La. sweetened pot for EA testing site

• By GARY PERILLOUX
• Advocate business writer
• Published: Aug 22, 2008 - Page: 1A - UPDATED: 12:05 a.m.

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Louisiana had to sweeten the pot at the last minute to lure Electronic Arts to Baton Rouge, a move that cost it another $750,000.

The retention incentive apparently helped fend off fierce competition from another state, but by the time it’s paid — beginning in 2015 or so — the state will have recouped its investment in the digital gaming company, said Stephen Moret, secretary of the state Department of Economic Development.

The EA testing center announced Wednesday is the biggest fish landed so far for Louisiana’s emerging digital media industry. Although it will focus on the development, testing and publishing of video games, it could eventually merge that work with projects in the film business.

Here’s how the estimated $13.6 million in benefits for EA break down:

• $12 million in statutory incentives — meaning they’re set in state law and available to any business that meets the same qualification thresholds. They include digital media tax credits worth 20 percent for each video game developed within a two-year cycle and a 6 percent payroll rebate that applies only to the 20 permanent full-time jobs EA committed to out of a total 220 it expects to hire within two years.
• $750,000 for a retention package that pays at an annual rate of $150,000 in years six through 10 of EA’s presence in Baton Rouge. The retention incentive gets paid only if EA meets its hiring targets. To start, EA has committed to meeting a $5.7 million annual payroll target two years from now.
• $850,000 during the first three years of EA’s operation on the LSU South Campus on GSRI Avenue. About $500,000 will be paid to renovate a 13,000-square-foot space at the South Campus and $350,000 to cover a three-year lease — all cost to be borne primarily by LED, the state economic development department. East Baton Rouge’s city-parish government, however, will pay $100,000 to defray those costs.

What happens in years four through 10 for EA’s office space will become the subject of future negotiations between the state and the company.

Much will depend on EA’s experience here, how successful it is in helping Louisiana recruit other digital media firms and whether enough business is supported by LSU’s AVATAR digital media curriculum and other efforts to grow EA’s seed facility — essentially, a testing center for its sports games — into a full-blown research park of digital development companies.

“This is really, really big,” Moret said. “This company, without question, is at the very top of the list. EA’s decision to come here would be comparable in the film industry to Pixar or The Walt Disney Company coming to build a studio in Louisiana.”

So attractive was the EA facility that Louisiana created the $750,000 retention incentive to fend off a rival state’s offer. That state — neither EA nor LED would identify the competition — offered a 25 percent rebate versus Louisiana’s 20 percent tax credit.

Companies in Louisiana can sell their credits to brokers at a discount up front rather than wait to claim the value in future tax returns, but the net value of the tax credit dips to about 16 percent or 17 percent, Moret said.

That deficit — versus a 25 percent rebate in another state — would have meant EA was giving up about $500,000 a year in pure incentives to come to Louisiana.

“Although we obviously did not completely close the gap with the retention incentive, it was enough to knock the other state out of contention, given that Louisiana was so strong on other dimensions,” Moret said.

LSU’s commitment to the EA project, including the AVATAR curriculum, played heavily in the company’s decision, he said.

“The partnership engagement (with) Louisiana really made the difference,” said Sharon Knight, EA’s senior vice president of central development services.

Based in California, the company has operations in six states, with its largest video game development studios in the Canadian province of British Columbia and in Orlando, Fla.