Michigan’s generous film production tax credits appear to have been too good to be true. Now, the state’s burgeoning film industry is losing its momentum and filmmakers are fleeing the state.
In 2008, Michigan created one of the nation’s most aggressive rebate programs with a 42% tax credit that provided unlimited rebates. Studios and independents rushed to the mitten-shaped state; among the studio projects that took advantage of the offer were “Transformers 3,” “Gran Torino” and “Scream 4;” indies included “Vanishing on 7th Street,” “Salvation Boulevard,” “Youth in Revolt” and “Stone.”
That changed in February, when newly elected governor Rick Snyder proposed reducing the credit from unlimited rebates to an annual $25 million cap.
“I got a call three hours later after the governor’s proposal that I was out of a job,” says production coordinator Jax Baker, calling from the road on her way to New Orleans.
The job was a cop drama starring 50 Cent, “Freelancers,” on which she was slated to be an assistant production coordinator. Rather than lose the job when it left Michigan for New Orleans, she moved with it. Baker has now decided that Louisiana will be her new home.
“I looked at my future in Michigan,” says Baker, who was born and bred in Grand Rapids, “so much so that I had to pack my bags and leave the state.”
The cap isn’t official yet, since legislature won’t take up the incentive issue until summer. However, the Michigan Film Office is operating according to the governor’s proposal.
On Monday, the state announced its first film to receive a credit since Snyder took office — Universal Pictures’ “Five Year Engagement.” The production has committed to $12.5 million in Michigan spending and is positioned to receive $5.26 million in subsidies, a sum that would account for more than 20% of the governor’s proposed $25 million cap. By comparison, Michigan approved nine productions for $9.7 million in credits in January-March 2010.
“Just the fact that the Governor opened his mouth has put the fear of God into producers,” says producer Matthew Tailford, who runs 10 West Studios, a three-year-old production facility in tiny Manistee, Mich. (pop. 6,856). “Because of his stance [and] the continual uncertainty, we have, with much reluctance, advised two films not to come to Michigan.” Tailford says he may shutter his Michigan shop and move back to Los Angeles.
The most high-profile evacuation is Disney and Marvel Studio’s big-budget “The Avengers,” which jumped the border to Ohio. But Tailford says the harshest blow is the abandonment of independents, which provide an ongoing source of work for local crews.
“The studios can afford to take the risk,” he says. “It’s the guys with the shallow pockets who can’t risk it and that’s where it’s hitting us the hardest.”
Ted Hope, who recently shot “Super” in Louisiana to take advantage of that state’s tax credit, says he had an upcoming shoot designed and budgeted for Michigan; he’s now looking at Ohio and North Carolina. Another would-be Michigan production may now go to Oregon.
“Each of these films are budgeted at under $5 million and need an incentive to happen,” he says. “It is absurd to see the tax incentives as anything other than a good thing. They create jobs, they bring revenue where it is needed and they are the only thing close to a cultural policy in this country.”
Film Office spokesperson Michelle Begnoche defends the state’s position. “We now have finite choices,” she says. “Part of that is to look at the [tax incentives] criterion more rigorously: Are [productions] using Michigan’s existing infrastructure; will they promote Michigan as a tourist destination and will Michigan play a part in the story; what is the magnitude of the Michigan spend? And how many Michigan jobs will be created? Those pieces were always part of the statute, but we’re now looking at all those elements more closely.”
However, filmmakers say moving from an unlimited to a limited program has effectively shut down the incentive before it could establish a foundation for Michigan’s film industry.
West Michigan Film Office commissioner Rick Hert says he was negotiating for the creation of a $7 million studio that would host a slate of films, including a couple of $35 million shoots and four low-budget films from Toronto. “We were right on the precipice of all this great infrastructure coming in, and people who were ready to make investments in the state,” he says. “They’ve all pulled back.”
“What’s unfortunate about this whole thing is the main reason the incentive was created was to bring in a new industry into the state,” says independent producer Hopwood DePree, an Michigan Film Office advisory council member who helped conceive the incentive. DePree produced one of the first films that utilized the incentive, the low-budget “Tug,” which also employed former autoworkers as part of a new job-training program.
“So many people set up shop here and the crew base was building, but now, unfortunately, they’re off looking for work elsewhere, because of the uncertainty,” he says. “A lot of producers and crew people are already shifting gears. While [the incentive program] works itself out, the entertainment business has to continue on.”
The Michigan Film Office says it still has applications for more than 40 new productions. However, states like Ohio (with a relatively stable 25% credit), Louisiana (with a secure 35% program), and Georgia (with 30%) now appear to be drawing the majority of shoots. Other cash-strapped state programs are in flux: according to the Incentives Office, New Mexico is poised to install a $50 million cap on its 25% rebate, while incentive programs in Rhode Island and Missouri appear to be on the chopping block.
Under the constraints of the economic downturn, government agencies remain skeptical about the efficacy of tax incentive programs. Michigan’s nonpartisan Senate Fiscal Agency issued a study that showed a 2009 positive net private impact of $21.05 million — but for the state, a net public loss of $33.83 million. The study concluded: “The State will never be able to make the credit ‘pay for itself’ from a State revenue standpoint, even when the credit generates additional private activity that would not have otherwise occurred.”
Michigan film and incentive advocates say such reports are misleading because they don’t factor in ancillary business revenue, job creation, and what DePree describes as the “morale boost.”
“What I’ve seen is people moving back and buying houses, and that’s not measured on any survey and that’s what’s important,” he says. “That morale boost, that excitement level, has to account for something. But it’s hard to put a number on that.”
Says now-former Michigan resident Baker, “It’s not just about the numbers. It’s people’s lives that are at stake here.”