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States’ flights: Budget woes impact U.S. incentives

American Film Market 2011: Territory Report - U.S. Update

When Jay Villwock got laid off from his job as a TV news reporter in Des Moines, Iowa, in early 2009, the state had recently enacted one of the most generous film and TV production incentives in the country.

Its 25% tax credit for in-state expenditures and a 25% tax credit for investors attracted an influx of projects into Iowa, which had only hosted a handful of movies during the previous few decades, most notably 1989’s “Field of Dreams.”

Villwock had studied theater in college and done some summer stock. Why not give acting another shot?

In short order, he found himself in a scene with Adrien Brody and Forest Whitaker in “The Experiment” and playing a zombie in “Collapse.”

“I could hardly believe it,” gushes Villwock, who today is president of the Iowa Motion Picture Assn. “It was this golden opportunity; a once in a lifetime thing.”

Then, in September 2009, an audit revealed improprieties in Iowa’s incentive program. The governor suspended the tax credit, and the flood of productions pouring into the state dried up.

Incentives don’t need to be eliminated or scaled back to scare away production. These days, producers start looking at other locations as soon as a governor indicates a desire to tinker with a tax credit.

“What the industry always wants most of all is certainty,” says California Film Commission director Amy Lemisch. “They want to know what they’re going to get, what the rules are and that they won’t change.”

California got an added bit of certainty last month when Gov. Jerry Brown signed a law extending the state’s $100 million-a-year tax credit through the end of the 2014-2015 fiscal year.

New Mexico wasn’t so lucky. In January, Gov. Susana Martinez came into office vowing to drastically scale back the state’s popular incentive program, which had attracted such big-budget films as “Cowboys & Aliens” and “Terminator: Salvation.”

In the end, the state preserved its 25% tax credit and added a still-generous $50 million annual cap. But the damage was done.

“For first eight months of the new administration, nobody really knew what was going on, so therefore the number of pilots and (other projects) is way down from what it usually is,” says Lance Hool, CEO of the newly opened Santa Fe Studios. In the meantime, “the money for the rebates sits there, waiting to be used.”

Up in Michigan, the state’s once-popular 42% tax credit is in a state of suspended animation. In February, newly elected Gov. Rick Snyder announced plans to put a $25 million annual cap on the incentive. State economic development officials say additional money could be allotted for major productions, but it would need legislative approval.

Faced with such uncertainty, Marvel Studios nixed a planned Michigan shoot for “The Avengers” and went to Ohio, which offers a 25%-35% refundable tax credit.

Last month it was reported that, after once again failing to reach a deal with Michigan, Marvel would take “Iron Man 3” to North Carolina, which has a 25% tax credit.

On Sept. 30 came the coup de grace: the Michigan Film Office announced that, with the bill formalizing the rules for the reformatted incentive program stuck in committee, it would no longer accept applications for fiscal year 2012.

This doesn’t bode well for the new $80 million Raleigh Michigan Studios in Pontiac. But Michael Moore, president of Raleigh Studios Worldwide — which also has three studios in California and another three in Baton Rouge, La., Atlanta and Budapest — remains optimistic.

Disney’s $200 million “Oz, the Great and Powerful,” starring James Franco, “is taking up the whole facility right now,” he points out, and “we’re talking to several (other) productions.”

EU Screen Gems president Chris Cooney says his company has been careful to invest in studios in locales with a strong history of production pre-incentive — New York City, Atlanta and Wilmington, N.C.

But in today’s climate, where even the most established of filming hubs, Hollywood, has been struggling to hold on to production, “you’re taking a measured risk,” he admits.

According to Joe Chianese, senior VP of taxes, business development and production planning for Entertainment Partners, 39 U.S. states offer incentives.

While well-established players such as Louisiana and New York remain hot, he says, less-heralded states like Mississippi (“The Help”), West Virginia (“Super 8”) are also picking up steam.

“I don’t think all the states will stay involved (with incentives),” says Massachusetts Film Office chief Lisa Strout. “There are quite a few programs that are either not user-friendly or they’re too rich to sustain themselves.”

As for Iowa, Villwock is hoping the state can simply re-open its film office.

“Incentives aren’t even a part of the conversation at this point,” he says “As far as film is concerned, what was a blooming garden is now a desert.”

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