Film Industry Incentives Lure Investments To Michigan

September 13, 2008
| By Pete Daly |
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GRAND RAPIDS — Investments are coming in to Michigan in response to the state's film industry incentives, but some local business owners who have actually been involved in movie productions in the past are wary of the new opportunities.

"We're doing one to see if it's something we want," said Dean Horn of Deano's Inc., a sound stage in Plainfield Township where scenes from the feature film "The Steam Experiment" are being shot over 16 days in September. The movie, starring Val Kilmer, is also being shot at the Amway Grand Plaza and other locations downtown.

Horn said he and his wife and business partner, René Anderson, have been in business since 1988. They have extensive experience in television commercials, corporate videos and commercial still photography, but this is the first time their studio has been hired for a feature film production.

Since the film industry incentives were announced in April, he said he has had many inquiries from would-be movie makers, including "a lot of wacky phone calls."

The new laws provide a 40 percent refundable or transferable tax credit for producing films in Michigan. That jumps to 42 percent if the film is shot in a designated "core city," which includes Grand Rapids. The tax credit is applied to the film company's Michigan Business Tax liability, and the remainder of the 40 percent is rebated in cash to the production company by the state. The new laws also provide a 25 percent tax credit for film and digital media infrastructure investments, including such things as construction of studios and purchase of equipment.

According to Terry Stanton of the Michigan Treasury department, in early September the state had 56 incentive agreements — meaning 56 movies — representing $352 million that will ostensibly be spent on movie production in Michigan. The estimated value of all those incentives is about $132 million, said Stanton.

To qualify for the incentive this year, a producer must commit to spending at least $100,000 in Michigan before Jan. 1. The minimum qualifying expenditure required for each year after this is $250,000. The law expires on Sept. 30, 2015.

Anthony Wenson is head of the state government's Michigan Film Office, which processes applications for the movie incentives. The law prohibits incentives for any films containing "obscene matter" or "obscene performances," so each proposed script is carefully reviewed.

Wenson said that as of early September, about four or five of the movies approved for the incentive this year have been completed, another four or five are in production, and the same number are in pre-production. Most of the completed films were shot in the Detroit region.

"I think we could start to get bigger as we start to get our infrastructure and our resources in place," said Wenson.

David O'Malley wants to do just that. A Battle Creek native who now lives in Los Angeles, he is planning to open three studios in Michigan in response to the film incentives laws. His new company, Great Lakes Studios, is negotiating to buy a vacant building in southwest Michigan that he will convert into a studio to lease to production companies. He plans on doing the same in southeast Michigan and is also looking for a building to buy somewhere between Grand Haven and Grand Rapids.

Other investors are building sound stage studios in Lansing and Muskegon for movie and television show productions. O'Malley said some of those are very large plans, adding: “We're trying to get moving a little more quickly by starting a bit smaller."

O'Malley noted that there will be a need for sound stage studios in Michigan because the winter weather here will preclude outdoor shooting. The American film industry began in the New York City region but soon moved to Southern California because the climate there allows year-round outdoor shooting.

O'Malley noted that Grand Rapids is home to Lowing Light & Grip Inc., "the only company on the west side of the state that provides light equipment, grip and electrical equipment, and trucks for production. They're used a lot for commercials and, hopefully, they'll be used a lot more."

David Lowing, owner of Lowing Light & Grip, has been hired to work on some of the special effects shooting for "The Steam Experiment." He has also worked on "In The Woods" (1999), "An Ordinary Killer" (2003), and "Kalamazoo?"

Lowing, who has been in business since 1985 and has four employees, does not have a studio but he does have an 18,000-square-foot warehouse containing about a half million dollars worth of rental equipment.

According to Lowing and Horn, the mainstay of West Michigan film production companies for years has been corporate video productions. Michigan also has had a history of new car commercials shot here for the Big Three automakers, but that work has shrunk in recent years.

"Detroit lost most of that to other climates and different places to shoot," said Lowing.

Now, he said, people in his line of work in Michigan do a variety of things. On Labor Day weekend, for example, he was hired to work with the stage equipment at the big rally in Battle Creek for Barack Obama and Joe Biden.

"This diversification helps us keep our head above water," he said.

As for the new movie industry incentives, "I don't know if it will be a gold rush. If we manage it properly, it will be some regular work for us," he said.

Lowing said the movie incentive’s impact on West Michigan so far is "pretty limited." Most of the impact thus far has been in the Detroit area, he said.

"I have to play it one day at a time," he said. "I'm not sticking a ton of money into things without seeing some business coming along," said Lowing.

Horn said most existing sound stage studios in West Michigan — his included — are small compared to those generally needed for movie productions. The Deano's Inc. sound stage was originally set up as a still photography studio.

As for his business in general, he said, "The last 10 years have been very challenging. We have managed to adapt."

The Wall Street Journal reported in early September that there is a glut of new movies competing to get into theaters in the U.S., and some films with big-name stars never even make the big screen but go straight to DVD. Last year more than 600 feature films made it into theaters in the U.S., up from less than 500 a year a few years ago. At the same time, movie theater attendance is down almost 5 percent compared to one year ago.

Movie financing can be dicey. Horn said payment of his fees for a corporate video is always a certainty but that isn't necessarily the case in a feature film project. As an example, he mentioned that some of the financing for "The Steam Experiment" was coming from Hong Kong.

He said a major flaw in the Michigan film incentives law is that it does not apply to television commercials.

"That's really sad," he said. "That's what most of us are used to making in this market," said Horn.

John Hyatt sums up the movie industry with one word: volatile. The owner of John S. Hyatt & Associates in northwest Grand Rapids, he said he was still trying to figure out the new incentives.

Hyatt has a studio and also provides lighting and other stage equipment, mainly for live theater. He has done a lot of corporate video production over the last 25 years, and some commercials. He has some movie experience, too, having been one of the creators of a 1989 film called "Blind Faith." Now corporate productions are "all that there is around here" and even that has retracted, he said.

Hyatt said he and others in his business have heard a lot about the film industry incentives — including a rumor that the new state law may be amended to trim back the incentives.

"We're not going to walk away from anything we're already doing," he said.

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