Mich. film subsidies star in legislative drama

Gary Heinlein
Detroit News Lansing Bureau
Crews film a scene for “Conviction” at the Wayne County Building in March 2009. The movie, which starred Hilary Swank, was set in Boston but shot in Michigan using tax incentives.

The stage is set for more drama over Michigan's future role in the motion picture and digital media industry when lawmakers get back Tuesday from their Thanksgiving recess.

Up for a House vote is a Senate-passed bill streamlining the state's film incentives and standardizing at 25 percent a business tax rebate offered for productions shot here — down from an average of 27 percent now. It also would make permanent the incentives, currently set to end in 2017.

Its director and chief sponsor, Republican Senate Majority Leader Randy Richardville of Monroe, says it's crucial that Michigan remain an attraction for the burgeoning industry and the young people drawn to it through the hand-held video devices they use every day. Michigan competes against 38 other states that offer film incentives.

Opponents include Michigan Chamber of Commerce President and CEO Richard Studley, who would like lawmakers to skip the credits and focus on Gov. Rick Snyder's top priority: Producing another $1.2 billion a year to speed up repairs of Michigan's crumbling roads.

To Studley, the state's film credits are like Hollywood props, an "unnecessary distraction" that could consume precious time better devoted to finding more road money as the clock winds down on the legislative session.

"Now's the time for Republicans and Democrats, business and labor, to come together and finish work on fixing the roads," he said. Failing to do it, Studley added, "would be a terrible missed opportunity" when fuel prices are down and lawmakers can approve the necessary tax increases without facing a looming election.

Richardville, whose film bill sailed last month through the Senate on a 32-4 vote, aims to do both.

"We just need to be competitive," he said. "I've talked to people in the industry; they're looking for quality sets, quality people. We believe that with our workforce, studios, the overall environment here — we can win projects just by being competitive."

The Senate has approved its solution to the road funding conundrum: a bill converting Michigan's flat-rate fuel taxes to a proportional levy starting at 9.5 percent next April and rising to 15.5 percent by 2018. It likely would more than double the 19-cent-a-gallon gasoline and 15-cent-a-gallon diesel fuel tax rates reflected at the pump during that period.

But House Speaker Jase Bolger, R-Marshall, is scripting an alternative that could lead to more legislative wrangling. It gradually would switch state sales tax revenue collected on fuel purchases to road repair use. Most revenue generated by the 6 percent sales tax currently is mandated for schools and municipalities.

Bolger hasn't decided whether to hold a House vote on the film credits bill, said press secretary Ari Adler. It was sent to the House floor Nov. 13 on a 10-8 vote of the House Commerce Committee that illustrated the bipartisan support it will need to pass in the GOP-controlled House. Six Democrats and four Republicans voted yes; eight other GOP members voted no.

Some states end incentives

Like most states, Michigan is trying to sort through conflicting claims and data to decide how much it wants to continue spending on films and in foregone state tax revenue to compete for a chunk of an industry that now extends well beyond traditional movies and television sitcoms.

The state made waves with a 2008 law offering tax subsidies up to 42 percent for in-state production costs, saw Metro Detroit neighborhoods become backdrops in Clint Eastwood's acclaimed "Gran Torino," then dialed back its generosity. It now offers up to 32 percent, depending on how many state residents and facilities are used, and has a $50 million annual limit on film-related tax rebates.

Snyder consistently has proposed setting the annual limit at $25 million, citing a 2011 estimate that Michigan gets a return of 28 cents in tax revenue for every dollar in tax subsidies awarded film productions. Lawmakers have budgeted twice that amount each year — at Richardville's behest.

By contrast, at least seven states — including neighboring Wisconsin and Indiana — have ended their incentive programs or stopped funding for them in the past few years, according to the National Conference of State Legislatures.

Film-related tax write-offs are a handout to billion-dollar media companies by states and Canadian provinces competing against each other, argues Joseph Henchman, vice president of the Washington, D.C., nonpartisan Tax Foundation. In an article, Henchman cites an Ernst & Young finding that Michigan's incentives in 2010 amounted to more than $122,000 for each of the employees in the state's industry.

Added benefits cited

But an Ernst & Young study also found that a multiplier effect boosts economic activity by a six-to-one ratio for each film incentive dollar spent. Bolstered economic activity leads to investment and consumer optimism, film incentive supporters contend.

Number crunchers opposed to film incentives point only to statistics that make them look like a bad bargain, said Joseph Scott Anthony, an industry insider who heads the Media Arts Coalition of West Michigan in Grand Rapids.

"If numbers and studies show no benefit comes out of it, why is the whole world competing for it?" Anthony said. "Look at your iPhone, your iPad or the GoPros (tiny cameras) every kid is strapping to their head at Christmastime. Digital video content is exploding, and somebody is going to produce it."

Republican Rep. Jeff Farrington of Utica, who was among the eight opposition votes in the House Commerce Committee, told The Detroit News he believes movie subsidies "are nothing but a boondoggle." Farrington said he sponsored the 2017 expiration date for them in the current law "because I was afraid of what this was doing."

He charged that Richardville's proposed film credit revisions are intended "to fit one specific film project in Michigan. I don't know the exact film the legislation is written to accommodate, but it is a superheroes film that Toronto is also pursuing."

Actually, said Anthony, several superhero films are in the planning stages and Michigan would have a shot at all of them under the certainty Richardville's proposed changes would offer. Equally important, he said, Michigan has to remain invested in the industry if it wants to keep the generation of kids whose world revolves around video.

The number of movie production jobs in Michigan peaked at 2,177 in 2010, according to the U.S. Bureau of Labor Statistics. About $157 million in movie incentives were approved that same year, the highest amount in the past decade, according to the Michigan Film Office.

Today's youth "will never not think in terms that say everything revolves around a video screen," Anthony said. "Our kids can get those jobs in digital media here or go elsewhere for them."


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Recasting film incentives

Among the proposed changes, Senate Majority Leader Randy Richardville's film bill would:

■Provide a 25 percent business tax rebate on state-certified, in-state direct production and personnel spending compared with a current range up to 32 percent.

■Set aside at least 10 percent of annual state funding for films, documentaries and television series budgeted at less than $15 million each.

■Require productions to employ state residents at ratios beginning at 1-to-1 in October 2017 and rising to 3-to-1 in October 2022.

■Require that Michigan's film office consider, in awarding rebates, whether a company would premiere its production in the state and make film trailers or clips available for use in the Pure Michigan state tourism campaign.

■Make the film incentives permanent, rather than ending Sept. 30, 2017.

Source: Michigan Legislature