Legislature(2007 - 2008)
02/05/2008 01:32 PM Senate L&C
| Audio | Topic |
|---|---|
| Start | |
| SB117 | |
| SB196 | |
| SB230 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 230-FILM OFFICE/ FILM PRODUCTION TAX CREDIT
2:10:45 PM
CHAIR ELLIS announced SB 230 to be up for consideration. He said
he was very excited about this legislation, because it's an
important step towards diversifying Alaska's economy. Forty-five
states have active film offices and it is a very competitive
business for big bucks, lots of jobs and lots of business
impact. Almost all of those states have some kind of incentive
program; 12 states offer transferable tax credits and many
others do direct grants.
He said this bill proposes transferable tax credits. He
reminisced when oil dropped from $29 to $8/barrel and the very
successful film office in Alaska got dropped. He thought that
was a shortsighted decision, but now they have a chance to
rectify that shortcoming. Films that Alaska lost include "The
Guardian" with a production budget of $80 million was set in
Kodiak, but filmed in Louisiana, and "Insomnia," production
budget of $46 million, set in Nightmute but was filmed in
British Columbia. He noted that an upcoming production is set in
Sitka, but is being filmed in Massachusetts.
2:13:35 PM
MAX HENSLEY, staff to Senator Ellis, sponsor of SB 230,
explained that section 1 on page 1 established the ability for
the Department of Revenue (DOR) and the Department of Commerce,
Community & Economic Development (DCCED) to give tax credits to
film producers for a certain percentage of their qualified
spending on projects that qualify. This credit is transferable
and fully divisible and functions much like the tax credits for
capital projects and oil exploration.
Page 2, line 5, section 2, outlines the duties of the film
office and requirements for the film incentive program. He said
the current film office is staffed by a one-quarter time
position in the DCCED and this expands the roll of the position
to be more of what it was previously - to promote the State of
Alaska as a filming location and to assist producers who wish to
take advantage of the Alaska scenery.
Page 3, lines 1-19, determine a production's eligibility. A
producer must spend at least $50,000 in the state on qualified
expenditures to be eligible; they must employ interns from the
Film Internship Training Program (which will be certified at the
University of Alaska through this bill), and the production must
be approved by the Film Office. It won't allow news, sports,
weather, political ads, programs that are distributed for
internal corporate use, nor any sort of pornographic or obscene
production.
2:17:07 PM
Language on line 20 sets up the application process; producers
must submit a script or synopsis of what they plan to film to
the Film Office, some of the key personnel involved, estimated
dates and distribution plan for the final project. The tax
credit process starts on page 4, line 3. After the filming is
complete the production will submit an audited report to the
Film Office which will set out the amount and type of spending
that was done in the state. The tax credit will be awarded equal
to 25 percent of that spending with an additional 10 percent
bonus on qualified expenditures that are wages paid to Alaska
residents. An additional 1 percent goes for any expenditures
made in a rural area or any expenditures made between October 1
and March 30 during the traditional slower season for this
industry.
Finally, on page 4, lines 26 - page 5, line 29, defines
qualified expenditures, which are things directly related to the
film's production. It does not include indirect costs, marketing
and advertising - anything that is reimbursed at a later date.
SENATOR BUNDE asked what the profit margin is on a $30, $60 or
$80 million film and what the potential tax liability would have
been if one of those films been produced in Alaska. He was also
concerned with how "obscene" is defined since he would consider
many recent films to be obscene.
CHAIR ELLIS said the state would probably go by the existing
film rating system that is well established.
MR. HENSLEY said that producers have told him they would want a
better definition and suggested adopting the U.S. Code
definition, which very clearly states what is pornographic and
obscene.
2:20:37 PM
SENATOR STEVENS wanted to know about the Film Production
Internship Training Program and to make sure the University is a
willing participant in establishing it.
SENATOR BUNDE asked for an explanation of the fiscal note that
starts out at $290,000, drops to $33,000 and then jumps up to
$323,000.
2:21:27 PM
CAROLYN MUEGGE-VAUGHAN, President, Alaska Film Group (AFG), and
BOB CROCKETT, Board Member, Alaska Film Group, introduced
themselves.
2:23:59 PM
MS. VAUGHAN said AFG is a non-profit trade association whose
goal is the same as Alaska's - progress from activity in putting
Alaskans to work. She called SB 230 "our next gold rush." She
said it creates diversification of our economy, new private
sector jobs, new training programs, jobs for interns, crew and
Native Alaskans, infusion of construction dollars, millions of
dollars worth of PR, opportunities in rural Alaska and tax
credits for corporations.
SB 230 uses similar components of other successful incentive
programs from states like Louisiana and New Mexico. She said a
plethora of people will be used and hired; money will be spent
in Alaskan communities.
MR. CROCKETT added that Alaska isn't competitive and it is one
of a few states without an incentive program. The first thing a
production company asks is if you have an incentive program; if
you don't they walk away. With no incentive program these
communities are losing out on opportunities. As an added
benefit, many companies will leave infrastructure behind for
future and local productions to use. He recognized the economic
impacts of "Northern Exposure" that allotted $839,000 to each
episode in its beginning, but ended up costing $92 million to
produce in its four years. An estimated "ground-spend" of 75
percent put over $69 million into Washington's economy. Each
year a moose fest is still held in Rosalyn, Washington, where
the series was shot and it continues to attract loyal fans and
their money.
"Men in Trees," another recent show, is being shot in Vancouver,
Canada, but it is about Alaska, he said. They spend $1
million/day, but the only Alaskan put to work is a
cinematographer who spends a few days shooting the backdrops and
Alaskan product placements.
2:25:37 PM
A reality-based TV show called "Deadliest Catch" is now in its
third season with a ground- spend of $3.7 million. It has a crew
of about 30 people and only 2 are Alaskans. He said features
bring in the most; a recent feature, "30 Days of Night," was all
about Barrow but was shot in New Zealand for an estimated
ground-spend of $37.5 million. He said, "These are the projects
SB 230 will target."
MR. CROCKETT said the average cost to produce and market a
feature film is $100.3 million. In 2006 there were 607 features,
an increase of 72 films, which translates into $722 million.
MS. VAUGHAN said their competition is global. She took the crew
around who thought the perfect setting for "Insomnia" was
Seward, but it was shot in British Columbia because of the
money. The estimated ground-spend for that production was $37.7
million.
She said Canada has created infrastructure around its film
industry. They are so booked now they don't have enough crew to
meet their demands. The U.S. is also Alaska's competition. She
said "The Guardian" was set in Alaska, but only one week was
shot in Kodiak; the rest was shot in Louisiana and South
Carolina. After Louisiana created its incentive program, the
film production went from $7 million to $343 million in just two
years. In 2003 the film spending supported 5,437 jobs and in
2005 it went to 13,445 jobs and after five years the industry
there had ground spend of $500 million. In 2007, Louisiana had
three TV series and 343 features. They did it through their tax
credit program.
MS. VAUGHAN related that Louisiana has a 25 percent investor tax
credit, a 10 percent credit on Louisiana payroll and a 40
percent credit on infrastructure and development. Since 2001,
Louisiana and New Mexico have experienced a compound annual
employment growth of 23 percent.
2:27:51 PM
MR. CROCKETT said an upcoming Disney film, "The Proposal,"
starring Sandra Bullock is set in Sitka, but it is actually
being shot in Massachusetts. The producers have told AFG they
would love to shoot in Alaska. He said Alaska has long been a
popular setting for films and TV; just look at the ones that got
away.
2:28:32 PM
MS. VAUGHAN and Mr. CROCKETT showed a display done by the
Association of Film Commissioners International on the daily
economic ground spends of different kinds of film projects
saying that high-end budget films, full crew, union scale spends
about $100,000/day. "Deadliest Catch" which is very popular is
at the bottom of the chart at about $15,000/day.
2:28:56 PM
MR. CROCKETT said that wages compare to the North Slope and
feature films use union scale rates; commercials are even
higher. He emphasized that Alaska has a lot to offer - our
beautiful scenery, the mystique, professional crews - but one
item missing is the incentive program. It would bring growth and
development.
MS. VAUGHAN recapped that SB 230 creates jobs, diversifies the
community, stimulates tourism, builds infrastructure and support
services and provides opportunities for rural Alaska. It
develops educational and internship programs and it provides
transferable tax credits for Alaskan corporations.
2:30:54 PM
DAMA CHASLE, Partner, The Incentives Office, Los Angeles, said
she is a former Fox and Warner executive and that many shows
they discussed today would have been filmed in Alaska but for
the cost. She said the U.S. dollar is at an all-time low and
it's time to compete and have a film incentive that can really
stimulate a diversified economy and allow Alaskans to be part of
craft services. In addition to the benefits mentioned, she said
there is the pride in working in an industry that is state-of-
the art. Film is moving from 35 mm standard film into high
definition. Even the low cost project, "Deadliest Catch," a non-
scripted, non-starring reality show, but even that is an
expensive endeavor. It starts with someone making the food and
catering clear up to the stars. She was part of the Louisiana
endeavor. She watched jobs in Louisiana increase from a ground
spend of $20 million/year in November 2002 when they passed
their first bill to over $350 million two years later. Currently
it is over $500 million/year.
She has been part of the U.S. Incentive Planning Team with the
Motion Picture Association of America, and she encouraged them
to think very positively about this industry saying, "We're
lean; we're mean; we're green; and...we typically don't
pollute." Many producers will select Alaska with financial
incentives, and it will grow Alaska business and enhance the
cultural economy.
2:36:07 PM
PROFESSOR MIYA SALGANEK, University of Alaska Fairbanks (UAF),
said she teaches theatre and film directing and production
classes. She related that she went to the Sundance Film Festival
as a co-producer of a Fairbanks film that was selected for
Sundance in its spectrum category. It was written by a UAF
graduate student and was produced by people in Los Angeles who
called her. She had a group of students participate, all of whom
became production assistants and transferred away from UAF
because its film program is inadequate. She said students all
the way from high school up have a desperate interest and need
to be involved in dramatic arts. For those students that isn't
the world of the stage; it is the world of theatre, of YouTube,
of cinema, of production. SB 230 provides a unique opportunity
to help encourage that growth and development to the next level.
PROFESSOR SALGANAK said she is working with two productions now
- one as director at Sundance and with another group the AFG has
been involved with. Both productions are looking to shoot this
summer and they are both waiting to find out what will happen
with SB 230. She added that the film community is excited about
not having to represent Alaska from an outsider's point of view.
The incentive program would help hone the skills of Alaskans so
they would meet the needs of the workforce. Alaska has more than
enough people to fill these jobs, and she didn't see why we
should have to import people from L.A. to do them.
SENATOR STEVENS asked if the University would establish an
internship program if this bill passed.
PROFESSOR SALGANEK replied "Most definitely." She explained that
her students started out as interns and they were quickly
promoted to production assistants for one film. She is taking a
class to Barrow this summer and some students are being trained
to do scientific documentary work. The University is working now
to create an interdisciplinary film program using students and
faculty from journalism, art, history and English as well as
theatre and film studies.
2:40:26 PM
GORDON CARLSON, Vice President, CLI Construction, said he is
located in Cantwell AK and supported SB 230. He said he worked
on "Into the Wild" and it brought $3-$4 million to the
community. It affected local restaurants, motels, hotels,
carpenters, and laborers; it was a huge shot in the arm when
they stated filming in April. Now he is getting phone calls from
different people who want to visit his area as tourists.
2:42:20 PM
JERRY LAVINE said he has a production and equipment support
company in Anchorage that caters to the film and video industry.
A majority of business comes from outside Alaska, and he would
like to see the industry grow; SB 230 would help it go in the
right direction. He explained that his business and other local
companies could invest in more equipment that would meet the
needs of producers coming to Alaska who would then not have to
ship equipment up here. Also, if this bill passes and more
movies get produced here, companies like his don't even have
enough equipment and this would make it possible for them to get
more faster. He advised that tax credits work better than
rebates, because it provides an incentive to earn the credits
rather than just receiving the money.
He also advised that they should also consider the duties of the
office being created. It would provide assistance in permitting,
location scouting, and serve as a liaison between other local
groups and organizations. They should ask themselves if the
state should be involved with location scouting; maybe the
production should pay for it up front and get it as a qualified
expenditure. The same for permitting on state land. He also
thought the title of the office could be named so that it would
favorably affect marketing. Some states offer no caps or minimum
expenditure on the qualified expenditures, but that could be
figured out.
He urged them to consider that the 25 percent base credit didn't
go to enough Alaskans first. Instead, he suggested offering a 5
percent base amount to the production coming up here, and 25
percent more if they hire Alaskans, and maybe add another 5
percent for going to a rural area - and another 5 percent for
working between October 1 and April 30. He exhorted them to make
the production earn the qualified expenditures. He thought the
Internship program at the University was a great idea and
suggested including certification of any private training
programs that may be created through the industry as it grows.
2:50:12 PM
ANGELA MIELE, Vice President, State Tax Policy, Motion Picture
Association (MPA), said the MPA is a trade association
representing the nation's leading producers and distributors of
motion pictures and television programs. In her roll she
oversees the tax issues affecting member company business
practices around the country. She has seen a dramatic surge of
states adding film production incentives or increasing their
existing ones. This is due to a lot of increased
competitiveness, and a lot of states are realizing the economic
impact of these productions. They want to attract permanent
infrastructure and capital investment; it has really paid off.
2:51:59 PM
MS. MIELE cautioned them against using the MPA rating system,
which has been found to be unconstitutional; so she would go
with the federal provisions. The elements of the bill are very
competitive; it seems unencumbered with caps and limitations
which is key to a successful program. It is easy to access with
clear eligibility. She said countless studies have been done on
how much economic activity comes from film productions, which
they have heard about.
2:53:43 PM
BARBARA HUFF-TUCKNESS, Director, Governmental and Legislative
Affairs, Teamsters Local 959, supported SB 230. They are excited
about the job opportunities it will create in the state.
2:54:46 PM
KATE TESAR, pro-bono lobbyist, Alaska Film Group, said SB 230
has been developed in close association with people in the
industry and incorporates what has worked best in other states.
She said it has benefits for Alaskans through the transferable
tax credits for corporate Alaskans.
SENATOR STEVENS said it's a fascinating topic, but they need
more information about the history of Alaska's Film Office. He
asked Commissioner Notti, Department of Commerce, Community &
Economic Development, to give them a report on what the state
did wrong at that time.
SENATOR BUNDE said he wanted to see a potential net gain for the
$300,000 it will cost each year to run the office.
2:57:38 PM
CHAIR ELLIS said all the work on this legislation needs to
happen in this committee, because it only goes to the Finance
Committee afterwards.
SB 230 was held in committee.
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