretation of legislative staff and assurances of lawmakers at the time. In the years since, the operation has failed to cause a problem due to the surplus fund accrued during the Covid-19 pandemic and two industry union strikes.
This year the department hit a snag — the projected amount of funds needed to pay out productions for the current fiscal year was more than the film grant program had in its account. To correct it, the state legislature would have needed to provide more funding — on top of $31 million in recurring appropriations — to shore up this fiscal year’s obligations. According to several sources, the Department of Commerce was told this would happen if it ever overobligated itself.
When the money didn’t come in the initial state budget, and the department learned it had to stop operating the program in a way that led to the overage, the snag turned into a full-blown rupture in the program.
Now, the department is on course to spend the next three fiscal years’ funding allocations toward its $106 million in obligations to productions that have already filmed in the state.
As such, already “The Hunting Wives” announced it would move from Charlotte to film season three in Atlanta. “Outer Banks” creator and Wilmington’s Jonas Pate told Port City Daily last month he is considering moving “Kildare”— the prequel to his popular Netflix show — to South Carolina as well; it would be the second time he has had to relocate from his home state due to legislature decisions. Sources have told Port City Daily additional productions circling the state are also looking elsewhere.
There are three ways to course correct — all of them, either directly or indirectly, involve more money.
The first was outlined by Secretary Lilley on Tuesday. If the Department of Commerce is allowed to return to its former method of operation, it could make new obligations for money they aren’t projected to have for three years. This move will almost certainly require a higher appropriation from the legislature in the future, but when this happens, Lilley can point to Hall and Berger’s sign-off as a commitment.
The second option would be legislation upping the recurring appropriation from $31 million. This would require the legislature to be in session — either through an emergency call or waiting until the next convening in November. In this scenario, the department could end up in the same situation later if the demand for the incentive outpaces additional money available.
A third option would be to overhaul the film grant program and implement a new system. As Port City Daily came to understand through conversations with lawmakers, the current operation can make it hard for the department and North Carolina Film Office to predict when obligations will come due.
But without a fix, the state risks losing all momentum on bringing productions to the state, as well as ruining its reputation among productions companies that can last well past 2029.
How did we get here
Conversations about the film grant began ahead of budget discussions in the North Carolina General Assembly, with both Rep. Ted Davis (R-New Hanover) and Sen. Michael Lee (R-New Hanover) submitting bills.
Davis told Port City Daily he made Lee aware of the legislation he was planning to file, but never heard back from the senator. Lee then filed his own bill the same day.
“No offense to Michael Lee — he doesn’t meet with the movie people like I do. I meet with the local movie studios, the union for the workers, people that are involved in it, and I’ve done this continuously,” Davis said.
Lee did not respond to Port City Daily’s request for an interview about the film program. However, at the Greater Wilmington Business Journal’s Sept. 3 Power Breakfast, Lee said the shortage of funds is due to mismanagement of the grant program.
Both Lee and Davis’ bills include changes to film incentive’s enhancements that would eventually make it into the state budget. The language increases the reimbursement ceiling from $7 million to $20 million for a feature-length film and $15 million to $25 million for a single television season. Highly compensated individuals, i.e. big name talent, also saw a cap increase from $1 million to $4 million.
Lee’s legislation also removed language barring game shows from eligibility and included provisions for the micro-budget incentives, both of which made it into the final budget.
Neither bill included additional money for the film grant, either in an increase to the annual allocation — which would allow the Department of Commerce more room for new grants — or in stop-gap funding to ensure all projected obligations coming due this year would be covered.
After additional conversations with industry leaders and lawmakers, Davis said his bill was combined with Lee’s and sent to the appropriations committee in both chambers.
The legislation was then shared with Rep. Donny Lambeth (R-Forsyth County), one of the chairs of the appropriations committee, for consideration in the 2026 budget.
Lambeth told Port City Daily the film industry is outside his area of expertise, but Winston-Salem has become a small hub for productions in recent years and Forsyth County is also home to the North Carolina School for the Arts. Thus, he’s a supporter of the film incentive, but has become involved with the inner workings of the grant from a fiscal responsibility standpoint.
“When we started doing the budget, the staff told us, basically, the film account was in a negative balance,” Lambeth said. “In other words, they had obligated and spent more money on film companies than money that was in the account.”
Lambeth said this came as a surprise because the program had been in a surplus for several years prior.
Slowdowns from the Covid-19 pandemic and two industry strikes prevented the Department of Commerce from disbursing the full $31 million each year, to the point where some lawmakers wanted to adjust down its annual allocation, according to Davis. Davis said he contacted Tim Moore, the former House speaker who Davis described as supportive of his initiatives, and the downsizing effort was halted.
After the combined bill was delivered to Lambeth, Davis said Neal Inman, Speaker Destin Hall’s chief of staff at the time, got involved in negotiations. Inman is now Hall’s campaign adviser. Davis told Port City Daily, at this point, he had not been contacted directly by Hall nor Berger about the film incentive, despite ongoing budget discussions.
An email obtained by Port City Daily shows Inman telling Davis the budget will include language lifting enhancement caps, yet “previously proposed changes to the structure of the program have been removed.”
Based on Inman’s involvement in negotiating the incentive changes, Davis surmised Inman could have been the one to flag problems with the film program’s deficit, causing the Department of Commerce to clam up on issuing new grants. Davis was clear he had no direct proof of this; however, Secretary Lilley said Tuesday the “General Assembly budget team” gave him instructions to change the department’s ways.
In a statement to Port City Daily, Inman said he actually did the opposite.
“My email to Rep. Davis confirmed that the legislature would not be adopting a suggestion from central staff that would have statutorily changed how the state cash flows film grants,” Inman said.
He continued by saying Speaker Hall had no desire to change the program without careful thought and consideration first.
“I don’t know why the Department of Commerce has now decided to act as if that removed provision had become law,” Inman said.
Lambeth affirmed he believed legislative staff raised flags about the status of the film grant. Though he couldn’t ascertain whether they proposed language to mandate the Department of Commerce stop operating on a cash flow basis, he said it would not be unusual for them to do so.
Port City Daily asked Director of Legislative Analysis Kara McCraw about how the language Inman referenced and allegedly removed from the bill made it in there in the first place.
“The work done by legislative staff at the request of a legislator is required by law to be kept confidential unless the legislator chooses to waive that confidentiality under Article 17 of Chapter 120 of the General Statutes,” she wrote in an email. “As a result, legislative staff would be unable to discuss your questions. The best resource would be the members involved in the legislation.”
While Lee did not respond to repeated Port City Daily correspondence, Davis said he was unaware of the language. Lambeth said Davis and Lee were largely outside of negotiations after submitting initial legislation, as is typical.
Sen. Lee did secure an additional $15 million in a technical corrections bill, a follow-up to the budget to make adjustments to the budget’s 600 pages of appropriations.
However, Lee previously told Port City Daily this money will shore up the film program’s obligations this fiscal year and then go toward paying down the $106 million in current obligations.
Moving forward
Ahead of Tuesday’s press conference, Davis told Port City Daily he was trying to spur conversation among top leaders to find a solution that will at least let the Department of Commerce approve new grants while the legislature works on a permanent fix.
When Port City Daily initially spoke with Davis on Sept. 3, the legislator said he made a call to the governor’s office and was awaiting a reply. He followed up a few days later noting he had spoken at length with the governor, as well as Speaker Hall.
Davis said Hall instructed him to have the governor call and he would “be glad to discuss” it with Stein; he then sent Stein a text, who replied he would call Hall.
On Tuesday, Stein said he has spoken with “leadership in both chambers.”
Lilley said it is the General Assembly’s decision on how it wants the program to operate, but ultimately more money is needed to stay competitive with other states.
“We want to make sure that it is a sustainable program, that we have the funds to run it, and most importantly, the jobs that are associated with it, producers that are bringing the production here, can count on the program,” Lilley said.
Both Davis and Lambeth told Port City Daily they would like to see more oversight of the Department of Commerce’s operation of the program, promoting specific accounting requirements and mandatory summary reports to the legislature.
Lambeth said he would promote a system similar to how the state funds capital projects.
“Let’s just say there’s an N.C. State project and capital might take seven years to tear down and build a new building,” he said. “We know every year how much is obligated, how much has been spent to date, and how much is to be spent in future out years, so we’re constantly monitoring those things, and that’s what we need, in my opinion, on film because it’s it’s gotten large enough and more complicated, and nobody really has their eye on that financial ball.”
However, film financing is more fickle.
Unlike capital projects whose costs can be equally spread across multiple fiscal years, film disbursements are awarded at one time.
Additionally, the film program’s two-part process makes it difficult to predict when disbursement might come due. It’s also difficult to pin down exactly how much the payout will be when the grant is approved, versus when it comes back after audit.
Right now, productions apply for a film grant by submitting budgets to ensure they qualify for the incentive. Usually, productions reach out to the North Carolina Film Office, which then works with the commerce department on funding availability.
The Department of Commerce can then quantify the maximum amount a production is eligible to receive when it finishes its shoot; it is not until the production audit is submitted that the exact payout is known. Thus, the department’s $106 million in obligations reflect the maximum amounts and could be lower upon audit completions.
After a production wraps, there is no hard timeline for a production to submit an audit to the state. Timing varies by production and is dependent on items like the shoot days, number of expenses and speed at which some auditors operate versus others.
Theoretically, if a production wrapped today, it could submit an audit by the end of the June 2027 fiscal year, where a certain amount in the funding pot is available. However, even a month can make a difference; if the same production submitted the audit in July there would be a different funding amount available due to the new fiscal year starting in July 2027.
For example, a production eligible for $20 million could, depending on audit submittal, overextend the account in fiscal year A with only $10 million remaining, while being fully covered in fiscal year B, where at least a full $31-million is available.
The Department of Commerce could then choose to approve the production, betting on it coming due in fiscal year B or the General Assembly to allocate more money if it comes due in fiscal year A.
The other choice would be playing it safe. If the department senses the fiscal year 18 months from now has almost reached its cap, it could turn away productions temporarily until the approvals would be projected out of the next funding bucket.
The Department of Commerce does have the discretion to turn away productions, even if enough funding is available, but saying no to studios — either all of them now or one or two occasionally over the years — runs the risk of damaging the state’s ability to keep attracting the industry.
This current conundrum is why Davis prefers the state’s former rebate system. From 2000 to 2014, North Carolina operated a 25% refund to all productions that turned in a clean audit — no pre-approval and no overall budget limit involved, though individual productions were capped at certain refund amounts, such as TV at $15 million and film at $7 million.
Davis told Port City Daily he tried to save the refund program as it was expiring and initially received enough support to get a favorable report in committee, though those supporters ended up tanking the proposal.
However, Davis is leaving office in November and the General Assembly isn’t scheduled to be in session again until then. Thus, Davis will pass the film advocacy baton to his successor, either New Hanover County Commissioner Dane Scalise, the Republican candidate, or Merrick.
Davis said he has been working with Scalise on the issue; he said he believes Scalise has spoken with Speaker Hall on the matter. Scalise did not return Port City Daily’s request for comment.
Merrick was at the governor’s event Tuesday and told Port City Daily the industry needs immediate short-term funding to keep studios active in the state; it also needs long-term stability and flexibility from the General Assembly. He also pointed out he’s been endorsed by the AFL/CIO, which include the local film union IATSE 491.
“If the General Assembly can spend half a billion dollars each year on school vouchers, which have not proven to help our economy grow, certainly we can afford to invest in film incentives that bring high paying jobs and tourism to our state,” Merrick said.
Lee has remained silent on whether he will support additional money or changes to the film grant program.
Lambeth would support allocating more money to the film grant, either through eliminating the cap or increasing the recurring distribution, especially in light of the recent raises to enhancements, which depletes the money quicker. Under the new caps, one season of television at $25 million would wipe out more than half the annual allocation of $31 million.
Lambeth also pointed to the financial impact of the film industry on the state — and not just the $185 million in direct economic benefit productions generated in 2025. It provides indirect tourism that can be unaccounted for, such as through “One Tree Hill” conventions held annually in Wilmington. Films and TV essentially act as living billboards for the municipalities they’re filmed in.
Lambeth said he was inspired to visit the area after seeing the 1991 film “Sleeping with the Enemy,” filmed in Bald Head Island, Fort Fisher, Wrightsville Beach and other locations in the Cape Fear.
“I believe that there are many people who see parts of North Carolina, whether it’s in Asheville or whether it’s other parts of the coast, the Outer Banks, and I do believe that those people decide that they’re going to come and visit or spend time in North Carolina because of something they saw in a in a movie that they watched, and it’s hard to quantify,” Lambeth said.
When asked his sense of the appetite to change the incentive, Lambeth doesn’t think there is a large enough amount among the whole legislature; thus, supporters have word to demonstrate the importance of changing the grant.
“There needs to be a core group of legislative leaders that will help educate the members and work toward trying to show what the payback and the benefits of growing the film industry,” Lambeth said.
As for the governor, he said he is working to find a compromise with the legislature.
“I think at this point we feel comfortable with the 25% rebate … I think what industry just wants is security, the comfort, the knowledge that they know that the program will be here this year, next year, in the year later,” Stein said. “Because with some of these TV shows, they can go on for multiple years, and that’s what we want in North Carolina.”
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