Michigan-Tax Credits for Movie Makers

Will movie law boost last?



LANSING (AP) -- Six months after Michigan began handing out the nation's most generous moviemaking incentives, results are surpassing lofty expectations.

Studios that had planned to shoot elsewhere turned on a dime and flocked here, bringing stars such as Val Kilmer and Drew Barrymore with them. The number of scripts approved by the state film office is up 20-fold over last year. Hotels, caterers and other businesses are cashing in on new economic activity.

Somerset Inn in Troy hired 15 to 20 extra full-time workers to handle film crews after Clint Eastwood's Malpaso Productions booked office space and close to 90 rooms a night for most of the summer while filming "Gran Torino" across the Detroit area.

The hotel has welcomed smaller crews, too, and has solid leads on more movie industry clients for next year at a time conference hotels are losing dollars because of cutbacks in automotive sales seminars and the poor economy.

"It's incremental business we certainly wouldn't have had if they didn't sign this legislation," said Duane Swanson, Somerset Inn's operations director. "You couldn't ask for a better hotel guest to come in. They're not afraid to spend a buck."

Neither is state government -- to the chagrin of Republican lawmakers who are having second thoughts about the measure signed into law by Democratic Gov. Jennifer Granholm in April.

To entice filmmakers to choose Michigan over other competing states, the Legislature passed bills creating refundable tax credits of up to 42 percent for in-state movie production expenses.

Giving businesses tax credits is nothing new, and such credits can reduce a company's tax bill to little or nothing.

But refundable credits go further. They're more like a rebate for production expenses and can require the state to cut the moviemaker a check.

The Senate Fiscal Agency estimates the state has approved $394 million in production expenses that will cost the government $122 million after accounting for the sales and income tax revenue generated by film crews.

That's six times the increases of up to 2 percent the state gave public universities and community colleges this budget year.

Sen. Jud Gilbert, R-Algonac, said traditional Michigan businesses are paying higher taxes while "we turn around and send a check to somebody from Hollywood, some Pee-wee Herman type. I think that's very hard to justify."

Michigan Chamber of Commerce lobbyist Jim Holcomb said lawmakers should reduce the Michigan Business Tax -- to which a 22 percent surcharge was added to fill a budget deficit -- and "stop handing out unaffordable tax breaks to out-of-state Hollywood filmmakers who are unlikely to make Michigan their permanent business location."

But not every filmmaker is from Hollywood, and there's no doubt the incentives are bringing movie companies and jobs to the economically sluggish state.

Cinepro Pictures Studios was set to film "The Steam Experiment" in Florida because that's where the company is located. But it shot the independently produced thriller in Grand Rapids after hearing about the incentives.

"The decision was purely financial," said Karinne Behr, an executive producer of the movie starring Kilmer and Armand Assante. "Michigan's incentives are definitely the strongest. Hopefully that will be a great success story for the state. It's better to spend the money here than overseas."

Behr said $3 million of the movie's $7 million budget was spent in Michigan.

The Michigan Film Office has approved tax breaks for more than 60 movies this year and next. Just two or three films were made in 2007.

The question, it seems, is whether a truly lasting industry is being hatched in Michigan.

Critics depict the business as fleeting because other states may increase their incentives to keep pace. They say moviemakers like to bring in people from California and elsewhere to make the movies, and add that filmmaking accounts for a minuscule portion of Michigan's overall economy.

But in a state that has shed 479,000 payroll jobs -- 10 percent of its work force -- since state employment peaked in June 2000, anything that brings in jobs and new businesses is seen as a plus by many.

And while the state has nowhere near enough infrastructure to support all the new films, it's further along than Louisiana, New Mexico and Massachusetts were at this point when they began luring the industry, said Anthony Wenson, chief operating officer of the Michigan Film Office.

He pointed out that Michigan once made more commercials and industrial training films than anywhere in the world, and said existing studios are being transformed to welcome the motion picture business.

"Not only are we finding many people getting into the business for the first time but we're also seeing people who left the state to get into the industry moving back into Michigan," he said.

So far, the GOP-controlled Senate has been unable to get enough votes for a bill that would cap film credits at no more than $50 million a year. Granholm, Democrats and some Republicans fiercely oppose the measure and say the bipartisan law approved by all but one of 148 legislators needs time to work, even if it could cost the state.

Job training classes are being held for people interested in the business, and producers qualify for more tax breaks if they hire in-state grips, camera operators and other "below the line" crew.

The film office expects to talk with Michigan State University about potentially developing a film program. Anticipating more work, some smaller sound studios have announced plans to expand.

The state still is awaiting the arrival of big new soundstages that provide more efficient one-stop shopping for the production of movies and TV shows and could allow Michigan moviemaking year-round rather than seasonally.

But Wenson said the state is talking frequently with interested investors.

"The true measure will be two years into this," he said. "It's taken Louisiana almost four years to really pull together ... and be able to say, 'This is a true, viable industry in our state.' Michigan is in this for the long haul."