03/17/2008 03:00 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB230 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 230 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
March 17, 2008
3:08 p.m.
MEMBERS PRESENT
Representative Kurt Olson, Chair
Representative Mark Neuman, Vice Chair
Representative Carl Gatto
Representative Gabrielle LeDoux
Representative Jay Ramras
Representative Robert L. "Bob" Buch
Representative Berta Gardner
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
CS FOR SPONSOR SUBSTITUTE FOR SENATE BILL NO. 230(FIN) am
"An Act establishing the film office in the Department of
Commerce, Community, and Economic Development; creating a
transferable tax credit applicable to certain film production
expenditures incurred in the state; and providing for an
effective date."
- MOVED HCS CSSB 230(L&C) OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: SB 230
SHORT TITLE: FILM OFFICE/ FILM PRODUCTION TAX CREDIT
SPONSOR(s): SENATOR(s) ELLIS
01/16/08 (S) READ THE FIRST TIME - REFERRALS
01/16/08 (S) L&C, FIN
01/25/08 (S) SPONSOR SUBSTITUTE INTRODUCED-REFERRALS
01/25/08 (S) L&C, FIN
02/05/08 (S) L&C AT 1:30 PM BELTZ 211
02/05/08 (S) Heard & Held
02/05/08 (S) MINUTE(L&C)
02/12/08 (S) L&C AT 1:30 PM BELTZ 211
02/12/08 (S) Heard & Held
02/12/08 (S) MINUTE(L&C)
02/14/08 (S) L&C AT 1:30 PM BELTZ 211
02/14/08 (S) Moved CSSB 230(L&C) Out of Committee
02/14/08 (S) MINUTE(L&C)
02/15/08 (S) L&C RPT CS 4DP 1NR SAME TITLE
02/15/08 (S) DP: ELLIS, DAVIS, STEVENS, HOFFMAN
02/15/08 (S) NR: BUNDE
02/22/08 (S) FIN AT 9:00 AM SENATE FINANCE 532
02/22/08 (S) Heard & Held
02/22/08 (S) MINUTE(FIN)
02/28/08 (S) FIN AT 9:00 AM SENATE FINANCE 532
02/28/08 (S) Moved CSSSSB 230(FIN) Out of Committee
02/28/08 (S) MINUTE(FIN)
02/29/08 (S) FIN RPT CS 4DP 1NR NEW TITLE
02/29/08 (S) DP: STEDMAN, ELTON, THOMAS, HUGGINS
02/29/08 (S) NR: OLSON
03/05/08 (S) TRANSMITTED TO (H)
03/05/08 (S) VERSION: CSSSSB 230(FIN) AM
03/10/08 (H) READ THE FIRST TIME - REFERRALS
03/10/08 (H) L&C, FIN
03/17/08 (H) L&C AT 3:00 PM BARNES 124
WITNESS REGISTER
SENATOR JOHNNY ELLIS
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Answered questions as the prime sponsor of
SB 230.
MAX HENSLEY, Staff
to Senator Johnny Ellis
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented SB 230 on behalf of the prime
sponsor, Senator Johnny Ellis, and answered questions on SB 230.
BOB CROCKETT, Past President, Board Member
Alaska Film Group, Juneau, Alaska
POSITION STATEMENT: Testified in support of SB 230.
KATE TESAR, Pro Bono lobbyist
Alaska Film Group
Juneau, Alaska
POSITION STATEMENT: Testified in support of SB 230.
MAYA FALGANEK, Associate Professor
University of Alaska Fairbanks
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of SB 230.
GORDON CARLSON
Cantwell, Alaska
POSITION STATEMENT: Testified in support of SB 230.
DAMA CHASLE, Production Executive
Los Angeles, California
POSITION STATEMENT: Testified in support of SB 230.
PAM FOREMAN
Kodiak, Alaska
POSITION STATEMENT: Testified in support of SB 230.
BRICE HABEGER
Juneau, Alaska
POSITION STATEMENT: Testified in support of SB 230.
ACTION NARRATIVE
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 3:08:08 PM. Representatives
Gatto, Gardner, Neuman, and Olson were present at the call to
order. Representatives LeDoux, Ramras, and Buch arrived as the
meeting was in progress.
SB 230-FILM OFFICE/ FILM PRODUCTION TAX CREDIT
3:08:23 PM
CHAIR OLSON announced that the only order of business would be
CS FOR SPONSOR SUBSTITUTE FOR SENATE BILL NO. 230(FIN) am, "An
Act establishing the film office in the Department of Commerce,
Community, and Economic Development; creating a transferable tax
credit applicable to certain film production expenditures
incurred in the state; and providing for an effective date."
SENATOR JOHNNY ELLIS, Alaska State Legislature, testifying as
prime sponsor of SB 230 introduced his staff, Max Hensley.
Senator Ellis stated that SB 230 would help provide incentives
for the film industry to the benefit of Alaskans. This bill is
an important step to diversify the economy, he said, noting that
45 states have active film offices, almost all with some type of
incentive program. Of these, 12 states offer transferable tax
credits and many others offer direct grants.
SENATOR ELLIS related some statistics that demonstrate other
states' successes such as New Mexico, whose tax incentive
enacted in 2001 initially spent $1.5 million in expenditures.
However, in 2007, the film industry spent $476 million in New
Mexico. Louisiana went from $7 million in film spending in 2003
to $350 million in 2006. These are states not normally thought
of as great locations for the film industry, but with an active
film office to answer the phones, to coordinate permits for this
type of activity, and to assist in offering incentives, these
states have been able to aid their local economies. The film
industry offers communities lots of jobs and small business
opportunities. Alaska has lost film opportunities in recent
years such as 30 Days of Night, which was produced by Columbia
Pictures and set in Barrow, but was filmed in New Zealand with a
production budget of $32 million. The Proposal produced by
[Touchstone Films] features Sandra Bullock, set in Sitka, Alaska
but filmed in Gloucester, Massachusetts. This film is currently
in pre-production and is scheduled to be released in September
2009. He noted one upcoming film that he would hope could be
filmed in Sitka is the The Yiddish Policemen's Union, written
and directed by the Coen Brothers, based on a novel set in
Sitka. It's a rare occasion when the film director has the
authority to film in the authentic location, he noted. Sean
Penn insisted on filming Into the Wild in Alaska and local
people were hired and local businesses benefited, he opined.
However, the producers examine their profits in the film
decision making process.
3:13:06 PM
MAX HENSLEY, Staff to Senator Johnny Ellis, Alaska State
Legislature, explained SB 230 on behalf of the prime sponsor,
Senator Johnny Ellis. Mr. Hensley referred to proposed Section
1, which would authorize the Department of Commerce, Community,
& Economic Development (DCCED) to cooperate with the Department
of Revenue (DOR) to provide a transferable film production tax
credit that must be used within 3 years of issue. He
characterized the proposed Article 2, Section 2, as the bulk of
the bill which outlines the duties of film office including
provisions to promote Alaska as an appropriate location for film
production, certify an internship program and provide an annual
report to the legislature. He referred to page 3, which
authorizes the film office to administer the film production
incentive program, which set the minimum requirements for
eligibility for productions, such that a production must spend a
minimum of $100,000 in qualified expenditures over 24 months and
must receive approval by the film office. This bill disallows
news, weather, current events, internal corporate productions,
local advertising, infomercials, obscene productions, and
political advertisements from qualifying for the tax credits.
He referred to the bottom of page 3, which outlines the
qualifications for the transferable tax credit. He explained
the process, including that a producer must first apply for the
transferable tax credit and provide such items as the script or
a synopsis of the production; must include the names of the
producer, director, proposed cast, the estimated start,
completion, and filming dates; and must provide other
information the film office requires to determine eligibility
for the transferable tax credit. If approved, the film office
would issue the production company a preliminary certificate
which would include an outline of the credits that the company
could anticipate. He referred to page 4, to the provision that
outlines the film production tax credit. He noted the
transferable tax credit would consist of 30 percent of the
qualified spending, plus a 10 percent bonus for expenditures for
Alaskan payroll, and a 2 percent bonus for spending in rural
areas, and an additional 2 percent for filming between October
and May. He noted that prior to receiving any tax credit, the
producer must submit to the film office a cost report that has
been verified by an independent certified public accountant
(CPA). He referred to pages 4-6, which lists the qualifying
expenditures including preproduction, production, and
postproduction spending that must be incurred in the state and
on items used in the production. Some items not covered include
such items as the cost for the CPA verification, cost for
marketing or distribution of the film, or profit sharing costs.
3:17:49 PM
MR. HENSLEY, in response to Representative Gatto, answered that
the exceptions include pornographic films so pornographic
filmmakers would not qualify for the transferable tax credits.
3:18:38 PM
REPRESENTATIVE LEDOUX inquired as to what taxes would apply to a
film company that was not based in Alaska, but is filmed in
Alaska. In further response to Representative LeDoux, Senator
Ellis answered that all the film companies set up limited
liability corporations (LLCs) in order to benefit from the tax
status. Several suggestions were made to amend SB 230 to
initiate a tax on LLCs in order to capture revenues for the
state treasury. However, he noted that initiating a tax would
entail a major policy call with overarching ramifications for
future economic activity. He opined that he personally thinks
that taxing LLCs would be a mistake, although the discussion
could start with SB 230. The taxes that would be paid would
accrue to the local areas of the state.
REPRESENTATIVE LEDOUX related her understanding that the bill
would give film companies a credit to use to pay against local
taxes.
MR. HENSLEY explained that the credit SB 230 would offer is a
transferable tax credit, which is the most common mechanism used
among the states that provide incentives for the film industry.
That transferable tax credit would be applicable to corporate
tax liability that could apply to a number of industries. The
transferable tax credit would be issued to the film company
based on its spending. In turn, the film company would sell the
transferable tax credit through a broker or to a company that
holds a corporate income tax liability, he offered.
REPRESENTATIVE LEDOUX inquired as to whether the film company
could sell its tax credit to oil companies.
MR. HENSLEY answered it could do so or it could sell the
transferable tax credit to the grocery store or a
telecommunications company.
3:22:12 PM
SENATOR ELLIS pointed out that currently less than a billion
dollars of corporate income tax is paid to the state treasury by
a variety of corporations. He further noted his understanding
that two of three major oil companies do not participate in
transferable tax credits. If the concern entails some general
discomfort with oil companies in Alaska, then it is helpful to
know that two oil companies do not participate.
3:22:55 PM
REPRESENTATIVE RAMRAS inquired as to the process a company would
use to apply for the transferable tax credit.
MR. HENSLEY pointed out that in all the other states that have
introduced similar programs, brokers purchase the transferable
tax credits from out of state film companies and market them to
in state corporations interested in purchasing them.
REPRESENTATIVE RAMRAS related his understanding that brokers
would earn a commission, buyers would obtain the transferable
tax credit, and the private sector would enjoy the benefit from
additional jobs. Representative Ramras also noted that he
intends to offer an amendment later. He inquired as the
allocation process when an actor, such as Sean Penn, shoot a 90
day film in Alaska, but 10 days were filmed in another location.
He further inquired as to the cap on talent.
SENATOR ELLIS pointed out that SB 230 set a limitation in the
bill on high paid talent at a level the other body agreed upon.
SENATOR ELLIS explained that the limitation adopted in the
Senate Finance Committee capped a dollar amount on payments to
the primary stars.
MR. HENSLEY referred to page 5, paragraph (10), which outlines
the qualified expenditures for the total aggregate payroll for
services performed in Alaska to clarify the types of allowable
expenditures.
SENATOR ELLIS noted that if the limitation were removed, the
primary star's salary would be subsumed into the overall
payroll.
3:27:43 PM
REPRESENTATIVE RAMRAS stated he is a "big fan of this bill". He
recalled the program The Deadliest Catch and inquired how the
series would be handled under the bill, and whether the
production cost would be allocated for a particular episode. He
noted the $30 million in production costs for a film such as
Into the Wild. He further inquired that if $5 million of $30
million was spent in Alaska, what portion of that amount would
be eligible for a tax credit.
SENATOR ELLIS asked to hold off on that specific question.
3:29:42 PM
REPRESENTATIVE NEUMAN expressed concern about the fiscal cost to
state to create a tax credit when many good programs are not
funded due to funding constraints.
SENATOR ELLIS agreed. He offered to work to help secure
additional funding for foster children.
3:32:05 PM
REPRESENTATIVE NEUMAN inquired, with respect to the transferable
tax credit, to clarify the interplay between the Department of
Commerce (DCCED), Community, & Economic Development and the
Department of Revenue (DOR).
SENATOR ELLIS answered that each department is responsibile for
different provisions of SB 230.
MR. HENSLEY explained that the film office would be created
under the DCCED, which would evaluate and administer the
incentive program. Once credits were issued, the transferable
tax credit would be redeemed through DOR, and overall the
departments would work in cooperation with one another.
SENATOR ELLIS, in response to Representative Neuman, answered
that the Legislative Budget and Audit Committee (LB&A) would
perform any audits. This bill also provides for a review of the
incentive program in 5 years. He noted that either agency could
audit its own internal functions, but that LB&A would audit the
entire film office.
MR. HENSLEY added that the film office will provide the
legislature with an annual report to inform it of the amount of
transferable tax credits issued.
REPRESENTATIVE NEUMAN inquired as to what assurance there is
that the departments would work together. He further inquired
as to how the film office will promote film production in
Alaska.
SENATOR ELLIS explained that the film office previously promoted
filmmaking in Alaska prior to budget cuts. Currently the film
office consists of a quarter time position. Thus, the film
office would conduct its promotion through a variety of methods
including responding to e-mails, answering the phone, developing
or updating collateral materials, and conducting general
promotion activity that most states perform.
3:36:25 PM
SENATOR ELLIS, in response to Representative Neuman, answered
that under SB 230, he anticipates that the film office would
perform outreach to people who scout locations and write scripts
to entice film companies to produce films in Alaska.
Opportunities exist to reach out to studios, primarily to
cinematographers, which is necessary since the state competes at
a national or global level. Before anyone gets too concerned
about the state subsidizing the film industry, he pointed out
that the state subsidies almost all major industries, which
represents a state and private industry partnership to maximize
the benefits to Alaskans.
3:39:05 PM
REPRESENTATIVE NEUMAN stressed that he would like to see the
state expand its current industries. He noted the floundering
dairy and wood industries in Alaska. He asked if local
companies such as hotels could qualify for transferable tax
credits. He further inquired why infomercials are disallowed.
MR. HENSLEY referred to page 3, lines 18-19, which disallows any
advertisement infomercial, or any production that solicits
funds, except for a commercial television advertisement produced
for national distribution. In further response to
Representative Neuman, Mr. Hensley answered that in order to
qualify for national distribution, the advertisements would need
to be shown nationwide, and advertising in one state other than
Alaska would not likely qualify.
3:42:01 PM
REPRESENTATIVE NEUMAN referred to page 5, proposed paragraph
(17), and stated the "other similar production expenditures"
seems too broad.
SENATOR ELLIS answered that on page 5, proposed paragraph (17)
is intended to capture all expenditures that the film office
determines qualifies, or that should qualify, for the
transferable tax credit. He said that he anticipates that the
technology in the industry would continue to progress.
MR. HENSLEY further clarified that five years ago digital film
editing did not occur. Thus, the language on page 3, proposed
paragraph (17) would also encompass new technology.
SENATOR ELLIS offered that his approach has been aggressive, but
reasonable with the goal of refining the bill to produce the
best product in SB 230.
REPRESENTATIVE GATTO related his understanding that SB 230 would
allow transferable tax credits that include an initial 30
percent transferable tax credit, with an additional 10 percent
for Alaskan wages paid, plus 2 percent credit for off season
filming, and an additional 2 percent for rural hire. He asked
if this ratio is competitive.
SENATOR ELLIS opined that the amount of the transferable tax
credit is "right at his tolerance level," but he said he
believes it is competitive. He offered that he initially
thought that 20 to 25 percent seemed like enough, but after
listening to other state's film offices throughout the country
that 30 percent transferable tax credits to be competitive. He
pointed out that SB 230 represents a competitive rate based on
recommendations from industry analysts that cannot benefit from
SB 230. He highlighted that the transferable tax credits are
only provided if the economic benefit actually occurs.
3:44:55 PM
REPRESENTATIVE GATTO opined that a strategy to start high and
reduce the rate if "five film companies are tripping over one
another" seemed like a good strategy.
SENATOR ELLIS reiterated that the effectiveness of the film
office would be reviewed.
REPRESENTATIVE GATTO posed a scenario in which a film is highly
successful. He inquired as to whether the state would tax the
profit.
SENATOR ELLIS answered that SB 230 does not contemplate a
windfall profits tax, or a piece of the profit sharing with the
industry. He pointed out that filming in Alaska would provide a
means to show the national world the beauty of Alaska to enhance
tourism, economic opportunities, and the many reasons that
Alaskans live here. He surmised that it would probably not be
well received by industry to institute a profit sharing tax and
might be the tipping point against filming in Alaska.
3:48:14 PM
REPRESENTATIVE GATTO offered his encouragement for benefits to
Alaska from SB 230. He pointed out that the program The
Deadliest Catch showcased Alaska's fishermen and other series,
such as one that highlights the toughest jobs could also
demonstrate the effectiveness of the oil industry regulation in
Alaska.
MR. HENSLEY referred to a news article, titled "TV show heats up
king crab market" [by Margaret Bauman], Alaska Journal of
Commerce, that credits a 17 percent increase in king crab sales
to the program The Deadliest Catch. In fact, one major
restaurant chain will add the name of the vessel, the "Time
Bandit," to its menu. However, he noted that decisions are made
annually to determine whether a program will continue to be
aired.
3:50:09 PM
REPRESENTATIVE GARDNER referred to page 4, line 17, which read,
"(3) an additional two percent of qualified expenditure made in
the state between October 1 and March 30." She inquired as to
the rationale for offering an incentive when often winter is a
saleable commodity for Alaska.
SENATOR ELLIS answered that SB 230 attempts to offer incentives
at a time when many communities go into economic slowdown. He
also pointed out that many of the winter scenes can be filmed in
British Columbia so an incentive is offered in order to be
competitive.
REPRESENTATIVE GARDNER referred to proposed Section 44.33.232,
and inquired as to the timing and clarification of the
appropriations.
MR. HENSLEY explained that this section refers to appropriations
to the DCCED for operating funds for administering the film
office. He referred to the fiscal note of approximately
$300,000.
3:52:31 PM
REPRESENTATIVE BUCH, in response to an earlier question, noted
that Article 2A refers to the duties of the film office, which
includes directing the DCCED and DOR to work in cooperation with
one another. He highlighted that the letters of reciprocation
currently exist and that a letter of conveyance could foster the
desired cooperation.
SENATOR ELLIS responded that the two departments have a history
of working together so if more specificity is necessary, that it
can be facilitated.
3:53:19 PM
REPRESENTATIVE LEDOUX inquired as to the reason that SB 230
would eliminate some productions from eligibility for the
transferable tax credit listed in proposed Section 44.33.233
(b), such as those productions produced primarily for
industrial, corporate, or institutional purposes, and
advertisement infomercials.
MR. HENSLEY answered that some productions are excluded since
programs such as news or weather cannot be filmed outside the
state. Other programs that are for internal use are not paid
for by the production companies. Instead, these programs are
paid for by sponsors so an incentive is not needed. He
highlighted that infomercials are paid by the companies that
advertise the "extra sharp knife" to pay for the infomercial and
that the advertising is not paid by the producer.
3:55:18 PM
REPRESENTATIVE LEDOUX inquired as to whether the distinction
should be made to limit the type of filming. She suggested that
another approach would be to offer incentives to anyone who came
to Alaska to produce a film.
SENATOR ELLIS explained that the industry made a compelling
argument during prior committee hearings in the Senate. He
offered a willingness to consider changing the list of eligible
productions and noted that SB 230 could be "tweaked."
MR. HENSLEY, in response to Representative LeDoux, explained
that the bill excludes small productions so as not to inundate
the film office since it will administer the applications.
Thus, SB 230 limits eligibility to those projects that have
$100,000 or more in qualified expenditures. The limits help to
discourage people from filming, "my Alaskan vacation." This
bill's intent is to focus on incentives for worthwhile film
projects in Alaska.
SENATOR ELLIS further emphasized that the small film office
would not have time to spend on lots of applications. Thus, the
minimum application amount tends to curb the projects that
require time to process, but produce little economic benefit to
the state.
MR. HENSLEY noted that the various costs of production will be
highlighted in the upcoming presentation.
REPRESENTATIVE LEDOUX referred to page 3, paragraph (5), which
excludes sexually explicit conduct. She noted that most regular
programs advertise sexually explicit products and asked for
clarification.
SENATOR ELLIS answered that SB 230 uses the national standard
"as defined by 18 U.S.C. 2256." He further noted that this is
the method used by other states to limit incentives to the
pornographic film industry.
MR. HENSLEY offered to furnish a copy of the national standard
to committee members.
The committee took an at-ease from 4:00 p.m. to 4:01 p.m.
4:01:21 PM
BOB CROCKETT, Past President; Board Member, Alaska Film Group,
began his PowerPoint presentation by stating that the Alaska
Film Group is a non-profit trade association with a diverse
membership base that was formed in 1992 as a voice for the film
and video industry of Alaska. The Alaska Film Group (AFG)
advocates for the film industry in order to create economic
opportunities and jobs for its members and Alaska's businesses.
He opined that the State of Alaska's goals and the AFG's goals
are the same - progress, productivity, and putting Alaskans to
work.
KATE TESAR, Pro bono lobbyist, Alaska Film Group, stated that
she is filling in today for someone who was unable to attend the
hearing. She noted the packet contains letters of support from
around the state. She assisted in highlighting SB 230 in the
PowerPoint presentation. She read slide 3, labeled Senate Bill
230, and stated that SB 230 creates diversification of our
economy, new private sector jobs, new training programs, jobs
for interns, crew, and native Alaskans, along with an infusion
of construction dollars - millions of dollars worth of [public
relations], - opportunities in rural Alaska, and tax credits for
corporations.
MS TESAR highlighted that SB 230 has drawn components from other
states' programs such as Louisiana and New Mexico. She referred
to the slide, "Who Benefits?" and read that films benefit wage
earners, air service providers, catering companies, hotels,
retailers, freight companies, maintenance firms, rental
companies, security companies, and tourism businesses.
4:05:01 PM
MS. TESAR opined that Alaska is missing out since it is not
competitive in the global film industry. She highlighted that
45 states currently have a film incentive program. She noted
that film companies inquire first about any incentives that are
and if there are none, the company is no longer interested in
filming in Alaska. A film industry can impact all communities
across Alaska and many will leave infrastructure behind such as
sound studios, sound stages, and movie sets. She noted that the
set for White Fang, filmed in Haines, Alaska continues to be a
tourist attraction 10 years after production.
MR. CROCKETT explained that tax credit incentives process such
that the production company applies for the transferable tax
credit, the film office approves production, issues a
preliminary certificate with estimated tax credit amounts, and
the movie is filmed. The production company submits a spending
report, verified by the DCCED and an independent certified
public accountant (CPA). The film office and the DOR issue the
transferable tax credit. The producer sells the credit to an
Alaska corporate taxpayer, generally through a broker and the
taxpayer redeems the transferable credit to offset corporate tax
liability, which must be used within a 3 year timeframe.
MR. CROCKETT referred to page 4, labeled "Economic Impacts." He
opined that Northern Exposure put Roslyn, Washington on the map.
Early network promotions showed a sign that read, "Cicely,
Alaska, population 839. The number was an inside joke that
referred to the $839,000 allotted for each episode, even though
it was a low budget series, he offered. It cost over $92
million to produce over its 4-year run. At an estimated "ground
spend" of 75 percent, that put over $69 million into
Washington's economy.
4:06:55 PM
MS. TESAR offered that Canada has been Alaska's biggest
competitor for film production locations. From 2001-2005, 142
features were produced in Canada. Canada has built an
infrastructure around the film industry and at times has so many
films booked for production that not enough crew can meet the
demand, she opined. She noted that Canada is currently
reviewing and considering increasing its tax incentives, since
so many states compete for films. She offered examples of some
films set in Alaska, such as The Guardian, that was set in
Kodiak, was filmed for one week in Alaska, but the rest of the
film was shot in Louisiana and South Carolina due to the
incentive program offered in Louisiana. In two years time, film
jobs in Louisiana went from approximately 5,400 jobs to 13,445
jobs due to the increase in film expenditures, while film
production rose from $7 million to $343 million. In 2007, she
highlighted that Louisiana had 3 television series and 34
feature films filming in its state.
4:08:26 PM
MR. CROCKETT mentioned that The Deadliest Catch is currently in
its third season and has a crew of 30, of which only 2 are
Alaskans. The per season "ground spend" is $3.7 million. He
opined that Alaska missed out on Men in Trees with a "ground
spend" of $20 million per season but is currently shot in
Vancouver, British Columbia. Another project that is upcoming
series is America's Toughest Jobs, which is an NBC sponsored
series. Features have the highest "ground spend" equating to
approximately 75 percent of a film's total budget, he said. A
recent feature Alaska lost was Thirty Days of Night, previously
mentioned, set in Barrow, but shot in New Zealand with an
estimated "ground spend" of $37.5 million. He offered that
these are the types of projects that SB 230 would target.
MS. TESAR referred to a slide labeled, "Welcome to Sitka,
Massachusetts". She opined that without incentives, rebates, or
tax credits that Alaska lost the filming of the Walt Disney
Pictures film produced by Touchstone Pictures, The Proposal
starring Sandra Bullock to Gloucester, Massachusetts. She
highlighted that Massachusetts offers incentives, rebates, and
tax credits, plus a coastline that resembles Alaska.
MR. CROCKETT referred to a slide called "Show Me the Money"
which lists the economic impact per shooting day ranging from
$35,000 per day for low-end budget motion pictures to $100,000
per day for high-end budget motion pictures. He said, "Feature
films pay high union rates and commercials pay even higher."
4:10:55 PM
MS. TESAR stated that incentives attract films, which affect
markets, which help build local infrastructure that employs
Alaska's labor forces. She opined that affects the level of
projects that would be attracted to film in the state. Alaska
offers mystique, backdrops, and the basic crew, but Alaska does
not have the incentives to bring in film productions. Alaska
receives calls from film producers that would like to film in
Alaska, scripts are written, awaiting incentives.
4:11:38 PM
MR. CROCKETT referred to the slide labeled, "Passage of SSSB
230" and stated that this bill would create jobs, diversify the
economy, stimulate tourism, build infrastructure and support
services, provide opportunities for rural Alaska, develop
educational and internship programs, and would also provide
transferable tax credits for Alaska's corporations.
MS. TESAR concluded with remarks that goals shared by AFG and
the state include progress, productivity, and putting Alaskans
to work. She opined that SB 230 will do that. She urged
committee member's support for SB 230.
4:12:13 PM
REPRESENTATIVE LEDOUX offered her support for SB 230. She
related her understanding that the film, The Guardian was
weathered out in Kodiak, and that the film moved not due just to
a lack of a tax incentive.
MR. CROCKETT agreed that there were weather problems. However,
he noted that he met with the Vice-President of physical
production who stated that if a Alaska had tax incentives, he
would have fought to have the film continue filming in Alaska.
4:14:15 PM
MR. CROCKETT, in response to Representative LeDoux, answered
that only two technical crew members participate in filming The
Deadliest Catch. In further response to Representative LeDoux
answered that this bill would offer incentives for local hire.
4:16:36 PM
The committee took an at-ease from 4:16 p.m. to 4:18 p.m.
4:18:17 PM
REPRESENTATIVE NEUMAN made a motion to adopt Amendment 1 as
follows:
Page 4, line 21, following "accountant":
Insert "selected by the film office"
REPRESENTATIVE NEUMAN explained that since the expenditures
would be verified by an independent certified public
accountant (CPA) under the bill, Amendment 1 would add more
credibility as the CPA firm would be selected by the film
office instead of the film producers.
4:18:54 PM
SENATOR ELLIS offered his support for Amendment 1.
REPRESENTATIVE GATTO inquired as to whether the sponsor had a
preference for "approved" over "selected."
SENATOR ELLIS offered his neutrality, but suggested he could
consult with legislative bill drafter and Alaska Film Group to
see which term would be best. He offered that the intent is
positive.
4:19:55 PM
CHAIR OLSON asked if there were any objections to adopt
Amendment 1.
REPRESENTATIVE GATTO objected.
Representative Gatto made a motion to conceptually amend
Amendment 1, as follows:
On page 4, line 21, following "accountant":
Delete "selected"
Insert "approved"
4:20:28 PM
CHAIR OLSON stated that the Conceptual Amendment to Amendment 1
would appear to limit the film office.
REPRESENTATIVE GARDNER noted that adding "approved" does not
preclude selection, so she offered that adding "approved" would
expand and not limit the film office's decisions.
REPRESENTATIVE LEDOUX opined that adding the approval process
suggests that the film office must have some reason to support
is decision, which she thought would limit the film office's
discretion, whereas if the selection is made by the film office,
it would have total discretion in the matter.
REPRESENTATIVE NEUMAN if the film office [approves] the
accounting firm instead of selecting it, the film producer could
select the firm, whereas the film office represents the state
and should have control over the firm selected.
REPRESENTATIVE RAMRAS inquired as to whether the amendment to
the amendment is before the committee.
4:23:12 PM
A roll call vote was taken. Representatives Gatto and Gardner
voted in favor of the amendment to Amendment 1. Representatives
Neuman, LeDoux, Ramras, Buch, and Olson voted against it.
Therefore, the amendment to Amendment 1 failed by a vote of 2-5.
CHAIR OLSON announced that the amendment to Amendment 1 failed.
Amendment 1 is now before the committee.
There being no objection, Amendment 1 was adopted.
4:23:32 PM
The committee took an at-ease from 4:23 p.m. to 4:24 p.m.
4:24:15 PM
REPRESENTATIVE RAMRAS prefaced his motion to adopt Amendment 2,
with a comment that he has a modest conflict of interest since
Fairbanks has hosted film actor Sean Penn and has participated
in the economic cycle described.
REPRESENTATIVE RAMRAS made a motion to adopt Amendment 2, which
read:
Page 6, line 10:
Delete ";"
Insert "."
Page 6, lines 11 - 12:
Delete all material.
4:25:09 PM
REPRESENTATIVE GARDNER objected.
4:25:15 PM
REPRESENTATIVE RAMRAS cautioned that the film office might take
all the steps described, but could find that a significant
amount of credit was excluded since the payroll costs for stars
would not be included. He asked for clarification. He noted
that in the travel industry the most valuable words uttered are,
"I've been there." Many movie and television productions echo
that since people see series like Men in Trees and say, "I'm
going there." He expressed his interest in moving forward with
SB 230.
SENATOR ELLIS noted that the limitation on tax incentive on high
wage talent was language adopted by the Senate Finance
Committee. He agreed with Ramras that without the limitation,
that the state would be more competitive. He suggested that he
would be amenable to the committee's decision on whether to
limit the incentives on high wage talent.
REPRESENTATIVE NEUMAN expressed concern that the state could be
liable for 30 percent of the wages for stars such as Sean Penn,
including future royalties.
MS. TESAR answered that Representative Neuman is partially
correct, that the transferable tax credit would apply to the
portion of the salary paid while the talent is in production in
Alaska. She noted that illustrates the importance of the
process with the CPA firm to closely monitor the Alaskan
portion.
MR. CROCKETT, in response to Representative Neuman, agreed that
the transferable tax credit for a production would be prorated
and no future royalties are paid. In further response to
Representative Neuman, Mr. Crockett answered that the cap is set
at $2 million.
4:31:40 PM
REPRESENTATIVE RAMRAS explained Amendment 2 is being offered to
maximize the potential of attracting feature films that have big
name actors since the feature film production costs are
sometimes in the $100 million range, while some series have
production costs much lower such as The Deadliest Catch, which
cost $3.7 million for the total production. Thus, the state
would benefit more if it can attract films featuring actors such
as Kevin Costner.
MS. TESAR related that after SB 230 passed the Senate that
feedback from the industry was that the amendment capping the
compensation and wages in excess of $2,000,000 per actor created
a large problem with the legislation. Other states that are
competitive do not have a cap considering the types of films the
state wants to attract. Since SB 230 would create more jobs and
a new industry in the state, Ms. Tesar argued against the
restriction. She further noted that SB 230 requires an annual
report to the legislature with a 5 year sunset on the bill.
4:34:18 PM
REPRESENTATIVE GARDNER removed her objection.
There being no further objection, Amendment 2 was adopted.
REPRESENTATIVE NEUMAN referred to the fiscal note number [3],
and read that "Alaska's credit will therefore be one of the most
generous in the nation in terms of the percent of qualified
production expenditures."
4:36:05 PM
SENATOR ELLIS, in response to Representative LeDoux, answered
that LLCs are not subject to state taxes.
REPRESENTATIVE RAMRAS clarified that he holds several
corporations for his businesses that are not subject to state
income tax. He further explained that "C" Corporations enjoy
certain benefits through the federal tax code. He offered that
his company does pay a fee to organize the corporation.
SENATOR ELLIS noted that the cruise ships are organized
elsewhere.
4:37:36 PM
MAYA FALGANEK, Associate Professor, University of Alaska
Fairbanks, stated that she is a professor of film studies and
media. She also stated that she is the chair of the Digital
Cinema Curriculum Committee. She related that she helps to
guide upcoming directors, cinematographers, and animators
towards their vision and future career in the entertainment
industry. She noted that most of her students are talented
Alaskans who prefer to work in Alaska. She offered that she has
observed first hand how the film industry impacted her home town
and the rural communities during 5 years as a native of New
Mexico. She mentioned that during the past two weeks she has
been contacted by the United Nations, interested in filming in
rural Alaska; by the Discovery Channel, interested in filming a
statewide series called Alaska Week, and by an international
crew at the World Ice Art Championships. She also has been
offered an opportunity to co-produce a feature film which would
feature the World Eskimo Indian-Olympics in a fictitious comedy.
She explained that she has received the telephone calls since
her name is listed on film office in Alaska. She opined that
people first contact the film office for information. While she
realizes that the productions she mentions are small productions
ranging from $500,000 to $1 million, she argued that considering
the small cost of funding the film office would be repaid with
one film. She further opined that SB 230 would be the key to
unlock larger productions with multi million dollar budgets.
She related that Alaska's beauty is an export commodity, which
is a commodity Alaska can share with the world through its
films. She said she thinks that it is necessary to facilitate
the industry's growth and provide local training. She related
that UAF has a committed group of faculty and staff ready to
provide training opportunities to students to help ensure the
jobs will be given to Alaskans.
4:41:04 PM
GORDON CARLSON stated he and his wife, Rachel, reside in
Cantwell, Alaska and own a small construction company, CLI
Construction located in the Denali Borough. He encourages the
committee to vote in support of SB 230. Many movies made
outside Alaska and Alaska needs to compete. This bill would
boost the state's economy and would offer a visual education of
what Alaska really looks like. Alaska tourism industry would
benefit greatly from this. His experience is that the film Into
the Wild brought $3 to $4 million in ground spend to the Denali
Borough, let alone the little community of Cantwell. The film
affected his small construction company, businesses, hotels,
restaurants, carpenters, and laborers, as well as car rental
agencies in Anchorage and Fairbanks. He noted that the timing
of the April filming offered a boost to the start of the
construction and tourism industry. He also opined that films
shot in Alaska will encourage visitors to the state to see the
film's location. He said that "passage of SB 230 would be an
asset to our state."
4:42:50 PM
DAMA CHASLE, Production Executive, stated that she is a
production executive in Los Angeles who has also been an advisor
on film legislation in other states. She related that most of
the films that depict Alaska have been shot in Canada. She
explained that when the business of film lands in a state it is
a job incubator. She noted that one of the by products of large
films like The Guardian are the "leave behinds" which in this
instance went to Shreveport, Louisiana such as a wave tank. She
noted that Mr. Costner bought a home in Louisiana, which goes
beyond, "I've been there" to "I'll stay there". She noted that
"hustle and bustle" happens when actors and major motion picture
stars are in a town. She asked, "Who doesn't want to sit on the
bench where Forrest Gump sat?" She suggested that SB 230 not be
limited by talent cap, at least until the industry becomes a
sustainable industry. She pointed out that local businesses
benefit such as lumberyards, hotels, apartments, casting
agencies, equipment rental, banks, and real estate offices fill
up when a production comes to town. She noted that cast and
crew spend their salary and per diem where they make it. She
said she has seen success stories such as Shreveport, Louisiana
becoming multi-million dollar leaders for the state. Louisiana
is now number 3 in film production behind California, and New
York, followed by New Mexico. Alaska has a chance to be part of
the industry. She offered that the state could have digital
companies to provide year round training, to help prevent youth
from migrating to the Lower-48. She surmised that the state
would not just have one or two small reality shows, but the real
Men in Trees, or the project that the Coen brothers would like
to make in Alaska. She offered that if it is economically
prudent for the studios, who are ultimately the decision makers
for film or series location. In response to earlier testimony,
Ms. Chasle cautioned against being involved in profit and loss
sharing with producers, since the state would also share in any
losses the producer experienced. She also highlighted that the
production companies would be eligible for the transferable tax
credits. But that the talent, the expensive leads, are not
eligible for transferable tax credits. She said, "I will end on
this note, from a favorite movie of mine Field of Dreams, a
little change, if you build it they will come, my sense is, if
you build this business in Alaska, they will stay."
4:48:46 PM
PAM FOREMAN stated that she would like to speak in favor of SB
230. This bill would allow Alaska an opportunity to participate
in this multi-million dollar film industry. She surmised that
currently the film industry in Alaska is severely hampered by
the lack of a program. She offered that from 1988 to 2007 she
served as the director of the Kodiak Island Convention and
Visitor's Bureau. With the lack of a state film office, the
local convention and visitor's bureaus often stepped in to act
as a community's film office. In 2003, she worked with John
Markel, who is a location scout located in Girdwood, Alaska.
She offered that Mr. Markel was scouting for a location for The
Guardian and Kodiak was being considered since the film was
about a rescue swimmer stationed at a U.S. Coast Guard station
in Kodiak. The majority of the film was shot in Shreveport,
Louisiana and Elizabeth City, North Carolina. She explained by
the time Kodiak had weather problems, the majority of the film
had moved to Shreveport due to the lack of tax incentive
program. She urged support of SB 230.
4:51:17 PM
BRICE HABEGER stated he is a resident of Alaska, but has spent
the last five years in Chicago in a film studies program. He
graduated in December with a degree in film studies. He offered
that he can shoot, edit, and perform most production tasks. He
surmised that Alaskans are qualified. He hopes that his future
in film industry will be in Southeast Alaska. He surmised that
the tax incentive program could create jobs for people like him.
4:52:46 PM
REPRESENTATIVE BUCH inquired as to whether Mr. Habeger could
have studied film in Alaska.
MR. Habeger answered that the UAF offers a digital studies
program, which is a small scale program compared to the Chicago
program, which also offered opportunities and access to film
productions being shot on location in Chicago, studio equipment,
cameras, professionally run sets. He opined that it was a
personal choice that best suited his needs.
4:53:49 PM
REPRESENTATIVE RAMRAS offered that this bill offers the
opportunity to get young people involved in Alaska and to
showcase the state.
4:55:54 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on SB 230.
4:56:09 PM
SENATOR ELLIS, in response to Representative Neuman, answered
that the film industry would cover the costs of the independent
audit.
REPRESENTATIVE GATTO posed a scenario in which a person could
become an independent filmmaker just to earn the transferable
tax credit, even though the person simply took a vacation in
Alaska. The person would create a film and apply for the
transferable tax credit to cover costs of his/her vacation.
MR. HENSLEY referred to page 3, and noted that the eligibility
section establishes that the film office would approve
productions and would not approve an incentive for the type of
film mentioned in the scenario.
MR. HENSLEY, in response to Representative Neuman, referred to
page 6, paragraph 2, excludes postproduction expenditures for
marketing and distribution the transferable tax credit.
4:59:43 PM
REPRESENTATIVE RAMRAS expressed his support for SB 230. He
related that several stars from the film, Ice Age, even though
it was animated film, visited Fairbanks, Alaska. This
represented an opportunity to showcase winter tourism in Alaska
while promoting a high budget film, he noted.
5:02:02 PM
REPRESENTATIVE GARDNER moved to report CSSSSB 230(FIN) am, as
amended, out of committee with individual recommendations and
the accompanying fiscal notes. There being no objection, HCS
CSSB 230(L&C) was reported from the House Labor and Commerce
Standing Committee.
5:02:35 PM
ADJOURNMENT
There being no further business before the committee, the
meeting was adjourned at 5:02 p.m.
| Document Name | Date/Time | Subjects |
|---|