19 September 2010

Study: Film Aid Costs State

The Detroit News

Michigan paid nearly twice as much money in film incentives as the industry brought into the state the past two years, according to report released Friday by the Senate Fiscal Agency.

The incentives cost taxpayers more than $190,000 per direct full-time job created last year, the report found.

"The nature of the credit and the resulting activity is such that under current (and any realistic) tax rate 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," according to the report.

The study, a compilation of data presented at Senate and House hearings over the past two years, says Michigan spent $137.5 million to generate $80.6 million in private sector activity.

The report didn't shake Gov. Jennifer Granholm's faith in the program.

"We stand by the film incentive program and its ability to create good-paying jobs," spokeswoman Liz Boyd said.

"We're working every day to diversify our economy," she said. "This is a brand-new sector which continues to grow. And we are pleased with what we've seen so far."

The program subsidizes the direct cost of the production of movies and television shows by up to 42 percent.

Since the Legislature passed the incentives, movie and TV filming has been a growing industry in Michigan. It has led to the creation of studios, spawned college programs to teach movie jobs and brought a number of big-name stars to the state. It's also given the national media a positive story to write about a state wracked by job loss and outmigration.

The report analyzed the impact of the film industry incentives on the state budget and does not take into account additional money the movie and TV productions have contributed to local governments and businesses, such as restaurants and hotels.

"I've said all along that any industry that the state decides to pay 42 percent of their costs is going to come to Michigan," said Gary Olson, executive director of the Senate Fiscal Agency. "It doesn't mean there aren't other benefits. Is it worth it? That's up to the people who are elected."

The agency is a nonpartisan government office that analyzes legislation for the Senate.

The film credit was created in 2008 to attract film productions to Michigan. Since then, 105 film projects have been shot in the state.

According to the report of Detroit movie accounting services, in 2009 there were 355 direct full-time jobs created by the tax credit at a cost to taxpayers of $193,000 each. Adding indirect jobs, 1,542 have been created at a cost of $44,000 each.

The number of jobs created was much higher, but because they are temporary, the numbers shrink when converted to equivalent full-time, 12-month jobs.

The film industry does provide a net financial benefit to the private sector, according to the report, but that benefit is less than the net cost of the program to the state.

Michelle Begnoche, communications advisor to the Michigan Film Office, said the industry is still taking root in the state.

"We always knew it would take some time before seeing the benefits seen in other film-friendly states," she said.

State Sen. Nancy Cassis, R-Novi, a longtime critic of the program, said she plans to hold hearings on the report.

"There are better economic alternatives than this film incentive giveaway," Cassis said. "These films are like cotton candy -- they're sweet when they're in your community, but there's no longterm nutrition.

"I think there is a chance to do something before the end of the session. And if not, we will be laying the groundwork for the new administration to review the film policies and get them in line with our revenue."

Republican gubernatorial candidate Rick Snyder is not surprised by the report's findings, spokesman Bill Nowling said.

"This is just a tax incentive that is just not financially feasible over the long term," Nowling said.

Democratic gubernatorial candidate Virg Bernero's campaign could not be reached for comment.

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