House votes to bring curtain down on film tax incentives
By Kurt Anthony Krug
Legal News
Earlier this month, the House of Representatives voted to pass a bill – HB 4122 – that will end the Michigan film tax incentives 58-51, effective October 1, the beginning of the next fiscal year.
“My motivation for this bill is simply one of fiscal responsibility,” said State Rep. Dan Lauwers, R-Brockway Township, who sponsored the bill. “We have had a great number of tax credits come due this year, which has had a negative effect on our budgeting. It is just common sense that we should not further extend incentives in a new fashion for new projects. My thought is we need to use this $50 million requested for film subsidies in the next budget to pay tax credits already on the books.”
However, House Minority Leader Tim Greimel, D-Auburn Hills, voted to save the incentives. “Since it was created in 2008, the Michigan film incentive program has created thousands of jobs, elevated Michigan’s profile on the international stage, and successfully marketed Michigan as a place where natural beauty meets modern technology and a skilled workforce. It has been a prime example of how the smart use of incentives can grow a state’s economy.
That’s why it makes no sense that the House voted to destroy the program and undo the progress made by Michigan’s film industry,” said Greimel.
By deadline, no exact numbers from the Michigan Film Office were readily available on the incentives’ economic impact on the state of Michigan, but spokesman Frank Provenzano stated the MFO is compiling that information and will make it available in the coming weeks.
He also stated the MFO does not have a position on HB 4122. The MFO acts in accordance with the policy, stipulations, and legal requirements of the governor and the state legislature in whatever course they choose.
He clarified that the incentives “have not ended.” The MFO is actively pursuing its mission of attracting film projects to Michigan and providing services to state-based filmmakers, Provenzano said.
“Please do not mistake the passage of a House bill, which calls for the elimination of incentives, with an actual end of incentives for filmmakers. Please note the passage of a bill in the House is one of many steps before it becomes a law/policy…” said Provenzano.
The fate of the incentives is now in the hands of Gov. Rick Snyder and the Michigan Senate. Snyder has been in favor of eliminating the incentives upon taking office.
It has been a long, bumpy road for the incentives since they were signed into law under 2008’s Michigan Film Production Credit by then-Gov. Jennifer Granholm as part of her economic stimulus plan for Michigan, so hard hit in the economic recession. Initially, the incentives were to provide a 40 percent refundable movie tax credit for production cost spent in the state – 42 percent for movies filmed in any of Michigan’s 103 core communities.
These incentives were considered very generous and many notable movies were filmed in Michigan: 2009’s Gran Torino, starring Clint Eastwood; 2011’s Scream 4, starring Neve Campbell; 2011’s Ides of March, starring George Clooney; 2011’s Real Steel, starring Hugh Jackman; 2013’s Oz: The Great and Powerful, starring James Franco; the third and fourth installments in the Transformers franchise, and more. Two police dramas set in Detroit were also filmed in Detroit – 2010-11’s Detroit 1-8-7 and 2013’s Low Winter Sun. Next year’s much-hyped Batman v. Superman: Dawn of Justice received an incentive of $35 million.
The incentives coincided with the crash of the automotive industry. There was a misconception that they would replace the auto industry, something that Jim Burnstein, who was instrumental in getting the MFPC passed, called “ridiculous.”
“It was never going to replace the auto industry, but would diversify the economy,” said Burnstein, a University of Michigan film professor who wrote 1994’s Renaissance Man starring Danny DeVito. “Michigan is the auto capital of the world, but politicians can’t even agree on how to fix the roads, so [ending the incentives] comes as no surprise.”
In 2011, the film credit was capped at $25 million by Snyder. This had an impact on 1-8-7, which was doing marginally in the ratings. This also forced the creators of Marvel’s The Avengers not to film 2012’s top-grossing movie in Michigan.
In late 2014, the House voted 73-37 to extend the incentives – which were set to expire in 2017 – until the end of 2021 in the hopes of bringing more projects to Michigan. Former Senate Majority Leader Randy Richardville, R-Monroe, championed them But HB 4122 would reverse that. Many representatives are new, having taken office at the start of 2015. In fact, Richardville is no longer in office due to term limits.
Snyder pledged to fund the incentives for $50 million in the 2015-16 budget, but cut $12 million last month when a $325 million budget deficit arose.
“We messed the whole thing up in 2011 when it was capped at $25 million. That created uncertainty, which is going to be a political football – the handwriting was on the wall,” said Burnstein. “You cannot build a stable industry on uncertainty.”
Rep. Kathy Crawford, R-Novi, voted to end the incentives.
“The previous state legislature offered incentives to the film industry, which resulted in Michigan business start-ups, primarily in the tri-county region… I believe that these new companies have made business decisions relying on the current credits,” said Crawford. “There comes a time, however, when these new start-ups must become self-sufficient and it appears that the anticipated growth of the film industry in Michigan has not met expectations.”
Lauwers added: “Any business that receives a 40 percent reimbursement for their business expenses ought to be thriving. Throwing money away to bring filmmakers to Michigan – but not the promised permanent, full-time jobs – is a complete waste of taxpayer money. This is all about fiscal responsibility and using common sense when we spend the money taxpayers entrust to us. From a Michigan budgetary standpoint, for every dollar of taxpayer money we have invested into film subsidies, the state has gotten 10 cents in return. That’s unacceptable.”
Robert Fox, a media teacher at Ann Arbor Huron High School, has always been torn over the incentives. Fox stated the filmmaker in him has loved it from the start and hoped Michigan would become a “hotbed” of Hollywood and independent film production.
“However, another part of me, objectively, always wondered how feasible and economically viable it could be. The incentives were certainly compelling to a production company looking to slash their budget,” explained Fox. “However, if the program was bringing enough money in to not only pay for itself, but to actually pump more money into our economy, then I question its validity.”
He continued: “There was no doubt it was creating jobs and helping a wide range of small, local businesses. Perhaps, over time, once the roots of the industry were firmly planted, it would become a lucrative industry here independent of any incentives. However, there was no guarantee that Hollywood would keep coming back without the incentives and I’m not sure keeping them in place long-term was ever going to pan out. I hoped it would. And I am very sad to see them go away.”
Eric Knop, who served as a production assistant on 1-8-7, was one of those who benefitted.
“The incentives were a great idea that would have succeeded if given the chance. First, they were drastically cut just as things were getting started and now they’re gone,” said Knop. “It’s a shame because the productions really brought a lot of money into the area and many of the crew positions paid very well.”
Snyder stated the incentives will be phased out gradually.
“The governor has stated that we should look at some gradual ramping down rather than just pulling the rug out from under them and I agree,” said Crawford.
Burnstein says the presence of TV and film projects – especially high-profile ones – would have brought much favorable publicity to Detroit, whose resurgence has drawn international attention.
Lindsay Warren, president/CEO of Lindsay Warren Consulting public relations firm, agreed with Burnstein.
“I’m very disappointed in the Michigan House voting down the film incentives. The money invested in that program provided invaluable positive publicity for our state. The Republicans who voted against the incentives do not seem to care about our image,” said Warren, who actively campaigned to save 1-8-7.
Actor/director Timothy Busfield of thirtysomething fame, who lives with his wife/Little House on the Prairie alumna Melissa Gilbert in Howell, is also disappointed.
“While other states such as Georgia and Illinois are exploiting our industry’s excessive spending on film and TV, Michigan will lose out on another opportunity to build business to fill the hole created by the auto industry,” he said. “It won’t stop Melissa and me from moving forward with our plans to shoot TV and film in Michigan, and use the infrastructure so nicely established. We still love our state.”
Burnstein called the end of the incentives a shame.
“It’s a failure of imagination,” he said. “I don’t know what to say about the people who want to kill the incentives, then turn around in the same breath and say they want young people to stay in Michigan… We’ve been written off; that’s a fact.”
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