Report indicates that Michigan’s generous film incentives may actually be worthwhile

As we’ve discussed in previous threads, I have issues with Governor Snyder’s proposed budget. There are some things that I’m very much against, like the cuts to K-12 education and the elimination of funding mechanisms for brownfield remediation projects, and there are others that I’m not yet sure about. Among the items in that category, I’d include Snyder’s proposed defunding of his predecessor’s big film initiative. While I’ve enjoyed having celebrities around, like everyone else – did I ever mention that I bumped into Catherine Keener – and liked the fact that we were diversifying our economy a bit, I was never convinced that the program made good fiscal sense. The way I saw it, the entertainment industry, which is one driven, like most others, by the almighty dollar, would never put down real roots here. As soon as a better deal came along, I thought, they’d be gone. And history has pretty much demonstrated that. Before Michigan, after all, there were places like Alabama, Texas and North Carolina. All of them had economic incentives, but Michigan, by offering to reimburse producers up to 42-cents for each dollar spent in the state, started pulling business away from them. So, while I agree that there’s a certain feel-good value to it – which is probably particularly important these days, as people are leaving the state in droves – I don’t know that it was going to be a good bet in the long run. But, according to press reports coming out today, maybe there is a benefit to keeping the incentives, even if they don’t lead to long term investments by studios. The following comes from the Detroit Free Press:

…Gov. Rick Snyder has proposed ending the current tax breaks for filmmakers as part of a broad elimination of special tax credits and exemptions. He plans to allocate $25 million a year for new movie incentives, far below the $60 million paid out to production companies last year.

The study shows that the production of movies and TV shows in Michigan during 2009 and 2010 generated 6,491 full-time equivalent jobs in the state and $812 million in economic output.

“There is significant growth and economic activity,” said Larry Alexander, CEO and president of the Detroit Metro Convention & Visitors Bureau, which teamed up with its counterparts in Ann Arbor, Grand Rapids and Traverse City to commission the study late last year. “This is an industry that has not had a chance to mature (here) yet.”

Among the study’s findings:

• Production companies spent $532 million in the state in 2009 and 2010. Of that amount, nearly 60%, or $310.5 million, impacted Michigan’s economy.

• Eighty percent of the 4,656 indirect jobs that the movie business has created in Michigan have occurred in five industries: food services, business services, rentals and repairs, personal services and retail.

• The net cost of the tax credits awarded during 2009 and 2010 totaled $137 million. Taxes and fees generated from movie activity, plus reduced unemployment benefits because the filming creates jobs, offset the state’s costs, the study says. According to the Michigan Film Office, the state has awarded $304 million in film tax credits since April 2008 and has paid out $96 million so far.

• Film productions paid Michigan residents $42.8 million in wages and salaries in 2009 and $66.9 million in 2010. That equates to an average annual salary of about $53,700 per full-time equivalent employee.

• The average film production in Michigan lasted 90 days in 2009 and 89 days in 2010.

The state’s nearly 3-year-old movie tax breaks are the most generous in the nation, covering up to 42% of production expenses. But with the state facing a $1.8-billion budget deficit, Snyder’s budget cutters are targeting the incentives….

The study is the first to show that subsidies for the movie industry have produced positive benefits in Michigan.

In September, the Senate Fiscal Agency released a report saying that the incentives only generate 10 cents in new tax revenue for every dollar paid out…

According to the Detroit News, the report also points out that “for every dollar spent in state tax breaks to filmmakers, nearly $6 of economic activity is generated here.”

The report, which was produced by Ernst & Young, can be found here.

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  1. Ale Roka
    Posted February 22, 2011 at 12:05 am | Permalink

    I’m trying to wrap my head around why folks who generally oppose massive tax breaks for large, highly profitable corporations are making an exception for this one (beyond the obvious celebrity butt sightings). Is this being offered as a proof that slashed corporate taxes are the engine powering economic gain?

    I mean, if this is really good for the economy, shouldn’t we extend equivalent tax incentives for everyone who is willing to buy lunch and get a haircut here?

    Any help?

  2. Knox
    Posted February 22, 2011 at 7:15 am | Permalink

    It’s sexy. That’s the difference. And it tied in with Granholm’s whole “cool” thing. Plus, it was supposed to keep talented young people in the state.

  3. Andrew Jason Clock
    Posted February 22, 2011 at 9:29 am | Permalink

    I’m not against subsidy at all, if it works. I am against blanket tax cuts for the corporations and the wealthy IN HOPES that it spurs the economy. Targeted tax breaks and subsidies don’t get handed out unless a company actually commits to coming in and adding jobs/tax base. I would also add that such subsidies should first be aimed at industries we want to develop (green energy/battery/film production) over industries we want to ween ourselves off off (coal/oil/gas).

    Snyder wants to call providing tax breaks or subsidy “picking winners and loosers”. I would call it “picking people who move our economy forward, and bring jobs with them”.

  4. wetdolphinmissile
    Posted February 22, 2011 at 11:08 am | Permalink

    subsidies are for new industries to get a start, like the film industry in MI, not for old successful stinking rich companies like oil and gas

  5. Ale Roka
    Posted February 22, 2011 at 12:21 pm | Permalink

    By all accounts, when the subsidies for this industry are ended, the industry will leave (unlike say, a power plant or other industry that’s stuck in Michigan soil). This suggests we have to pay them forever.

    As I understand it, if a film spends $10 million in Michigan, we give them $4 million. This isn’t a tax refund, it’s money straight from our budget that helps pay for the movie’s production costs. These are state funds that could be used for schools, roads, etc. Yes, the $10 million generates jobs and spending (how could it not), but it doesn’t doesn’t return the $4 million to the tax rolls (it cannot, unless you tax everything at 40%).

    Now, if that same $4 million was spent on schools, infrastructure, etc. it would also generate jobs and spending. If we’re to consider the impact of film industry in providing jobs, we should also consider ways that money could be spent and what impact, economic and otherwise, it could have.

    I might be missing something (please let me know if I am), but I don’t see the benefit (at least when you compare it to other benefits that could come from spending those millions elsewhere).

  6. Mr. X
    Posted February 22, 2011 at 4:24 pm | Permalink

    It’s confusing. I think purposefully so. It’s called a tax credit, but it’s really not. It’s a subsidy, that is part tax credit. Essentially a production company recoups $.42 on every dollar spent in the state. The first chunk comes back in the form of a tax abatement against what they owe the state of Michigan. The remainder is then handed over in cash. Other states have attractive offers. Ours, however, is the most generous. The hope was, I think, that studios would move here. That never happened, though, largely because the Republicans made it clear that they’d do away with the incentives once they came back into power. And you’re right, the money should have been spent on schools instead. Unfortunately though school kids don’t get Jennifer’s motor running like George Clooney. People like celebrities and sex. It was seen as an easy solution to a huge problem. It was a sexy bandage for a rotting open wound.

  7. wetdolphinmissile
    Posted February 22, 2011 at 5:17 pm | Permalink

    Mr. X what bullshit…school kids don’t get Jennifer’s motor running like George Clooney” …that is the most inaccurate and stupid thing I have seen posted in a while. While it is refreshing to not be moderated so heavily as…it doesn’t mean you should be so very stupid.

  8. Ted
    Posted February 22, 2011 at 7:42 pm | Permalink

    Why so angry, Wet Dolphin Missile? I think Mr. X was just saying that Jennifer, like all people, was attracted to the celebrity aspect of it all.

    And, you’ll be happy to know, I found your online hiding place.

  9. Alice Krum
    Posted February 22, 2011 at 9:17 pm | Permalink

    No one has mentioned it yet, but I distinctly remember hearing years ago that Granholm had wanted to be an actress when she was young.

  10. wetdolphinmissile
    Posted February 22, 2011 at 9:24 pm | Permalink

    Hee hee, if only…

  11. Pop Couture
    Posted February 22, 2011 at 10:53 pm | Permalink

    Meechigahn has what? Ten millions people? That is like a small $6 charge for having famous premium ass visit to make you feel so good. Less than price one visit to cinema to be part of magic! Plus, you get to work hard which you like to make the ass look so good. To famous quote: “The world will forget you, but will always remember the art made in you.” What we make makes us, you know? I don’t even remember my second grade teacher. She had no art. Small price to pay, eyah?

  12. Meta
    Posted February 25, 2011 at 12:28 pm | Permalink

    Fox News had something on the ‘keep the film initiative’ protest that took place in Livonia last night.

One Trackback

  1. […] and Milla Jovovich would flock to Ypsilnati and cause a stir. Today, things are different. Now that our overly-aggressive film incentives have dried up, it takes a hell of a lot less to make us giddy with excitement. Judging from the […]

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