Legislature(2013 - 2014)BARNES 124

03/13/2013 03:15 PM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
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Heard & Held
Heard & Held
Heard & Held
            HB 112-REPEAL FILM PRODUCTION TAX CREDIT                                                                        
4:35:04 PM                                                                                                                    
CHAIR OLSON announced that the final order of business would be                                                                 
HOUSE BILL  NO. 112,  "An Act repealing  the film  production tax                                                               
credit;  providing  for  an  effective   date  by  repealing  the                                                               
effective  dates  of  secs.  31  - 33,  ch.  51,  SLA  2012;  and                                                               
providing for an effective date."                                                                                               
4:35:10 PM                                                                                                                    
REPRESENTATIVE  BILL   STOLTZE,  Alaska  State   Legislature,  as                                                               
sponsor  of  HB 112,  stated  this  bill  would repeal  the  film                                                               
subsidy program  with transition  language to allow  film credits                                                               
for those in the queue.  While  that effort adds cost, he felt it                                                               
was  fair to  transition  the  program for  those  in the  queue.                                                               
Further,  he offered  his  belief  that the  costs  for the  film                                                               
incentives do not  relate to the benefits for this  program.  The                                                               
bill  would also  keep  in place  the state's  film  office.   He                                                               
supported having  businesses talk to  Alaskans, whether it  is in                                                               
the tourism industry  or any other industry.  In  fact, the state                                                               
has previously had a film  office, which was reenergized with the                                                               
advent of the initial film subsidy  bill in 2008.  Last year, the                                                               
[Alaska Film Production Tax Incentive  Program] was extended with                                                               
a state commitment  of $300 million.  He acknowledged  that he is                                                               
driven by his philosophy that  this program isn't worth the money                                                               
[given in  tax incentives].  He  advised members that he  did not                                                               
solicit  people to  testify  on this  bill  since his  district's                                                               
constituents are  driven by their  own philosophy and  don't have                                                               
any financial  stake in the  program but  speak as citizens.   He                                                               
asked to read a letter.                                                                                                         
4:38:12 PM                                                                                                                    
REPRESENTATIVE STOLTZE  said there was  a call to action  out and                                                               
the subject was, "Urgent -  Representative Stoltze to move to END                                                               
the Alaska film industry - Importance:  high."                                                                                  
REPRESENTATIVE  STOLTZE  read  Mr.  Ron  Holmstrom's  letter,  as                                                               
      This is an emergency.  It is the opening days of the                                                                      
     present 2013 legislature.  Representative Bill Stoltze                                                                     
     has  introduced HB  112, which  will repeal  the Alaska                                                                    
     film  incentive program.   This  bill will  effectively                                                                    
     end  feature  film  production   in  Alaska.    I  urge                                                                    
     EVERYONE  to write,  call, or  e-mail your  legislators                                                                    
     immediately to stop this malignant  move before it goes                                                                    
     any  further.   You can  find your  legislative contact                                                                    
     This  bill is  going to  the House  Labor and  Commerce                                                                    
     Committee  this  week  so  now   is  the  time  to  get                                                                    
     cracking.    The   hundreds  of  concerned  businesses,                                                                    
     actors, crew,  and crafts people  who will  be directly                                                                    
     affected by  the death of  the film industry.   "Please                                                                    
     pass this along" and help stop this madness!                                                                               
REPRESENTATIVE STOLTZE pointed out  that the word "malignant" was                                                               
Mr.  Ron Holmstrom's  word.   He recalled  that Mr.  Holmstrom is                                                               
also a  news person.   He  said lots of  people have  a financial                                                               
interest in  this and those who  have an interest never  want the                                                               
funding to end.  He said  this becomes apparent during the budget                                                               
deliberations,  as well.   He  concluded  that he  expects to  be                                                               
outnumbered today [by  testimony in opposition to the  bill].  He                                                               
suggested that  many people  who agree  with him  are at  work or                                                               
driving  but he  wanted to  frame the  discussion for  members to                                                               
better understand  [the opposition  to HB 112.]   He  offered his                                                               
belief the department would likely be neutral on the bill.                                                                      
4:40:57 PM                                                                                                                    
REPRESENTATIVE REINBOLD thanked him for  bringing up the bill and                                                               
indicated she would co-sponsor the bill.                                                                                        
REPRESENTATIVE  STOLTZE  concluded  that   he  did  not  like  to                                                               
artificially [create support or  opposition on bills, but prefers                                                               
people spontaneously testify].                                                                                                  
4:41:38 PM                                                                                                                    
REPRESENTATIVE SADDLER  asked whether the tax  incentive would be                                                               
the end of the film industry.                                                                                                   
REPRESENTATIVE STOLTZE replied  he thinks it would be  the end of                                                               
the subsidy  for the type of  film industry that exists.   He did                                                               
not think the  film industry [in Alaska] is  sustainable since it                                                               
is heavily  subsidized.   He said  he doesn't  use the  term "tax                                                               
credits" since  the film  industry is not  an industry  that pays                                                               
taxes.   He  offered  his belief  that the  term  tax credits  is                                                               
really a  misnomer since the  program is  a film subsidy  so he'd                                                               
appreciate  the  committee  adopting  the  term,  as  well.    He                                                               
acknowledged that  the film industry  has had some  benefits, but                                                               
he did  not think the cost  pencils out.  He  suggested that many                                                               
people  feel good  about the  scene being  filmed in  a stage  or                                                               
studio in Anchorage  instead of Los Angeles or  in Alaska instead                                                               
of  British Columbia,  Canada.   However, he  asked at  what cost                                                               
these benefits  have to  Alaskans.  He  wondered how  many people                                                               
were  truly excited  about  reality programs,  such  as Life's  a                                                             
4:43:14 PM                                                                                                                    
REPRESENTATIVE HERRON  asked whether he had  considered any other                                                               
options or if this is the best fix.                                                                                             
REPRESENTATIVE  STOLTZE   responded  that  the   committee  could                                                               
decide.  He  offered his belief that this bill  is an appropriate                                                               
fix, but the  committee process will decide. He said  he wants to                                                               
be  sure programs  are working  and  make sure  the cost  benefit                                                               
ratio is good.   He said, "If there are better  ideas out there -                                                               
I would be  happy with stopping the bleeding while  we still have                                                               
a good blood flow."                                                                                                             
4:44:26 PM                                                                                                                    
REPRESENTATIVE  HERRON   related  his  understanding   triage  is                                                               
possible, but the sponsor believes it is better to end it now.                                                                  
REPRESENTATIVE STOLTZE answered yes.                                                                                            
4:45:18 PM                                                                                                                    
REPRESENTATIVE   JOSEPHSON  recalled   the  sponsor   saying  the                                                               
committee would  hear from  those who  have an  economic interest                                                               
[in the film  industry].  He understood the  state encouraged the                                                               
aforementioned to have economic interest  through 2023.  He asked                                                               
what  the legislature  should do  about that  action [taken  last                                                               
REPRESENTATIVE  STOLTZE characterized  [the  film production  tax                                                               
credit program]  as a  bad idea.   He said that  the state  had a                                                               
different  economic   picture.     He  indicated  [HB   112]  has                                                               
transition language that would allow  the industry an opportunity                                                               
to find  a "cash  cow" somewhere  else.   He suggested  that some                                                               
people  are really  enamored with  the film  industry, but  he is                                                               
not.  He offered his belief  the program should be stopped before                                                               
the  state has  given out  more benefits.   He  further suggested                                                               
that the program was a mistake and should be ended.                                                                             
4:46:42 PM                                                                                                                    
REPRESENTATIVE  SADDLER asked  the  sponsor to  elaborate on  the                                                               
transition  language,  phase out  of  the  program, and  auditing                                                               
REPRESENTATIVE STOLTZE deferred to the department.                                                                              
4:47:26 PM                                                                                                                    
REPRESENTATIVE   JOSEPHSON  recalled   reading   an  article   by                                                               
Representative  Costello   that  indicated  the   amendments  and                                                               
reforms were great.  He  asked whether some members still support                                                               
this industry.                                                                                                                  
REPRESENTATIVE  STOLTZE  declined  to  speak  for  Representative                                                               
Costello.  He  suggested the article could be  interpreted on its                                                               
face.  He was unsure  of Representative Costello's position on HB                                                               
112.   He  recalled some  of the  political issues  the committee                                                               
faced last  legislature.   He further  recalled that  last year's                                                               
bill was improved during the process last legislature.                                                                          
4:48:35 PM                                                                                                                    
DANIEL GEORGE,  Staff, Representative Bill Stoltze,  Alaska State                                                               
Legislature,  on  behalf  of  the  sponsor,  Representative  Bill                                                               
Stoltze,   stated  that   the  Senate   bill  that   passed  last                                                               
legislature  increased the  state's obligation  by $300  million.                                                               
The  fiscal  note  explains  HB  112  would  basically  stop  the                                                               
expenditures granted  by the Department of  Commerce, Community &                                                               
Economic  Development (DCCED)  by the  expiration of  the current                                                               
program, which ends July 1, 2013.   The total amount would be $83                                                               
million, he  said.  Thus, the  potential savings to the  state in                                                               
2013-2023 would amount to $217  million.  He emphasized that film                                                               
producers operated  in Alaska prior  to the program also  went on                                                               
the  record to  say  they  would operate  in  Alaska without  the                                                               
incentives.   He further  recalled an  article in  which "Denby's                                                               
Catch"  actually  stated that  fact.    He concluded  by  saying,                                                               
"There's a lot more here than meets the eye."                                                                                   
4:49:49 PM                                                                                                                    
REPRESENTATIVE STOLTZE  said this  bill is about  Alaska's fiscal                                                               
situation.   He  expressed concern  about last  year's bill.   He                                                               
stated that  he supported  the bill since  it had  other measures                                                               
attached to it.   Further, he also supported  last year's measure                                                               
since  the bill  supported economic  development in  Alaska of  a                                                               
more real and tangible nature.                                                                                                  
REPRESENTATIVE SADDLER asked  him to expand on  other elements in                                                               
last year's film bill.                                                                                                          
REPRESENTATIVE STOLTZE did not recollect,  but he thought perhaps                                                               
the  bill  contained  Nenana Basin  tax  credits,  corporate  tax                                                               
credits, and LNG storage credits.                                                                                               
4:51:38 PM                                                                                                                    
REPRESENTATIVE SADDLER asked whether DCCED  has a position on the                                                               
4:52:21 PM                                                                                                                    
ROBERTA   GRAHAM,   Assistant   Commissioner,   Office   of   the                                                               
Commissioner,  Department  of   Commerce,  Community  &  Economic                                                               
Development (DCCED), said the DCCED is  neutral on the bill.  She                                                               
highlighted   that  the   transition   language  recognizes   the                                                               
importance  of   continuity  for   the  companies,   actors,  and                                                               
businesses  that  need it.    Ironically,  the existing  statutes                                                               
which  will  go  into  effect   July  1  and  transfer  the  Film                                                               
Production Tax Incentive Program from  DCCED to the Department of                                                               
Revenue (DOR)  does not contain  any transition language.   Thus,                                                               
according to legal  opinions the DCCED has  received, the 55-plus                                                               
productions in  the queue that  have been prequalified for  a tax                                                               
credit will not  be grandfathered in and will  need to re-qualify                                                               
under a  new tax credit  regime.   This means budgets  which have                                                               
been approved  would essentially need  to be retooled,  which may                                                               
present some legal and financial  issues she said.  She clarified                                                               
that HB  112 contains transition  language which  recognizes [the                                                               
companies in the queue.]                                                                                                        
4:54:12 PM                                                                                                                    
REPRESENTATIVE  SADDLER  asked for  a  brief  description of  the                                                               
transition process and timeline for it.                                                                                         
MS.  GRAHAM  answered that  under  the  existing standards  if  a                                                               
production  has not  completed its  work by  June 30  the statute                                                               
would be  repealed and the  new statute  goes into effect.   Once                                                               
the statutes  are repealed,  the prequalified  firms would  be in                                                               
limbo  until they  re-qualify with  DOR under  the new  statutes,                                                               
which also  would include  the new tax  credit percentages.   She                                                               
explained that  the aforementioned  will impact at  least 55-plus                                                               
another  10   to  15  productions   that  will  go   through  the                                                               
prequalification  process between  now and  June 30,  2013.   The                                                               
DCCED  has been  working  with  the DOR  on  regulations and  the                                                               
proposed transfer  program to the  DOR.  Additionally,  the DCCED                                                               
will  retain the  function of  promoting and  marketing the  film                                                               
industry as a destination.                                                                                                      
4:55:40 PM                                                                                                                    
REPRESENTATIVE   HERRON   recalled    the   sponsor   anticipates                                                               
opposition in the form  of e-mails on HB 112 and  he noted he has                                                               
also been  receiving them.   He asked whether the  department has                                                               
received e-mails on HB 112.                                                                                                     
MS.  GRAHAM  said  she  has  not  seen  them,  but  imagined  the                                                               
department has  received them.   In further response,  she agreed                                                               
to provide a summary of the e-mails.                                                                                            
4:56:39 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON referred to page  2, line 17, of HB 112,                                                               
which identifies  an effective date  of July  1, 2013.   He asked                                                               
whether the effective date would  preserve the 55 programs in the                                                               
system  so  they can  finish  their  production and  receive  the                                                               
MS.  GRAHAM  replied  that  she  presumed  so.    The  transition                                                               
language  would  allow  the  Alaska Film  Office  to  proceed  to                                                               
process  the tax  incentive  credits as  they  are received,  she                                                               
[HB 112 was held over.]                                                                                                         

Document Name Date/Time Subjects
HB76 Draft Proposed Amendment ver A.1-Josephson.pdf HL&C 3/13/2013 3:15:00 PM
HB 76
HB76 Supporting Documents-DOLWD Response to Question by Rep. Josephson-UI Max WBA 3.6.13.pdf HL&C 3/13/2013 3:15:00 PM
HB 76
HB74 Supporting Documents-Assorted letters and emails of support 3-12-2013.pdf HL&C 3/13/2013 3:15:00 PM
HB 74
HB112 ver A.pdf HL&C 3/13/2013 3:15:00 PM
HB 112
HB112 Sponsor Statement.pdf HL&C 3/13/2013 3:15:00 PM
HB 112
HB112 Opposing Documents-Assorted Letters and Emails 3-12-2013.pdf HL&C 3/13/2013 3:15:00 PM
HB 112
HB76 Draft Proposed Amendment ver A.2-Herron.PDF HL&C 3/13/2013 3:15:00 PM
HB 76
HB112 Fiscal Note-DOR-TAX-03-12-13.pdf HL&C 3/13/2013 3:15:00 PM
HB 112
HB112 Fiscal Note-DCCED-DED-03-07-13.pdf HL&C 3/13/2013 3:15:00 PM
HB 112
HB112 Supporting Documents-2013_AFO_AnnualReport_Final.pdf HL&C 3/13/2013 3:15:00 PM
HB 112
HB112 Supporting Documents-August 2012 Audit of AFPTIP.pdf HL&C 3/13/2013 3:15:00 PM
HB 112
HB76 Supporting Documents-Letter State Chamber 3-12-2013.pdf HL&C 3/13/2013 3:15:00 PM
HB 76
HB74 Supporting Documents-Assorted letters and emails 3-13-2013-am.pdf HL&C 3/13/2013 3:15:00 PM
HB 74