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Film industry supporters defend Michigan incentives
Film industry professionals and supporters meeting in Grand Rapids last week defended the current state incentives for films shot in Michigan, on the same day a bill to reduce the incentives was introduced in the Michigan Senate.
"The industry can't mature and grow if we are intentionally limiting the growth, and that's what a cap does," said Ken Droz, communications manager for the Michigan Film Office within the state government.
Droz said the incentives lured film productions to Michigan in 2008, creating jobs here and adding to the state economy, but that whenever caps are mentioned in the news media, movie producers call him virtually the next day to ask why they should come to Michigan if they can't get in on the incentives.
The recently released 2008 report from the Michigan Film Office states that 35 film projects were completed in Michigan last year, resulting in $125 million being spent in Michigan and creating the equivalent of 2,800 jobs. The report also states that as of Feb. 3, the refundable tax credits approved for 2008 total almost $48 million.
The film industry incentives law, which was signed by Gov. Jennifer Granholm in early April last year, provides up to a 42 percent refundable tax credit for qualifying film production costs spent in Michigan. The credit is applied toward the Michigan business tax the production company would owe. The amount above and beyond the tax liability is refunded in cash to the company.
In Lansing Wednesday morning, two bipartisan bills were introduced in the Michigan Senate to cap the state’s total annual film credits, increase the incentives on permanent infrastructure and revitalize in-state production of television commercials, which were not covered by the original law.
“These pro-Michigan reforms will right-size the film credits into a form that the state can afford and that places an emphasis on sustainable, long-term jobs,” said Sen. Nancy Cassis, R-Novi. “We want these jobs to be Michigan jobs, employing Michigan workers. The best way to ensure that our workers will see the benefits is to enhance the incentives to construct permanent production facilities in Michigan and help restore the state as a mecca of commercial production.”
Senate Bill 405 would increase the Infrastructure Film Credit from 25 percent to 30 percent, double the minimum facilities investment requirement from $250,000 to $500,000, and mandate that at least 90 percent of the employees be Michigan residents.
"Michigan’s film incentives have been successful beyond our wildest dreams. But they are also very expensive,” said Sen. Mickey Switalski, D-Roseville. “This legislation will expand some credits and place reasonable limits on others to accommodate our budget. We will still have the most generous incentives in the nation.”
Senate Bill 404 would reduce the current refundable credit from 40 percent (42 percent in core cities) to 35 percent and cap the total amount of credits at $50 million per year. According to an announcement from Cassis, the bill also would add transparency to how the credits are spent, allow television commercials produced in Michigan to be eligible for the credits, and require that 90 percent of the employees on a qualifying production be Michigan residents.
“The emphasis needs to be placed on creating jobs that stay in Michigan and employ Michigan workers,” said Sen. Jud Gilbert, R-Algonac. “It would be unwise for the state to continue opening its checkbook without limits for the film industry.”
At the Press Club of Grand Rapids last week, Droz said that if the movie industry becomes established in Michigan, "down the line, the incentives may not be so necessary to keep them here." But, he said, the film industry doesn't yet know enough about what Michigan has to offer as settings for movies and television programs.
Also at the Press Club event were Deb Havens of the West Michigan Film & Video Alliance and Dori and Hopwood DePree of TicTock Studios in Holland.
Havens said that while the incentives are "terrific" in attracting movie producers to Michigan, the producers still need help in West Michigan to find equipment, studio facilities and temporary employees. She said that is the role of the WMFVA and the West Michigan Film Office, headed by Rick Hert, which promotes shooting locations here.
Several feature films were shot in West Michigan last year in response to the incentives, including "The Steam Experiment" starring Val Kilmer. Another movie production just wrapped up in Grand Rapids in March. A documentary film shot at the Rothbury Music Festival last year and aired on cable television also qualified for the film industry tax credits.
Havens said West Michigan needs to develop more infrastructure — major sound stage studios — to keep those producers returning here. Major new studios are being planned, with assistance from the state of Michigan, in southeast Michigan. The Detroit area previously had a long history of film industry professionals and studios, related to television commercials made by the Big Three automakers.
The DePrees, who are siblings, also helped launch the 10-year-old Waterfront Film Festival in Saugatuck, which is reportedly now one of the five top-rated independent film festivals in the world. Hopwood said it now has an economic impact on West Michigan estimated at $1.6 million. This year the festival runs June 11-14 and will attract movie industry professionals from around the world.
Hopwood DePree has been involved in movie productions for at least 15 years. Last year he shot the feature film "Tug" in West Michigan, which hasn't been released yet.
Since the day the film incentives law was enacted last April, the Deprees have been involved in training crew workers for movie productions, in conjunction with Grand Rapids Community College and other schools in Michigan, including Henry Ford Community College in Dearborn.
Droz said the state law passed last year should not have excluded television commercials, and although they should be added, he told the Press Club the law should be left alone for now to give the movie incentives a chance to grow the industry here in Michigan. Any attempt to change the law now would also invite attempts to cap or "gut" the incentives, he said.
Late last summer, Cassis introduced a bill to cap the total annual film incentive amount but that proposal went nowhere.
Along with the report on 2008, the Michigan Film Office also released a study it had commissioned on the economic impact of the incentives in 2008. The study was completed by the Michigan State University Center for Economic Analysis. (Both are online at the Michigan Film Office Web site.)
While the Film Office says $125 million was spent in Michigan by movie producers, the MSU study says it was $65.4 million. Droz said the MSU study is only including wages paid to Michigan residents, while the Film Office report includes all wages and salaries paid in Michigan, even to non-residents. Droz said non-resident wages and salaries should be counted because "they paid Michigan taxes" on that money.
The MSU study said the movie industry will grow, assuming the incentives remain the same. It predicts movie expenditures of $187 million in Michigan by 2012, which could generate almost 3,000 jobs with total income of $189 million.
The Mackinac Center for Public Policy issued a press release in mid-March, blasting the Michigan Film Office 2008 report. Patrick J. Wright, senior legal analyst for the center, said the Film Office report is "sorely lacking in key information required by state law."
"The Film Office is required to report a breakdown of each film’s production spending on goods, services, salaries and wages," Wright said. "This allows lawmakers to see what kind of economic benefits the films may bring the state and to evaluate the Film Office’s judgment in handing out the law’s generous subsidies and tax credits. The Film Office argues it can’t disclose the figures due to the confidentiality of filmmakers’ budgets, but a reading of the law shows that that objection doesn’t apply here. The statute is very explicit that detailed spending breakdowns have to be in the report."
Wright also questioned the estimated amount of spending in Michigan by movie producers.
"The film incentives are less than a year old," said Rick Hert of the West Michigan Film Office. "What we are trying to do here is build a new industry, new jobs for Michigan. So we have to give it a chance."
Hert said he has "probably 12 to 15 different feature films and projects that are looking at (shooting) in our area." He said one movie project in particular is worth "$20 (million) to $25 million."
"We’ve got our fingers crossed. Right now, we're in second place on their list," he said.