07 May 2010

Michigan's Movie Rivals Offer Fewer, Smaller Enticements to Industry

The Detroit Free Press

SANTA MONICA, Calif.--Two years after Michigan lawmakers passed the nation's most attractive movie production incentives, no one has seriously challenged the state's dominance in this area. But that doesn't mean every movie is heading to Michigan. Though the state offers a wide variety of unique and appealing locations for filmmakers, it doesn't have everything. "We are not Hawaii," said Janet Lockwood, director of the Michigan Film Office. "We don't have mountains."

In some cases, Michigan loses out to other states that don't cap tax breaks for big-name actors, Lockwood said. Michigan won't pay more than $2 million per star.

Even with these limitations, though, Michigan's 42% movie tax credits are the most generous in the industry. Whether another state will try to top them is anyone's guess. But Lockwood said that a group of major Hollywood producers recently told her that they didn't think that will happen.

Since the incentives went into effect in April 2008, 90 productions have completed filming in Michigan, with dozens more expected to wrap this year.

"Incentives are very important to the production companies," Lockwood said. "It literally drives where they film."

In the U.S., only Alaska can claim that it offers a bigger movie tax credit than Michigan. But its base rate starts at 30% compared with Michigan's 40%. To get to Alaska's full 44% rate, production companies have to hire Alaska residents and film in rural areas of the state during the cold months of October through March.

Alaska's year-old program has attracted 23 productions, including several nonfiction TV shows and independent feature films. The state is still waiting for a big-budget movie to show up. "The name of the game these days is incentives," said Dave Worrell, a development specialist at Alaska's Film Office.

Michigan isn't the only place in the U.S. where moviemakers can get back 42% of their production spending. In October, Washington, D.C., increased its film tax rebate to 42%. Production companies must spend a minimum of $250,000 compared with $50,000 in Michigan, and the rebate is subject to available funding.

These efforts haven't threatened Michigan. Alaska's location and weather limit its appeal to filmmakers, and the nation's capital is too small to offer the diverse locations that many movies need.

Michigan's chief rivals in the movie business -- Louisiana, New Mexico, Georgia, Massachusetts and Connecticut -- all offer lower tax breaks of 25%, 30% or 35%. But that doesn't mean they aren't competitive, particularly in the case of Louisiana and New Mexico. These two states have a head start on Michigan because in 2002, they helped pioneer the use of tax breaks to lure filmmakers away from Hollywood.

Michigan's incentives "haven't put a dent in our level of activity," said Christopher Stelly, Louisiana's director of film industry development. "We have things Michigan doesn't and vice versa. I always feel competition is healthy."

Louisiana can provide the industry with several established film studios and 10 production crews, compared with five in Michigan.

New Mexico officials claim their state is home to the largest studio outside Hollywood, in Albuquerque. Unlike Michigan, New Mexico loans money to filmmakers. Thanks to its incentives, New Mexico now has 250 film-related businesses and 3,000 unionized production crew members.

"We feel pretty solid with our incentives," said Jennifer Schwalenberg, the New Mexico Film Office's deputy director. But she admitted, "We have lost a little bit to other states with other incentives."

Hollywood's focus on tax breaks isn't likely to go away soon. If anything, the incentives have become more important because obtaining the financing to make a movie has become very difficult.

Movies that used to be made for $8 million or $10 million have seen their budgets slashed to $5 million or less, said Stephen Saltzman, an entertainment industry attorney. "You have to be meaner and leaner than ever before," he told a room full of filmmakers this month at the annual Locations trade show in Santa Monica, Calif.

In this kind of environment, it's no surprise that filmmakers have been flocking to Michigan to take advantage of the tax credits. Once they arrive, many of the newcomers are discovering there's a lot more to the Great Lakes State than they realized.

"I was really taken by the people," said Robert Mearns, who plans to direct an urban detective movie in Detroit and was an associate producer of the 2009 Val Kilmer movie "The Steam Experiment," which was filmed in Grand Rapids. "They were very proud to call themselves Detroiters. They really love the city."

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