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 follows: 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 Tripp. 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 year.] 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 provisions. 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 bill. 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 credits. 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 said. [HB 112 was held over.]