Virginia's Own Watchdog Found Three Tax Breaks Losing Money
Summary
Virginia spent $287.5 million between FY15 and FY24 on six tax incentives meant to grow its film, media, and tourism industries. The state's own legislative watchdog ran the numbers and found that three of them -- a film-production tax exemption, a broadcast-and-broadband tax break, and a small airline marketing grant -- actually shrink Virginia's economy once the cost of raising the taxes that fund them is counted.
Three of six, run through the state's own model, come back negative
JLARC contracted the University of Virginia's Weldon Cooper Center to model each incentive's impact using REMI, the same commercial economic-modeling software used across the state's incentive-evaluation series. For the Film, TV, and Audio Production Input Exemption⧉ -- a $20.1 million sales-tax break that lets film productions buy sets, scripts, and equipment tax-free -- the return is 7 cents in state revenue per dollar spent, and "if the impact of raising taxes to pay for the exemption is considered, the exemption results in a small decrease in Virginia ."
The larger media provider equipment exemption⧉ -- a tax break for radio, TV, cable, and, since 2022, broadband equipment -- cost $63.9 million over the decade and nearly doubled to $11.4 million a year after that 2022 expansion. Its return is 4 cents per dollar, and the report states plainly: "when accounting for the forgone revenue to the state of providing the exemption, it results in negative economic activity."
The smallest of the six, the Governor's New Airline Service Incentive Fund⧉, awarded $340,000 in marketing grants to 18 new airline routes at four Virginia airports between FY22 and FY24 (only $231,262 was ever actually paid out, since some routes never launched). The grants ran $5,000 to $25,000 per route -- against gate access and ground-handling fees that, JLARC notes, "can reach $600,000" on their own -- and the approval process, meant to take 45 days, routinely stretched past 140 as it climbed through the Department of Aviation, three state secretaries, and the governor's office. JLARC's verdict: "when accounting for the cost to the state of providing the grant, the program has a negative impact on Virginia and personal income." Stakeholders told JLARC the grant plays "virtually no role" in airline route decisions at all.
View data as table
| Tourism Development Financing Program | 90¢ per $1 | High economic benefit rating |
|---|---|---|
| Governor's Motion Picture Opportunity Fund | 39¢ per $1 | Moderate economic benefit rating |
| Motion Picture Production Tax Credit | 29¢ per $1 | Low economic benefit rating |
| Film, TV, and Audio Production Input Exemption | 7¢ per $1 | Negligible; small net GDP decrease once financing cost is counted |
| Media provider equipment exemption | 4¢ per $1 | Negligible; negative net economic activity once financing cost is counted |
| Governor's New Airline Service Incentive Fund | 3¢ per $1 | Negligible; negative GDP and personal-income impact once financing cost is counted |
The one incentive rated 'high' rests on numbers nobody has verified yet
The best performer in the batch is the Tourism Development Financing Program⧉, which co-finances large tourism projects -- hotels, resorts -- that can't secure full private financing. Virginia committed $94.7 million in debt-service repayment (its one-third share of $284.1 million total, split evenly with localities and developers) across nine projects, which generated more than $1.6 billion in capital investment and roughly 2,100 jobs, combined. Its return -- 90 cents in state revenue per dollar spent, the best of the six -- is real money, but JLARC's own report flags a catch: those figures are "based on projected investments and jobs submitted in applications, not on verified results after projects were completed," because only one of the nine projects has finished its 20-year performance window.
Early evidence already shows projections moving: the Cavalier Hotel & Oceanfront Resorts project's job estimate has been cut twice, from 485 to 350 to 320, and the developer behind the Heron Hotel in Alexandria defaulted on its bonds, at least temporarily, even as the state -- which isn't on the hook for developer debt -- has already paid $7.6 million toward its own share of the program's obligations.
Where the rest went: a film industry that still barely registers nationally
The two remaining incentives -- the film tax credit⧉ ($64.3 million, half of all film-incentive spending, 29 cents returned per dollar) and the Governor's Motion Picture Opportunity Fund grant⧉ ($44.2 million, 39 cents returned per dollar, the best of the three film incentives) -- together with the exemption above pushed $128.6 million into 42 productions since FY15. The tax credit's annual cap has sat at $6.5 million since 2015; adjusted for inflation, JLARC says it would be about $9 million today. Even so, Virginia's film-industry employment, while up 60% since 2015 (faster than the 16% national rate), still accounts for only about 1.1% of the country's film jobs and carries a location quotient of 0.43 against a national average of 1.00 -- well behind Georgia (1.58), New Mexico (1.77), New York (2.55), and California (3.32), the states that built real production hubs on much larger incentive programs.
- Three of six incentives -- $84.2 million, 29% of the decade's total -- come back negative on the state's own model. The film exemption, the media/broadband equipment exemption, and the new-airline-route grant each subtract from Virginia's once the cost of the taxes that fund them is counted.
- The best-performing incentive's numbers are still unverified. The Tourism Development Financing Program's 90-cent return rests on projected outcomes from applications, not completed results -- and the two data points available so far (a job estimate cut by a third, a defaulted developer) both moved the wrong direction.
- Virginia is still a bit player in the industry it's paying to grow. After $128.6 million and a decade of tax credits, grants, and exemptions, Virginia's film industry employs 3,778 people -- 1.1% of the national total, a fraction of what Georgia and New Mexico built with bigger incentive programs.
Figures are drawn from JLARC's Film, Media, and Tourism Incentives (Report 618, June 3, 2026), the 10th in its Economic Development Incentives Evaluation Series, read in full via direct PDF fetch -- including the Summary, Recommendations, all four incentive chapters, and the agency response letters in Appendix L from the Virginia Film Office/Virginia Tourism Corporation, the Department of Aviation, and the Department of Taxation, none of which disputed the report's core return-on-investment or negative-impact findings. An archive.org Save Page Now capture of the direct PDF succeeded the same day. A blind adversarial verifier, working from the primary document alone with no access to this draft, independently checked every itemized fact; see verification.json.
The $84.2 million combined total and 29% share for the three negative-impact incentives, and the 34% Cavalier Hotel job-estimate cut, are this outlet's own arithmetic on the report's own itemized figures (methods and caveats in analysis.json). The report itself does not total the three negative-impact programs together. It also states two slightly different totals for the media provider equipment exemption -- $63.9 million in its summary table (used here, since it reconciles with the report's own $287.5 million six-incentive total) and $64.3 million in its detailed Section 4 narrative -- a roughly $400,000 internal inconsistency we flag rather than resolve.
Sources(2) ▾
- Virginia Joint Legislative Audit and Review Commission (JLARC) -- Report 618, with economic analysis by the University of Virginia's Weldon Cooper Center for Public Service, Film, Media, and Tourism Incentives (Economic Development Incentives Evaluation Series) (2026-06-03) — The primary document: JLARC's 10th in-depth evaluation in its Economic Development Incentives Evaluation Series, this one covering six Virginia tax incentives for film, media, and tourism activity (the Motion Picture Production Tax Credit, the Governor's Motion Picture Opportunity Fund grant, the Film/TV/Audio Production Input Exemption, the Tourism Development Financing Program, the Media Providers Equipment Exemption, and the Governor's New Airline Service Incentive Fund), covering FY15-FY24. Source for every spending figure, economic-impact rating, revenue-return figure, and finding in this article, including the report's own explicit statements that the film exemption, the media provider equipment exemption, and the new airline service grant each produce negative net Virginia or personal-income impact once the cost of funding them is counted. Report is watermarked 'Commission draft' on every page (JLARC's standard notation for reports released alongside the commission meeting at which they are presented) and carries a formal 'Report to the Governor and the General Assembly of Virginia' transmittal dated June 3, 2026; the exposure draft was circulated to and answered by all four named agencies in May 2026, and those response letters are reproduced in Appendix L. jlarc.virginia.gov · original document
- Virginia Joint Legislative Audit and Review Commission (JLARC), JLARC | Film, Media, and Tourism Incentives (report landing page) (2026-07-19) — Confirms Report 618 is JLARC's own publicly posted report and links to the same PDF, summary, and recommendations documents cited above. jlarc.virginia.gov · original document
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Virginia spent $287.5 million between FY15 and FY24⧉ on six tax incentives meant to grow its film, media, and tourism industries -- about 5.5% of everything the state spent on economic-development incentives that decade. The state's own watchdog, the Joint Legislative Audit and Review Commission, ran each incentive through an independent economic model and found that three of the six -- a film-production sales-tax exemption, a broadcast-and-broadband equipment tax break, and a small new-airline-route marketing grant, together costing about $84.2 million -- do not just underperform. Once the model counts the cost of raising the taxes used to fund them, all three actually subtract from Virginia's economy rather than add to it.