Detroit Free Press Article

Alternatives to movie incentives aim to keep Michigan competitive

With the end of tax credits that spawned a growing Michigan film industry, new state incentives -- beyond the $25 million in direct subsidies approved for 2012 -- are a long shot for the near future.

But advocates of incentives, who say $25 million isn't enough to keep Michigan in the highly competitive game, aren't giving up.

Here are some possible scenarios:

• The $25-million direct subsidy could become the norm, and major productions such as "Oz" take Michigan off their possible location list.

"Oz" was approved for more than $40 million of refundable tax credits and is in preproduction at Raleigh Studios in Pontiac.

• The direct subsidy could be increased a lot or a little if the program proves successful and state revenues grow enough to allow more spending. Gov. Rick Snyder would consider this.

• A different type of tax credit -- one that could be sold since the state's tax format changed -- could be used, with a Louisiana program serving as the model.

State Sen. Majority Leader Randy Richardville, R-Monroe, is exploring this, but Snyder doesn't like credits.
State's goal: Make sure film grants benefit Michigan

First of three parts

Gov. Rick Snyder wanted a stripped-down business tax, one without loopholes and exemptions for every well-connected interest group. And that's pretty much what he got from the Legislature when it replaced the Michigan Business Tax with a 6% corporate income tax.

Since the movie and TV subsidies enacted in 2008 were calculated as part of each production's Michigan Business Tax (MBT), they will be history when the new tax -- to which virtually no media productions would be subject -- takes effect Jan. 1.

In their place, the Legislature approved Snyder's recommendation for $25 million in direct grants for media production, unconnected to the tax liability of investors or producers, for the state spending year that begins Oct. 1.

Officials in the Michigan Film Office and the Michigan Economic Development Corp. are in the early stages of developing a plan for the administration of that fund.

Film Office spokeswoman Michelle Begnoche said the grant-making procedures, which may or may not require legislative action, will almost certainly include criteria designed to maximize hiring of Michigan residents, spending in Michigan and promotional value to the state. She said administration officials also want to maintain as much flexibility as possible to control the size of the awards and limit reimbursements for spending deemed of little value to Michigan.

Under the original incentives program, Michigan taxpayers paid up to 42% of the cost of talent (stars, directors, etc.) up to $2 million per person. Begnoche said that cap could be reduced since "most of those ... expensive people don't live in Michigan."

Snyder administration proponents of the grant program said it will allow the state to target and control spending better, while still attracting film and TV production. Producers also benefit, they said, because the state money could be available up front, instead of at the conclusion of filming.
Exploring a few options

Entertainment industry advocates mostly reject that view and urge Snyder and the Legislature to consider a reconfigured tax credit.

They have a potential ally in Senate Majority Leader Randy Richardville, R-Monroe, who has expressed concern about the fate of investment made under the original incentives, especially the millions of dollars spent to develop Raleigh Studios in a former Pontiac auto plant.

Richardville has asked Senate staff to explore options outside the grant program, said spokeswoman Amber McCann.

One possibility, she said, is an incentives program like that in Louisiana, which provides transferable credits (which can be sold back to the state treasury) against its business and income taxes. The incentives program has been expanded in recent years to include the recording industry.

The annual cost to Louisiana taxpayers was not immediately available. But the state's film office says the credits have resulted in $3 billion in spending in Louisiana since they were enacted in 2002.

Snyder appears to have little interest in restoring tax credits in any form.

"The governor wants to see how the grant program works out," spokeswoman Sara Wurfel said. "He believed we needed to get tighter control over the spending and a more transparent process, and that's what the new law does."

Another alternative -- and one Snyder may be more willing to entertain, Wurfel said -- would be increasing the money available under the new grant program. Film industry advocates told lawmakers in tax hearings that at least $100 million annually would be needed to sustain a viable movie and TV industry in Michigan.

Wurfel said Snyder would be open to increasing the $25-million program if it appears to be working and state finances stabilize enough to make it possible. But putting film subsidies in direct competition with school, health or community funding could be politically dicey.
Where things stand now

In the meantime, advocates for the industry will press for more. Some Oakland County legislators have expressed concern that the downsized incentive program could place the investment and jobs at Raleigh Studios in jeopardy.

Sen. Mike Kowall, R-White Lake Township, said he would like to "do something," but it's hard to know what, before the new tax and budget plans begin later this year.

John Truscott, a longtime Lansing public relations consultant who has been working with an industry coalition called Michigan Film First, said, "Right now, everybody is just trying to catch their breath ... and assess what (the new rules) mean."

The Film Office is doing the same thing, Begnoche said, but without the expectation that the rules will change soon.

"We've been given our directive," she said. "We're going to focus on what we know ... and that's that we have $25 million to work with next year, and we're going to try to use it in a way that's best for Michigan."