Lost another movie.. just the beginning thanks to Rick and company

[rb336]

I'm not doubting that all of this spending has created jobs. It just seems that it has created nothing but temporary jobs and as such cannot be viewed as a long term investment. Why not spend tax money on creating more permanent jobs?.

Look at that studio in Pontiac. that would have been permanent jobs. Surprised Snyder's bud Rakolta hasn't pitched a fit.

Ernst & Young, an independent, right-leaning firm [[based on political contributions) says for every buck we've invests through the tax credits, six have come back. 600% seems good to me

[FlyingJ]

I serious doubt movie makers will be flocking to Cleveland or anywhere else in Ohio anytime soon.

Maybe Marvel[[& some guy named Sam Raimi) were happy with their past experiences shooting there;
http://spiderman3cleveland.blogspot.com/

BTW, one of the shots in this sequence took 2 & a half years of CGI alone, so it's not like anybody made a snap decision about the place

[bartock]

Good thing that ain't how it works.

Really? Well, it is pretty close, then.

From the Michigan Film Production Website:
Michigan Film Production Incentives

* Information Disclaimer

40% Tax Rebate [[refundable tax credit) For Michigan Production [[42% in Core Cities)

Out of State Below The Line wages are pegged at 30%. Above The Line 40%.
40% refundable tax credit against Michigan Business Tax [[MBT) liability for qualified film or digital media pre-production, production, and postproduction costs incurred in Michigan. Alternatively could be claimed against Michigan income tax withholding tax liability.

Refundable and assignable [[transferable). This is a “refund” or “tax rebate” equal to 40% of qualified production expenditures, not a credit against taxes owed.

Additional 2% credit in core communities.

Wages paid to non-Michigan residents eligible as a qualified expenditure capped at $2 million per person per production.

$50,000 minimum spend. No project cap. No annual cap. No sunset.

Income Tax Exemption for Reinvestment in Michigan Productions
Allow an income tax deduction equal to all or a portion of a gain realized from an equity investment of at least $25,000 in an qualified production in Michigan, if the initial investment plus the gain, or a portion of the gain, is reinvested in a new qualified production within one year

[iheartthed]

Really? Well, it is pretty close, then.

From the Michigan Film Production Website:
Michigan Film Production Incentives

* Information Disclaimer

40% Tax Rebate [[refundable tax credit) For Michigan Production [[42% in Core Cities)

Out of State Below The Line wages are pegged at 30%. Above The Line 40%.
40% refundable tax credit against Michigan Business Tax [[MBT) liability for qualified film or digital media pre-production, production, and postproduction costs incurred in Michigan. Alternatively could be claimed against Michigan income tax withholding tax liability.

Refundable and assignable [[transferable). This is a “refund” or “tax rebate” equal to 40% of qualified production expenditures, not a credit against taxes owed.

Additional 2% credit in core communities.

Wages paid to non-Michigan residents eligible as a qualified expenditure capped at $2 million per person per production.

$50,000 minimum spend. No project cap. No annual cap. No sunset.

Income Tax Exemption for Reinvestment in Michigan Productions
Allow an income tax deduction equal to all or a portion of a gain realized from an equity investment of at least $25,000 in an qualified production in Michigan, if the initial investment plus the gain, or a portion of the gain, is reinvested in a new qualified production within one year

It's a tax rebate against the taxes that would otherwise be owed [[as subject to the MBT or other tax liability). The program does not subsidize the non-tax expenses of movie production.

[BagAJellyDonuts]

Good thing that ain't how it works.

Then how does it work?

IMO, the part of these incentives that is so frustrating isn't that they being cut, it's that states are fighting against other states while there isn't [[thanks to "our" representation in DC) a level distribution of tax dollars at the federal level.

[mikeg19]

My biggest question with this whole situation is what is going to happen to these film studios that have invested millions of dollars to set up studios here? If the tax incentives are repealed, than why would they stay here? Under Snyders plan, [[which I have not read), it's my understanding that these credits would wholly disappear. So again, if not for specific spot shots in a movie or tv show, there would be no reason to have a fully developed, functioning movie studio here. So there will also be lost tax revenue for cities housing these companies [[assuming they relocate out of state). Even if Snyder doesn't like the idea of a 42% tax break, can't we make some sort of compromise. Say, maybe 30%? At least something to lure movie production here. Dropping it to zero just seems idiotic....

[bartock]

It's a tax rebate against the taxes that would otherwise be owed [[as subject to the MBT or other tax liability). The program does not subsidize the non-tax expenses of movie production.

Read it again..."this is a 'refund' or 'tax rebate' equal to 40% of qualified production expenditures, not a credit against taxes owed."

Think about it. If it fit you definition of a tax rebate, the $200 million in taxpayer money "refunded" to these productions would mean that these productions owed $500 million in taxes! That would mean the "economic activity" generated was $20 billion!! If that were the case, I'd be totally on board. Unfortunately, this is a straight 40-42% refund, as it says, on all expenditures. The term "tax rebate" is misleading.

[iheartthed]

Read it again..."this is a 'refund' or 'tax rebate' equal to 40% of qualified production expenditures, not a credit against taxes owed."

Think about it. If it fit you definition of a tax rebate, the $200 million in taxpayer money "refunded" to these productions would mean that these productions owed $500 million in taxes! That would mean the "economic activity" generated was $20 billion!! If that were the case, I'd be totally on board. Unfortunately, this is a straight 40-42% refund, as it says, on all expenditures. The term "tax rebate" is misleading.

It would serve you better to go to the actual web site for the program, and not to a private company's web site who is trying to sell services related to the tax credit.

http://www.michiganfilmoffice.org/

[Det_ard]

From the Executive Summary of non-partisan Michigan Senate Fiscal Agency report in September 2010

Significant confusion appears to exist regarding the public and private costs and benefits of the credits. Statements in the press regarding the benefits of the Media Production Credit typically highlight the increases in private sector activity and measure them against the public sector cost [[often without accounting for the impact of lowering other public expenditures to offset the lost revenue from the credit). This comparison creates confusion about the impact of the credit on the budget. 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.

Public discussion of the Media Production Credit also has confused the nature of the credit, often leaving taxpayers with the impression that the credit represents foregone revenue that the State would not have otherwise received. The amount of the Media Production Credit, however, is unrelated to a taxpayer's liability. The credit represents a subsidy for production activity and is unrelated to any provisions in law that impose liability on the taxpayer. Because the credit is refundable, the State not only foregoes the revenue it would have otherwise received but also pays additional money to offset the costs of the production.

http://www.senate.michigan.gov/sfa/P...Incentives.pdf

[mwilbert]

Det_ard is right. If you think about it, there wouldn't be any serious question about the tax credit not paying for itself if a film company couldn't get back more than it paid in taxes, would there? The reason this credit is such an obvious target is its extreme generosity, bordering on self-flagellation.

[DetBill]

Yes I am referring to our state combining the attributes of Michigan and Alabama, sadly. I am not the first one to use this adjective lately, as its most appropriate considering the direction we are going on.
Also, to address a earlier question, Yes I am a CPA. a budget specialist for the last 11 years by the way. and any good analysis not only looks at immediate cash flow [[ wish has been good in the the recent year on this btw), but also start up costs needed , projected revenue flows, expansion needs, anticipated return and both postiive and negative scenarios. This venture scores quite well on all of these, Michigan should be proud of its progress in such a short period of time, As for the 42 percent tax credit, thats exactly what it is,, a tax credit which inturn in most scenarios causes more investment. If Governor Snyder is such a good businessman he should know start up capital is always needed as is start up time, We are doing very well, [[ up till now on this front). Diversification is badly needed in Michigan, This is probably the most successful industry we have attracted in such a short period of time that is not directly manufacturing. Earlier one addressed the non measurable element of positive publicity, Lets not even go there,, Its enormous and only a fool would underscore that. There seems to be a common comment from some in the papers and here that we "dont need them hollywood types here" , You are so missing the boat , its not about them, its about expanding our horizons for diversity and using this industry [[ a very popular one at that) to our advantage. We have spent several years building the necessary framework here, most of those individuals have no concept of what has been developed here to this point. To walk away from this development is quite unbelievable.
Furthurmore for the doubters on here that Ohio is doing this , The WKSU/NPR local news broadcast today airing at around 5 pm today in Cleveland is proof postive for the naysayers . Just a lovely segment how the cleveland tourist bureau and film society is ecstatic over inheriting this from Michigan and Detroit, and, how they are getting overwelming support on this from the civic [[Cleveland), County, [[Cuyahoga) and State [[ Ohio and yes a new Republican governor) on this,,and they feel this is just the beginning . Made me quite ill to even listen to this,, Obviously they all see the benefit in a swift second. Cleveland has many similar problems to Detroit as does Ohio to Michigan yet they strongly want to make this work, In short, they get it,,and they will, The have some very intelligent people there,, Many, many in this state dont, and quite frankly won't ever. To make matters worse WKSU reports that the whole percussionist section of the Detroit Symphony is gone now,, and guess who hired a couple of them - the Cleveland Symphony. I d say we need to roll up our sleeves in this town and get involved.

[DetBill]

This credit addresses no measure of revenue generated from its grant, thats what so many seem to be missing here.. Studies made so far show a 6 to 1 ratio for each dollar granted. Ask the Book Cadillac, last year they had over 1 million in revenue from the film industry attributable to rooms rented, Ok, lets take this away, guess what,, one hotel most likely closed in a couple of years,, many people unemployed,,, a major city with fewer room for large conventions, no high calibre hotel to attract other types of high end business . obvious property value decline in the immediate area, less property taxes collected by the city [[ and thats no small amount in this case )and the ramifications go on and on..and this is on just one hotel,..This doesn not take rocket scientist to see,

[adamjab19]

Good points Detbill but I guess there is still some shellshock from the last industry that shit the bed here. The movie industry just seems to fickle to try and set up any type of permanent shop here. OK let's say that there is some permanent shops set up here....it gaurantees jobs now but what if Ohio gets a bit slicker and slyer and up the ante on their tax breaks/refunds/incentives whatever? I still think the movie industry would be gone in a second. No solidarity from them.

Furthermore how long can Michigan offer this 40% refund/incentive/break? While the people of this state may start reaping the benefits of a new industry how long until the government starts getting some of THAT money into their pockets?

[Pam]

While the people of this state may start reaping the benefits of a new industry how long until the government starts getting some of THAT money into their pockets?

How long? They already are via sales tax on purchases made here related to filming and by income tax paid by Michigan citizens working in the industry.

[DetBill]

Exactly Pam,, for some reason people do not seem to be able to evaluate the whole ball of wax. There is already an enormous amount of money that is being injected into the state of Michigan from their presence..sales tax, restaurants, rooms for hotels, catering businesses, viability of businesses who rely on this business, their paying of tax to Michigan,, employment of thousands of Michiganders because of this presence and on and on and on,, No measure of this seems to be even looked at..unbelievable. and how very short sighted. Sound business decisons should never be made without evaluation of the whole situation. Ofcourse, taxpayers want to see that Rick is just taking a axe and cutting expenditures, No body is looking that with every knife cut he is making a bigger hole under the surface,,Politicians rely on people not being able to evaluate that.

[Det_ard]

Detbill, Pam, Rb336, Iheartthed, you really owe it to yourselves to read the Senate report. It covers all the areas you think are important [[except for morale or ego-boost). I think once you've read it you'll see the film credit in a different light.

It's not that long, and it's not hard to understand.
http://www.senate.michigan.gov/sfa/P...Incentives.pdf

[bartock]

It would serve you better to go to the actual web site for the program, and not to a private company's web site who is trying to sell services related to the tax credit.

http://www.michiganfilmoffice.org/

I guess if I was going to try and prove it in some sort of court of law I would have cited the same thing that det_ard did. All personal sentiments I may have aside, you and many others have apparently been duped by this, but show me something, anything, from whatever you believe to suggest otherwise.

This is misleadingly named a "tax credit." It isn't. It is a 40-42% REFUND on nearly all expenditures paid. Just READ everything that has been cited, including the state law. Find me something that says anything otherwise. Please, find it. Show it. It doesn't exist. It isn't a tax credit, all of the cites say it. It is a fact that these are reimbursed expenditures. Undisputed fact, even by the movie industry.

IF it was simply a "tax credit" as you suggest, let's do some crazy math. Let's assume that, instead of 4.35% in taxes, since the movie industry is corporate based, they were paying an exaggerated 12% tax rate and this truly was a tax credit.

According to the most film-friendly study [[read who funded it), there is a 6:1 "economic activity" to "film credit" ratio. Assuming that everything, everything, is exaggerated toward and past your argument, that would mean that if the state truly was giving a "tax credit" of what, north of $150 million last year, then the "economic activity" generated has to be proportional. IF my hypothetically inflated "tax credit" is 12%, then the "economic activity" generated MUST be at least $900 million. And, at $900 million, in "economic activity," at an insanely hypothetically inflated tax rate of 12%, the state gets $108 million in return.

Of course, that isn't true, because even the most favorable numbers can only get to $900 million and my numbers are grossly exaggerated in your favor. Aside from all of the other states letting it go, etc., even the $25 million that Michigan is setting aside for this year is a loss. [[By the way, notice that the all of the bellyaching over Ohio in this, yet that state is smart enough to cap their incentives at $30 million a year. Somehow we are idiots for "letting this get away" when our new incentives are about in line with theirs). A $25 million dollar "tax credit" - and I don't know why as an intelligent poster you cannot see for youself what that means - would have to generate roughly 20 times its cost in order to break even for the state. At 10 times its cost, it would still be a hit, but the arguments over image, etc., might start to make sense. That means, even at 10 times the loss for the state, a $25 million giveaway should generate $250 million in "economic activity" [[which, in turn generates $10-15 million in tax revenue). A $100 million dollar giveaway, at nearly a 10:1 loss in tax revenue, should generate $1 billion in economic activity. Last year Michigan gave nearly $200 million in tax credits, and the best that someone could come up with was $600 million in "economic activity." Which, by tax standards is likely a combination of 6% sales tax and 4.35% income tax, assuming everything stays in state [[which it doesn't). Even by combining the two, $600 million in economic activity [[which they paid them folks a lot of money to make sure this figure included direct and INDIRECT money), nets maybe $60 million in a totally utopian circumstance.

This isn't hard to understand, and we are not the first state to realize this. [[Of course the stupidity was in the fact that we were the first state to give so much money away, even Iowa and Wisconsin were capped. Our caps are being criticized for whatever reason, and blamed for "killing" this gypsy industry).

Eh I give up. Doesn't really matter. Just fun to vent, I guess.

[bartock]

Detbill, Pam, Rb336, Iheartthed, you really owe it to yourselves to read the Senate report. It covers all the areas you think are important [[except for morale or ego-boost). I think once you've read it you'll see the film credit in a different light.

It's not that long, and it's not hard to understand.
http://www.senate.michigan.gov/sfa/P...Incentives.pdf

Ah once again you did in very few words what I couldn't in so many, and you had time to write this before I finished mine. Well done.

[adamjab19]

How long? They already are via sales tax on purchases made here related to filming and by income tax paid by Michigan citizens working in the industry.

Well sure but I am talking about even more tax money from a large production study etc. Not just the sales tax from an extra meal from a star or an old telephone bought from an antique shop....

[Richard]

This all started what two years ago? All those fancy graphs and pie charts that the other states have seem to show that it takes 6 to 8 years for the film industry to show a good rate of return.

Really if you look at it as a business you cannot just throw it out there and expect a high rate of return tomorrow you have to feed it ,invest in it to make it work. Why is it that our forefathers had the insight to invest in our future but we cannot do the same? They were not exactly brimming with cash of course they could have said why should we invest in roads,rural electrical ,city water systems how many years did it take to pay that all off?

Of course it is our right to want it in our pocket now who cares what happens 25 years down the road we will be dead anyways.Let the future generations figure it out it will be their problem then.

You do not cut the check every month it is based on per film etc. No film no pay-out.
Tweak it, minimize the risk,but keep it competitive if it gets killed then that is one more area of diversification that someone has to come up with.

[canuck]

If you offer them the incentives and then work on bringing your corporate tax code into reality then the industry will feel more comfortable about setting permanent roots. Building studios, producing more TV shows locally... Hell, maybe even the next Oprah could be launched from a studio in Detroit.

That is exactly the way to look at it. There are already big players who invest in studio spaces and
other infrastructure in metro Detroit. But the for Hollywood by Hollywood scenario isnt the end of story. There are plenty of capable would-be producers who can develop projects in the local economy. The difficult thing is to crack the distribution/financing of film. Tom Rosenberg who produced a couple of pictures in Montreal whose company is Lakeshore Entertainment had to run the company out of Los Angeles in spite of his obvious attachment to his native Chicago. Oprah Winfrey is definitely a great example of what can happen outside L.A. and New York. I think it's important to develop a robust industry from Hollywood product and alongside it, local producers would use the infrastructure and knowledge to initiate their own stuff. Whta happens is if you develop local technicians to a level where they manage as well as in other markets and let productions go, another cluster of know-how will migrate to where the action is. It is good for Detroit to regain the advantage it once had as a film center as a poster said once on another thread. When corporate films and advertisements were made in the area, that certainly was a strong presence in the economy.

http://www.raleighstudios.com/index.php?

option=com_content&view=article&id=7&Itemid=8http://www.cinepropictures.com/

[jerrytimes]

Funny, and please correct me if I'm wrong, but the tax credit is still in effect for now? Isn't it?

[detmsp]

Look at that studio in Pontiac. that would have been permanent jobs. Surprised Snyder's bud Rakolta hasn't pitched a fit.

Ernst & Young, an independent, right-leaning firm [[based on political contributions) says for every buck we've invests through the tax credits, six have come back. 600% seems good to me

What part of this are you missing? The incentives are gone and the work at a studio like this disappears. How is that permanent? These jobs only exist for as long as the state is paying 40% of the salaries!

[canuck]

What part of this are you missing? The incentives are gone and the work at a studio like this disappears. How is that permanent? These jobs only exist for as long as the state is paying 40% of the salaries!

What makes you think other industries are permanent fixtures, havent you noticed the disappearance of mainline industries in Michigan in the past little while? The film business is fickle and it creates millionaires on a whim. That is for sure. I work in film in Canada and can tell you that the rehabs of old office buildings into hotels or the brand new luxury hotels were helped along by a robust film industry in the nineties and early 2000's. Restaurants and Casinos benefit from it and there is a definite vibe when film happens in your city. The labor intensiveness is a plus for Michigan. Film Studios are worth building because the cost of leasing on a weekly basis is astronomical but worthwhile for film productions. So when a large studio half to a million sq ft is built and leased for a number of films during the first three years, the investment is already pretty much covered. So the tax return has to do with recouping top heavy costs by production companies. This is called below-the-line costs. The "talent" or "A-list actors" are considered above-the-line costs. So there are two things to ponder in the cost of a medium to big budget movie. That is why the labor intensive film industry can also benefit Michigan by generating local productions due to increased expertise and available infrastructure and rental equipment. Film schools gain more instructors, post-production companies develop from better budgets, and actors, scriptwriters who otherwise would move to one of the coasts can live and contribute to Michigan. California gives incentives too, dont kid yourself.

[wolverine]

Word of advice to Michigan: Attract businesses, create an economy that won't turn its back on you when the incentives dry up. Certainly it created new jobs, and helped local business....but in a way that was inconsistent. I can't imagine anyone thinking they'd stick around forever, and some of the big promises of studios and production offices had never been fulfilled.

It's difficult for me to say this, considering I have friends here in Illinois and Michigan involved in talent and scouting for films, and I know their jobs are heavily reliant on the state's ability to attract filmakers. Yet they've been looking for better, higher paying jobs all along which tells me they knew this would be short lived.