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.