the choir has been preached to....now what?

The production industry was out last night. 

A town hall meeting in Livonia (and a simulcast of the event in Grand Rapids) brought out a couple of thousand folks, most of whom have benefited from the huge increase in the volume of production work that has come to the state since the production tax incentive legislation was signed into law in April, 2008. 

There were great stories told, and passionate points made--mostly to crowds that overwhelmingly support the continuation of the tax incentive program that has sparked significant economic development to Michigan.  The program was slated for significant changes/reductions as outlined (albeit briefly) in Governor Rick Snyder's budget proposal that the executive branch introduced last week.  There are certainly questions about the program's effectiveness, but the most recent study was done by Ernst & Young, and it shows a great return on investment.

So now that the production community's support is galvanized--across the state--what is next?  If the past week is any indicator, the coming weeks will certainly see extensive debate about the governor's budget.  And while the production tax incentive is a huge issue, it is an issue that has to be taken in the context of some sweeping changes to how Michigan deals with taxation and economic development across the board.  We're looking forward to the discussion, and to finding ways to continue sparking opportunities for our entertainment industry clients working in Michigan.

We hear each other loud and clear.  Now is the time for the rest of the state to hear how a thriving production industry in Michigan can help us all.

production incentives and subjectivity

Production tax incentive programs are definitely taking fire as we come to the close of 2010.  Nevertheless, the soft money that tax incentives bring to production budgets continue to help get projects that otherwise might languish in development limbo off the ground.  As many states and jurisdictions (including our home base, Michigan) debate the sustainability of production incentive programs, there are still a lot of options for producers seeking government help to get from limbo to lensing. 

One of the challenges that face producers seeking tax credit support is that the application and administrative processes for the programs vary widely.  It takes some concerted effort to evaluate not only the bottom line benefits of each jurisdiction's program, but all of the nuances of participating in those programs as well.  And then there are the true variables: the subjective criteria in each of the programs that can be impossible to predict.

In Michigan, projects have been denied tax credits because of concerns about the content of submitted scripts and because the Michigan Film Office determined that there were not sufficient economic development benefits to the state that would result from bringing the denied projects to the state.  Michigan is not alone.  This week we learned that Robert Rodriguez's most recent release, Machete, was denied incentive support in Texas because it portrayed Texas in a negative light.

There really is no escaping subjective criteria in the administration of the production incentive programs.  The key to successful utilization of incentive financing is working with professionals that have frequent interactions with the administrators of the programs in the jurisdictions that productions are considering.  While no one can predict an outcome when it comes to subjective criteria, it helps to know what has happened in the past and to have some insight into how decision makers approach each project as the applications come in. 

Update on December 14, 2010 by Joe Voss

The actor that played the title role in "Machete" has weighed in on the Texas decision....

Fighting to keep runaway productions from running away....

So The Hobbit films are staying in New Zealand.... Without knowing the inside details of how this all played out, this was still a very interesting journey.

Set aside, for now at least, the long saga of how Peter Jackson ended up as the eventual (and logical!) helmsman for these films.  And even set aside the guilds' boycott of the project that was only recently called off.  What is really interesting to me here are the events that transpired to keep New Zealand as the location of these films.

The thumbnail of the story is that New Line and its parent, Warner Bros., threatened to move the production of the films as a result of fracas surrounding the labor issues.  Then, people rallied around the cause (check out the promotional trailer for the demonstrations), and protested in the streets when WB execs were in the country for meetings to convince the New Zealand government and the producers to keep the films in New Zealand.

Now, it's pretty clear that the studio was just doing what studios do: negotiating the best deal for the production of what promise to be huge films for them.  So, what can we take away from this?  A few things:

1.  Productions of major motion pictures are major economic events, and around the world, they inspire public and political action to attract and retain them.

2.  Studios are always going to work for the best deal on physical production to maximize returns on investment.

3.  Labor issues are a critically important factor in steering production work.

4.  Currency fluctuations and government incentives/subsidies are (still) critically important factors in steering production work.

As things settling down with the planning of these films, we can now look forward to them taking shape as Jackson and his team work to dazzle the world with their movie magic.

Summer shooting in michigan

The Detroit Free Press is running a front page story today about all of the features that are coming to Michigan this summer.  We're definitely seeing more activity at the firm, but as the article points out, the debate inside Michigan about the tax incentives is not lost on the production community around the country that considers the state for housing their projects. 

We're getting a lot of questions about what is going to happen with the incentive program.  The rumors that float around--especially in the Los Angeles area--about the state being out of money and not able to make good on its obligations, pop up at least once a week.

As of now- the program lives.  Which means dollars are being spent in Michigan by productions that are free to spend their money anywhere they like.  It also means local crew members are building strong resumes, and the Michigan production community grows stronger by the project.

Making the Most of Production Tax Incentives

In its 2009 Annual Report, the Michigan Film Office estimates that $223.6 million was spent in the state on productions in 2009.  Michigan’s production tax incentive program—perhaps the most aggressive soft money program in the world, offering up to 42% of production expenditures back in the form of refundable tax credits—has certainly enticed producers to visit the Great Lakes State with talent, crew and money in tow.  Louisiana, New Mexico, Georgia, Connecticut and many other states offer attractive incentives that influence where studios send projects and, for some independent productions, incentive money can be the deciding factor of whether the project ever gets off the ground.

Tax incentive programs are nothing new, but the jurisdictions that offer them rarely leave the programs unchanged, so the incentive landscape constantly changes.  There are several solid industry resources for keeping track of the ebb and flow of the programs (the folks at The Incentives Office offer a good guide and fairly regular seminars, and Cast & Crew Payroll’s interactive incentive map is helpful), but as an attorney working on productions in Michigan and Illinois, I would like to offer a short list of things to keep in mind when taking your show on the road.  Some of these tips are obvious, but I think a gentle reminder now and then never hurts, and they can help you make the most of production tax incentives:

1.         Talk to your friends.  When making a determination of where to take a production, talk to people that have been there before.  This likely fits in the obvious category—the small town feel of Hollywood never ceases to amaze me, and word travels fast—but there is no education like experience.  When professionals that trust one another share information openly and honestly, better decision-making is inevitable.

2.         Use local professionals.  This one might expose my bias a bit, but you should talk with attorneys and accountants with production experience in the jurisdiction you are considering for your next project.  Your friends might even have some names to share, and so might your own accountant or attorney.  Local professionals not only have the best knowledge of their incentive programs, but they are also likely to have the relationships that are key to navigating the bureaucratic mazes that often exist in incentive jurisdictions. 

3.         Take an honest look at local crew.  Most jurisdictions reward spending money on local below-the-line crew, and it is easier to take advantage of that in some places then it is in others.  While key production positions are not likely to go to locals in most cases, it is worth it to review resumes and interview locals about filing out your crew.  Consider the cost difference between housing the entire crew and having a significant number of people on the payroll commuting to the set from home, add what the incentive yields, and go from there.  Your friends and the local professionals might be able to help you with this one, too.

4.         Remember the intent of incentive programs.  The justification for adopting production tax incentives is always local economic development.  When producers are attracted to a particular jurisdiction by these programs, they should keep that basic fact in mind.  The local film offices and taxing authorities that administer incentive programs are under constant pressure to prove the effectiveness of their incentives.  Demonstrating a sensitivity to the cause can be very helpful in getting what you need from the powers that be.

5.         Be ambassadors for your industry.  This one might also qualify as obvious, but I think it is important.  The survival of production tax incentive programs is ultimately subject to the way the political winds blow in the jurisdictions that offer them.  The impression that large amounts of money are being shipped to Hollywood for little return to the local bottom line is a hard one to counter, but it is even harder to counter when local businesses and citizens have a bad experience with a production.  Pay your bills on time (without getting gouged, which is another story altogether), and smile at the people who live and work where you’re shooting—you’ll be surprised at the returns.