COMMENTARY

Michigan moves to write ‘the end’ to state’s film tax credits

3/13/2015

DETROIT — For a few years, Michigan seemed to be on the brink of a movie industry boom. Suddenly, it was not all that amazing to see stars such as Clint Eastwood on local streets.

One night, Jack Nicholson came to dine at the Lark, an elegant little restaurant in suburban Detroit. He greeted the patrons at every table. “That’s something I don’t think anyone will ever forget,” owner Jim Lark said. “I know I won’t.”

There was an explosion of big-budget film and TV production in Michigan beginning in 2008. It wasn’t hard to see why: the Michigan Film and Digital Media Incentive, one of the few economic projects under then-Gov. Jennifer Granholm that generated excitement.

But the effort was controversial from the start. Now, any subsidies for the film industry soon may be gone.

Gov. Rick Snyder never has been a fan of special tax credits for Hollywood. Soon after he became governor in 2011, he pushed the Legislature to cap the tax credits at $25 million a year. Those credits soon may be repealed entirely.

Last week, the Michigan House’s tax policy committee sent a bill to the floor that would do just that. The bill passed this week.

The bill’s fate in the Senate is less certain. The previous Senate majority leader, Randy Richardville (R., Monroe), had protected the credits from elimination. But because of term limits, he is no longer in the Senate.

While the governor said late this week he thought the program should be phased out, not abruptly terminated, he still indicated he wanted the credits eventually gone.

No matter the outcome of the bill, the past few years for the Michigan film industry have been exciting. The original incentive was a package of bills that provided a 40 percent tax credit for film, TV, and digital production expenses, plus additional incentives for hiring and training Michigan workers.

The package was signed into law in April, 2008. The industry immediately took off. Michigan film industry spending ballooned to $125 million in 2008, compared with barely $2 million the year before. Things quickly got bigger.

Communities built studios in an effort to get in on the boom. In fewer than four years, the Michigan Film Office had approved $392 million in incentives for just over $1 billion in projects, including big-budget Hollywood releases such as Mr. Eastwood’s Gran Torino .

But some people always opposed the film incentives. And there were conflicting data on whether they were worth providing.

Governor Snyder’s main objection seems to have been philosophical; tax credits mean “picking winners and losers, and government isn’t qualified to do that,” he said in an interview.

State Rep. Jeff Farrington, a sponsor of the bill that would eliminate film credits, thought the state wasn’t getting enough bang for its buck. “Dollar for dollar, it doesn’t make sense,” he said.

Others disagreed. The accounting firm Ernst & Young found that the film industry created nearly 6,500 jobs in Michigan in 2009 and 2010, and that every dollar the state spent on tax incentives generated six dollars in economic activity, thanks to a multiplier effect.

Some people believed that even if the incentives were a temporary loss leader, they would pay off in the long run by creating a new permanent industry. Plus, having a major film made in your town was considerably more exciting than, say, a new auto parts plant.

Peter Watt is opposed to eliminating the credits. He is a producer who is also involved in advertising and marketing for Cavalier Pictures in suburban Detroit.

Cavalier is a mainly homegrown outfit. “Most of the video production work we do helps promote the region on behalf of the Detroit Metropolitan Convention and Visitors Bureau,” he said. Cavalier also does some work for a division of the U.S. National Park Service.

“Strange, there are 28 other states, including California, with generous film incentives,” Mr. Watt said. “That alone should be enough to keep the [Michigan] incentives. But Governor Snyder and a few other legislators failed to see the benefits.”

Mr. Watt, a Toledo native, thinks there’s hypocrisy too. “Since when does Governor Snyder oppose ‘special deals,’” he said, “when almost a billion taxpayer dollars are given to failing charter school operators in this state?”

He has no desire to leave Michigan. But he feels he may have to. “What’s even worse is that my family and I have little reason to stay in Michigan now that the incentives may end this year,” he said. “I can do video production in a state that offers incentives.”

He added: “Something I like to say to my clients is: ‘Your success is my business.’ I truly wished the Legislature felt the same way.”

Jack Lessenberry, a member of the journalism faculty at Wayne State University in Detroit and The Blade’s ombudsman, writes on issues and people in Michigan.

Contact him at: omblade@aol.com