Legislature(2015 - 2016)BELTZ 105 (TSBldg)
02/24/2015 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| Confirmation Hearings | |
| SB33 | |
| SB34 | |
| SB39 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | SB 33 | TELECONFERENCED | |
| += | SB 34 | TELECONFERENCED | |
| += | SB 39 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 39-REPEAL FILM PRODUCTION TAX CREDIT
1:58:05 PM
CHAIR COSTELLO reconvened the meeting and announced the
consideration of SB 39. "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."
She stated that Jared Meyer would give brief remarks and then
public testimony would be heard until 3:00. She asked for
individual testimony to be limited to three minutes.
1:59:19 PM
JARED MEYER, Fellow, Manhattan Institute for Policy Research,
Washington, D.C., summarized the purpose of the film tax credits
and questioned whether the program had been effective in
stimulating the overall economy rather than just for the film
industry. He said the data from other states and the Alaska Film
Office suggest that film tax credits fail to pay for themselves.
The credits aren't linked to profit but to the amount the
filmmaker spends on qualified expenses during production. He
also pointed out that the credits are more valuable than typical
deductions because they can be sold to another taxpayer or sold
back to DOR for 75 percent of their value. He described SB 39
and Governor Walker's proposal to suspend the program as welcome
steps because targeted tax breaks - especially ones targeted at
the film industry, are problematic.
MR. MEYER warned that states that choose to enter the
competitive arena of offering film tax credits are in a losing
battle and will have to continually increase the incentives to
keep the film companies from moving to other states that offer
better deals. He maintained that studies cited by proponents of
film tax credits are flawed. For example, a study funded by the
Motion Picture Association assumed that every dollar in credits
creates $17.75 in economic activity and leads to $1.88 in
increased tax revenue. He said that is pure fantasy. He
referenced independent studies that found that film tax credits
are not effective at creating permanent jobs or economic
development and only generate about 30 cents for every dollar
spent. Other states are taking notice of this problem and the
proposed legislation indicates that Alaska is as well. He noted
that in 2010, 40 states spent $1.4 billion on incentive
programs, but since then many states have eliminated or
suspended their credits. For example, Connecticut suspended its
film production tax credits for two years due to mounting
questions about whether the program paid for itself. Even the
Federal Reserve Bank of Boston concluded the program didn't pay
for itself when lost tax revenue is taken into account. He noted
that some states are ignoring the economic cost and racing to
see who can most heavily subsidize Hollywood. He described this
as a battle that benefits film producers but one that states
can't win.
MR. MEYER reviewed the most recent report by the Alaska Film
Office and stated that the numbers support the argument that
there are better uses of scarce taxpayer dollars than
subsidizing films, especially reality TV shows. He also cited
data from the [DCCED] program that shows that only eight percent
of the total qualified expenditures went to Alaska residents. He
stressed that the jobs coming to Alaska are not worth the cost
of foregoing tax revenue to try to bring in a new industry to
the state, especially in the face of falling revenues.
MR. MEYER summarized his comments stating that the economic
literature, trends in other states, and data from the Alaska
Film Office all suggest that subsidizing Hollywood producers is
neither fair nor smart economic policy.
2:08:43 PM
SENATOR STEVENS asked Mr. Meyer to give some background on the
Manhattan Institute including how it's funded as well as his
personal education and experience.
MR. MEYER said the Manhattan Institute is a 501(c)(3) nonprofit
that works on policies to promote economic growth. He attended
school at Saint John's University in New York City where he
studied finance. His current focus is primarily on regulation
and how tax breaks affect the economy.
CHAIR COSTELLO asked for a copy of the independent studies he
cited.
MR. MEYER agreed to provide the information. He reiterated that
those findings stand in stark contrast to what the Motion
Picture Association of America concludes when it does studies on
the effect of film tax credits.
CHAIR COSTELLO thanked Mr. Meyer for the broad view.
2:10:39 PM
RON HOLMSTROM, representative, SAG-AFTRA, Anchorage, Alaska,
testified in opposition to SB 39. He spoke of having to defend
his livelihood every year, of the incentives that have been
eliminated since the program started, and the local
entrepreneurs that have given up their plans to build ancillary
businesses for the film industry. He pointed out that there
hasn't been a major motion picture in Alaska in over three and
one-half years and that while membership in SAG quadrupled in
the first two years of the program, it has added just four
members since the program was changed.
MR. HOLMSTROM suggested that now was an excellent time to
diversify the Alaskan economy. He pointed to Louisiana, New
Mexico, Georgia and British Columbia as examples of
jurisdictions that are thriving on the film industry. They have
built the necessary infrastructure to support the industry,
which Alaska has not done.
He concluded saying that while film production may not be the
golden goose, it could be one golden goose in these difficult
economic times.
2:15:08 PM
KAREN TALLENT, representing herself, Anchorage, Alaska, stated
that she is intimately knowledgeable of the film industry in
Alaska and she is adamantly opposed to SB 39. She understands
why Governor Walker suspended the program, but believes it would
be a costly mistake to repeal the program altogether. She
pointed out that the film industry brings much-needed money to
the state and this is the kind of economic diversity the state
needs in the current fiscal situation. For example, the small
budget film "Big Miracle" spent $16 million during filming. A
larger budget film scheduled to film in Whittier in the spring
has the potential to bring in much more while providing jobs for
Alaskans and economic opportunity for Alaskan businesses.
Revenue from this industry could help to improve the financial
health of Alaska. However, if the tax credit program is
repealed, producers won't come and the state will lose the
chance to build a viable and sustaining industry that is badly
needed to diversify the economy in Alaska.
MS. TALLENT characterized SB 39 as unnecessary and shortsighted.
It would kill a growing industry that brings needed revenue to
the state, diversifies the economy, and provides jobs and
economic opportunities for Alaskan businesses.
2:20:29 PM
D.K. JOHNSTON, Tri-Seven Pictures, Anchorage, Alaska, testified
in opposition to SB 39. He stated that it is time to diversify
the Alaskan economy not limit it further. He described the film
production community in Alaska as alive with creativity and
determination. He said this Alaskan workforce is growing in
anticipation of the future in the film and television industry.
There are increases in educational opportunities, community
organizations, and small businesses that are rising to the
challenge of keeping the industry going. He related that he
recently attended a production education safety training course
in Whittier. It was attended by welders, carpenters, painters,
fishermen, and helicopter pilots as well as Alaskans who are
production oriented. This is a small sample of the variety of
jobs and professions that is needed to bring a large production
to life.
MR. JOHNSTON asked the committee to carefully consider the
consequences of repealing the film incentives and vote no on SB
39.
2:22:37 PM
ERIC ULZER, Business Manager, IATSE local 918, Anchorage,
Alaska, testified in opposition to SB 39. He explained that
local 918 is the film labor union comprised of painters,
carpenters, welders, and caterers. He described what the union
is doing in Whittier to provide an offseason bump for locals. He
said this demonstrates that the film tax incentive program
benefits many people who aren't from Hollywood.
2:25:10 PM
DANIEL JOSEPH LEE, representing himself, Unalaska, Alaska,
testified in opposition to SB 39. He told the committee that for
three years he paid his mortgage with reality TV and it allowed
his wife to continue her post-grad degree in psychology and
education. He pointed out that individuals that work in film
production and reality TV develop intangible skills that are an
asset in any field. They become goal oriented and focused
workers who show up on time and come prepared to work.
MR. LEE concluded that his family has been in Alaska for three
generations and it would break his heart if he had to leave
because the film industry fell apart
2:26:54 PM
LISA ROBERTS, representing herself, Unalaska, Alaska, testified
in opposition to SB 39. She said she has worked in the film
industry for about six years and she is an example of the
success of the film tax incentive program. Film companies
trained her as opposed to importing qualified workers and she
has trained others. She said the incentive program is about
putting Alaskans to work and SB 39 kills that opportunity. She
urged the committee not to squash opportunities for Alaskans.
2:28:18 PM
BETH SKABAR, Original Productions, Unalaska, Alaska, testified
in opposition to SB 39. She said that since the start of the
incentive program she has seen the film community come together
to grow an industry. New businesses have flourished, new careers
have started, and friends and colleagues have worked their way
up through the ranks in the industry. She emphasized that the
film incentives are working. There are Alaska businesses and
resources to support productions that weren't here before.
Alaskans are working on productions and in jobs that previously
would have gone to someone from New York. She pointed to the
large production on her front lawn that is ready to spend
millions of dollars in wages, goods, and services. This
demonstrates that the film incentives are working.
MS. SKABAR concluded that SB 39 would unreasonably stop a
successful program that aims to diversify the economy, which is
what Alaska needs.
2:30:22 PM
MATT SZUNDY, Glacier Film Productions, Anchorage, Alaska,
testified in opposition to SB 39. He provided a personal example
of the unquantifiable blue sky benefits of the film industry in
Alaska. In the past year he had two film industry contracts. One
was specifically for production and the other was a contract
with DCCED to serve as the state film representative. As a
result of that work, he was able to put three employees on
salary in tourism. That shows the trickledown effect of income
in the state via film. He advised that a number of film
productions are watching this legislation. They represent
millions of dollars in jobs and services to the state.
MR. SZUNDY concluded that the incentive program brings economic
benefit to the state, which is what the law says it is supposed
to do. It doesn't say it is to bring economic benefit to the
state government.
DAVID MCGOVERN, representing himself, Anchorage, Alaska,
testified in opposition to SB 39. He pointed out that states
that support the film industry all have sin taxes, which bring
funds into the state budget. He suggested that a sales tax might
be something to consider. He noted that Alaskans have had to
fight for the incentive program every year and one of the
biggest issues is the concern that the film industry will make
Alaskans look bad. He questioned the merit of that concern when
the state already has a reputation to overcome because it
already has the highest per capita rates for rape and suicide in
the nation He suggested the committee consider the jobs the
industry will bring.
2:34:56 PM
KEN FANKHAUSOR, representing himself, Anchorage, Alaska,
testified in opposition to SB 39. He said that now isn't the
time to shut the door on economic diversity. Rather, it's time
to make new, viable opportunities and jobs for Alaskans. He
described the incentive program as a hand-up, not a handout. He
related that about three years ago he began moving up through
the industry by learning on-the-job skills from people who have
come to Alaska to make films and television shows. Today he
works as a camera operator or an assistant. He stressed that
getting that type of work in Alaska is only possible because of
the tax incentive. If SB 39 passes, he and many other Alaskans
will have to leave the state because the industry won't survive.
2:36:56 PM
LOIS SIMENSON, representing herself, Eagle River, Alaska,
testified in opposition to SB 39. She said she realizes that the
decision on SB 39 will be based on dollars and cents and whether
the film incentive will continue to benefit Alaska. She said she
is speaking as an Alaskan who has worked on most of the major
films in Alaska. These projects are bridge builders that provide
jobs for Alaskans and bring the community together in ways that
cannot be captured on an Excel spreadsheet. She said the film
industry gave Alaskans hope for a diversified economy and paved
the way for an explosion of local film makers to enter the
industry. These films promote Alaska and its tourism industry.
They increase revenue for the support infrastructure, hotels,
catering, and transportation businesses.
MS. SIMENSON urged the committee not to eliminate the film tax
incentives which would send jobs out of state and force actors
like herself to leave Alaska.
2:39:48 PM
DAVID BOYLE, representing himself, Anchorage, Alaska, testified
in support of SB 39. He described the tax credit as a subsidy to
the film industry and a shining example of crony capitalism that
subsidizes outside companies and extracts money from the state
treasury. He maintained that Alaska's subsidy is the most
generous of the 40 states that offer film subsidies. He said
these subsidies don't pay for themselves and they reduce funds
that could support education, public safety, and infrastructure.
He said a review of the approved tax credits shows that most of
the jobs are nonresident. For example, the Deadliest Catch
production employed 8 residents and 35 nonresidents and reaped
$691,000 in tax credits. He cited several more examples to
support the point that the program isn't about employing
Alaskans. Rather, it's about hiring nonresidents and sending
Alaska money to outside companies while reducing tax liabilities
for Alaskan corporations. He discussed an audit that shows the
film tax subsidy cost Alaska more than $19.9 million from 2008
to 2012. The same audit shows that from 2008 to 2011 Alaska
direct hires represented just 16 percent of the total direct
hires, and that Alaskans received about 15 percent of the $52
million in wages paid. According to the Northern Economic Study,
$21.2 million in tax credits generated economic activity that
resulted in an estimated $1.2 million in additional taxes and
fees.
MR. BOYLE urged the committee to pass SB 39.
2:44:24 PM
MARY KATZKE, Affinity Films, Anchorage, Alaska, testified in
opposition to SB 39. She told the committee she has been
producing films in Alaska since 1980. This is work she loves and
it's difficult to put a value on that. She told the committee
that there is a rising pool of talent in Alaska and she would
like that to continue. She said she respects the economic
perspective of the testifier from the Manhattan Institute of
Public Policy, but she doesn't believe he understands the film
business. She said the average film takes 7-10 years from idea
to the screen. The highly criticized reality shows are always
the first to arrive but the goal is a television series that
lasts five seasons. That means nine months of steady work for
people. She and others have been working toward this for the
last three and one-half years and they had a master plan in
place until four weeks ago.
MS. KATZKE likened getting a film incentive program going to
planting a forest. She said the seedlings are starting to come
up and to send a mower in and knock everybody down is not the
way to nurture them. She reminded the members that this fiscal
crisis will pass and urged them not to kill the industry.
2:47:29 PM
RANDY DALY, President elect, Alaska Film Group, Kenai, Alaska,
testified in opposition to SB 39. He said he is the publisher of
the Alaska film industry news magazine and producer of a daily
show, which has allowed him to hire an editor, a sales person,
and a "second talent." He described SB 39 as a bad idea that
does not decrease spending this year but harms the future. He
said SB 39 won't solve the state's long-term budget problem of
spending more than it generates, but diversifying the economy
will. The Alaska film incentive provides some of that diversity
and it is competitive. He said the legislature designed the
program and if it is allowed to operate, the state will have the
opportunity to harvest revenue benefits from business done in
the state in the future. However, if SB 39 passes the money and
sweat equity invested in the program be lost and future revenue
will go away. The fact that the legislature has vacillated on
the status of the program each year has caused some projects to
leave the state and others to not come at all.
MR. DALY suggested the committee think of the program in terms
of a corn crop. Some of the corn will be sold and some will be
used as feed, but first the farmer sets aside seed for next
year's crop. This is sustainable into the future. By contrast,
SB 39 would have the State of Alaska eat its seed and starve in
the future. He asked that SB 39 be withdrawn.
2:51:01 PM
MARTIN WEISER, Managing Partner, Fireside Media Group (FMG),
Anchorage, Alaska, testified in opposition to SB 39. He
cautioned that repealing the film production tax credit program
will reverse what has already been accomplished and destroy any
future possibility for Alaska to claim its share of the growing
entertainment and technology industries that otherwise would
train Alaskans for state of the future jobs, return hundreds of
millions of dollars to Alaska businesses, and secure Alaska's
financial future without relying on oil.
He described a team of film and TV producers, Alaska-based
Hollywood executives, artists, educators, and some business and
civic leaders who have made a significant capital investment in
the past two years to lay the foundation for a sustainable
entertainment and information technology industry in Alaska. The
Alaska film tax incentive is key to this plan, but they utilize
the program differently than the majority of other producers and
out of state productions.
MR. WEISER explained that the strategy is to couple physical
production with post production, which is what happens after a
film is shot. This phase often lasts up to a year and includes
film editing, music scoring, audio engineering, visual effects,
and the data management and encoding necessary to take the film
to market. These post-production jobs are grounded in local
businesses such as FMG that might be working on multiple
projects at any given time. The jobs appeal to young Alaskans
who are looking for ways to take their experience with video
games, social media, and mobile computing into the workforce.
They also appeal to working Alaskans looking for a career change
that will provide skills that reach far beyond movie making.
He reviewed the accomplishments over the last 12 months
including a partnership with the University of Alaska System to
provide students and faculty with real world opportunities to
learn from some of Hollywood's prominent directors, producers,
and production staff. Another partnership has brought film and
TV scores to the Alaska Symphony Orchestra, many of which are
for productions filmed outside Alaska. This has made Alaska a
global contender for music and audio services that typically go
to symphonies in L.A. New York, London, and Eastern Europe.
MR. WEISER reported that they are close to signing a multi-year
service agreement with some of Hollywood's major studios to
pipeline a portion of the post-production work to Alaska, which
would create a sustainable and long-lasting workload for their
labor force. They have also established Alaska's first film and
TV financing syndicate to help co-finance certain projects that
either film their physical production and/or do their post-
production work in Alaska. He said this goes far beyond what the
legislature envisioned when it passed the legislation. Alaskans
will not only benefit from the production dollars spent here but
also capture a share of the global revenues of these projects.
MR. WEISER said the recent announcement that the tax incentive
program likely will not continue has brought all the hard work
by their staff and partners to screeching halt. He warned that
time is of the essence to restore market confidence that Alaska
is still open for business.
2:56:42 PM
DEREK MUSTO, representing himself, Anchorage, Alaska, testified
in opposition to SB 39. He works as a business agent for
Teamsters Local 959 that represents the motion picture studio
industry in Alaska. He described the suspension of the program
as a sensible approach given the current fiscal situation. It
gives the state the time needed to work through tough times
without closing the door on the film industry. He emphasized
that passing SB 39 won't save the state dollars, but it will
permanently cripple a growing industry in Alaska that can
operate anywhere it chooses. Keeping the program on the books
will leave Alaska's door open to an industry that diversifies
the economy and provides jobs. He urged the committee not to
pass SB 39.
CHAIR COSTELLO announced she would hold SB 39 in committee and
keep public testimony open.
2:59:51 PM
SENATOR ELLIS expressed appreciation for the time, energy, and
passion that Mary Katzke has put into episodic television, which
is the big prize. "My heart goes out to her and her efforts," he
said.
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