Eco-friendly facilities contingent on doubling of state incentive

Ryan Kavanaugh’s Relativity Media and Steve Bing’s Shangri-La Entertainment’s proposed $400 million production facilities and tax incentive legislation could position Hawaii to become one of the most competitive states for film production.

The proposals, announced Friday, include a boost to Hawaii’s current 20% film incentive to 40% with a $25 million per-project cap and 180,000 square feet of eco-friendly production facilities, the latter of which is contingent upon the legislation passing.

Relativity had a heavy hand in crafting the proposed bill, hiring several consultants to analyze the benefits and risks to the state before enlisting lobbyists to help bring it to the house floor.

The increase would put the state at competitive levels on par with Louisiana (38%), New Mexico (25%) and Puerto Rico (40%).

One of the major selling points of the bill, endorsed by former President Bill Clinton in an open letter to Hawaiian lawmakers, is Relativity’s proposal for state-of-the-art facilities on two of the islands. Company argues that including infrastructure in its proposals would complement the legislation by helping to draw productions to the state quickly.

“It takes about 10 years for a competitive tax credit in the film industry to work,” said Utica Films’ JP Pettinato, one of several consultants Relativity hired to analyze the effects of its proposals. “We believe that, for Hawaii, the tax credit’s going to work faster.”

Pettinato, who based much of his research on data collected from other states with comparable tax-incentive programs, also argues that the 18,000-square-foot facilities and a generous production incentive, combined with Hawaii’s aesthetic appeal, would make the state even more enticing than current filming favorites Lousiana, New Mexico, Puerto Rico and Michigan. “If a producer or an actor had a choice to go to Shreveport, La., or to Hawaii, where do you think someone would choose to go?” Pettinato asked.

According to Relativity, its joint proposals with Shangri-La would bring in $1.70 for every $1 spent by 2016, generating close to $2 billion for the state along the way.

The companies also say their proposed facilities would be LEED Platinum Certified, the highest environmental rating.

“According to the comparative analysis used by every other state, the passage of this bill should increase the value of Hawaii’s film-based economy from $20 million to $800 million in the first year alone,” Clinton stated in his letter. “The Shangri-La/Relativity commitment to build the most environmentally friendly stages in existence, coupled with the economic benefits of this bill and Hawaii’s timeless appeal, will make Hawaii the most attractive place in the world to shoot a film.”

State tax incentives have come under increased fire in recent months, with cuts proposed to programs in Michigan, Arizona and New Mexico.

Some analysts and recent studies assert that states lose money in the form of decreased funding to public services and that hiring local employees and spending money on local goods and services does not make up for revenue lost through incentives.

But Relativity believes that the benefits of its proposal far outweigh the risks and put together a 19-page report to prove it.

Among the many bulletpoints is Relativity’s conclusion that Hawaii generates 41% less revenue from its current incentive program ($1.29 for every $1 spent) than the average of other states with generous incentive programs.

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