Legislature(2013 - 2014)HOUSE FINANCE 519
03/28/2013 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB23 | |
| HB4 | |
| HB112 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 23 | TELECONFERENCED | |
| += | HB 112 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 4 | TELECONFERENCED | |
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."
4:14:22 PM
MIKE DELVIN, CEO, EVERGREEN FILMS, ANCHORAGE (via
teleconference), spoke in opposition to the bill. He
communicated that the bill would cause the company to cease
its projects in Alaska. He spoke to his background; the
company was currently in production of its first major
feature film titled Walking with Dinosaurs 3D, which would
be distributed later in the year by 20th Century Fox. He
detailed that the film had been shot in Alaska and New
Zealand. He emphasized that the company had made
substantial capital investments in the state including in
the construction of a $6 million facility in Anchorage for
the housing of post-production and screening operations and
a high-tech advanced stage; the investment did not qualify
for the tax credit, but represented investment the company
was making in Alaska. He communicated that the global
market was competitive for producers who had to find
locations that could provide a good economic environment
and a talented labor pool. He stressed that the existing
tax credits were necessary for Alaska to compete globally
and for the company to do business in the state. He spoke
from his perspective as an Alaska resident and relayed his
preference for doing business locally.
4:17:24 PM
PATRICIA HULL, ALASKA FILM GROUP, JUNEAU, spoke in
opposition to the legislation. She spoke to the purpose of
the group. She relayed that films took many years to plan
and culminated in weeks or months of activity. She
communicated that while a shoot may be brief, it
represented a boon to communities where filming took place,
infusing millions of dollars. She pointed to letters from
small businesses throughout the state that had benefited
from major films; one letter was written by a "mom and pop"
snow removal company that had expanded to a year-round
business after earning money from renting equipment to the
film industry. She stated that the 27th legislature's
decision to extend the credits by 10 years was visionary.
She stressed that the credits allowed the industry to begin
planning projects in Alaska.
Ms. Hull stressed that the rumor that the credits would be
discontinued had caused a chilling effect. She stated that
films that should be coming to the state were not; there
was a film about the Nome serum run that would be filmed in
Canada. She believed the legislative audit brought forward
an accurate assessment of the strengths and weaknesses of
the tax incentives. She accentuated that the program had
returned $2.00 for every $1.00 that was paid out. She
stated that improvements to the program were scheduled to
go into effect on July 1, 2013 including incentives to hire
more Alaskans and a sliding scale application process fee.
Another change included a content review; she believed that
some Alaskans had been offended by the way they were
portrayed in a reality television show and had taken aim at
the industry as a whole. She stated that the content review
would ensure that Alaska was portrayed in a positive light.
She emphasized that the state was a unique and beautiful
location to make films. She pointed to other beautiful
locations and the aggressive courting of the film industry
by other governments. She stated that Alaska's 44 percent
tax credit was the most competitive. She emphasized that
the legislation would sabotage years of constructive effort
and would divert the potential for hundreds of millions of
dollars away from the state. She noted that unlike some
forms of economic development activity, it was not
necessary to clean up after the film industry. She
encouraged the committee to retain the legislature's 10-
year commitment to the film incentive program.
4:22:37 PM
Representative Wilson noted that some of her constituents
had been upset about the way they had been portrayed in a
show. She pointed out that there had been a negative impact
for some individuals related to their jobs and increased
regulation as a result. Ms. Hull understood the issue
existed. She observed that the reality television show
genre was notorious for portraying people in a negative
light.
Co-Chair Stoltze relayed that his motivation for the
legislation was financial.
Ms. Hull stressed the importance of portraying the state in
a positive way.
Representative Wilson noted that her constituents were
miners and were working to make a living.
Representative Munoz asked whether Ms. Hull believed the
reality television portion should be retained under the
incentive program. Ms. Hull replied that she was not an
expert related to the specific issue. She added that her
comments related to the reality television industry did not
reflect the opinion of the Alaska Film Group. She stated
that it was difficult to control content in the specific
type of programming.
4:25:11 PM
CODY LAWHORN, SPROCKETHEADS LLC, ANCHORAGE (via
teleconference), spoke to his education in film production.
He stated that Alaska's image had changed subsequent to
2010. He pointed to the television show The Deadliest Catch
and to Alaska's great potential for the film industry. He
discussed the Drew Barrymore film Big Miracle that had been
filmed in Alaska. He had returned to Alaska from school in
2011 to work as an unpaid production assistant on a Nicolas
Cage film The Frozen Ground; he had received college
credits and many valuable hours learning about the job. The
position had led to other opportunities in the industry. He
had just received his degree in film production in
Portland. He discussed his desire to move home to make
films and to help grow the industry in Alaska. He had come
home to stay and had brought projects with him. He urged
the committee to not pass the legislation. He asked the
legislature to maintain the film bill extension.
4:29:24 PM
RANDY DALY, FILM INDUSTRY PARTICIPANT, KENAI, testified in
opposition to the bill. He spoke to his role as the former
president of the Kenai Peninsula Borough of Economic
Development district and in the film industry. He addressed
his support of business development, economic
diversification, and a year-round stable economy in Alaska.
He highlighted various examples of private funding
responsible for building film studios in Anchorage. He
emphasized that industry had invested millions of dollars
into business development and production facilities. He
stated that film and film production was a new industry
that was diversifying Alaska's economy statewide; it was
capable of producing well-paying, year-round jobs. He noted
that energy and government revenue were in decline in the
state. He stressed that it was the responsibility of
citizens to explore new opportunities to provide a better
future. He opined that film should be part of the future.
He detailed that over the past few years the state had
worked with private industry on legislation that would
allow the industry to move forward; credits to the industry
would only be maximized when business was conducted with
Alaskans and Alaskan owned businesses. He noted that the
legislation also included a cap to limit financial
exposure, a review process after five years, and the
oversight of third-party certified public accountants. He
stressed that it was time for the state to keep its word.
He urged the state to act accountable and to allow the
industry to conduct its work. He stated that vacillation on
the issue sent the message that Alaska was not a stable
place to do business. He urged the committee to not pass
the legislation.
4:32:22 PM
D.K. JOHNSTON, ALASKA FILMMAKERS, ANCHORAGE, spoke against
the legislation. He provided his personal background in the
film and education fields. He had received many questions
about why the legislature would entertain cutting down a
program that had been working vigorously to establish
itself over the past five years. He stated that the program
had helped to create jobs, diversify the state's economy,
promote new forms of education for Alaska's youth, and to
bring together talented artists to tell Alaska's stories.
He opined that a repeal of the film tax credit was a step
in the wrong direction; whereas, the continuation of the
program was a step towards new development. He shared that
millions of dollars had been invested in the new industry
and that turning Alaska's back on the industry would be a
mistake. He pointed to multiple documents in members'
packets expressing opposition to the bill (copy on file).
4:35:16 PM
RON HOLMSTROM, SCREEN ACTORS GUILD AND AMERICAN FEDERATION
OF TELEVISION AND RADIO ARTISTS, ANCHORAGE, testified in
opposition to the bill. He shared that he had worked the
film industry since 1975 on both sides of the camera. He
spoke to the federation's excitement that its Alaska
membership had more than tripled since the incentive
program's creation. He communicated that in the past year
12 feature films had qualified for the program; however,
following the introduction of the legislation, there had
been no applications. Additionally, the federation had not
had any Alaskans join its rank of professional performers.
He observed that Alaska had become less attractive to major
production companies; however, he believed there was time
to experiment with the program, which could be incredibly
fruitful for Alaskan workers and local businesses. He did
not understand why the bill to repeal the program had been
introduced. He was bewildered at the idea of closing down a
young industry that had shown itself to be financially
sound. He was available to discuss the business opportunity
at any time. He stressed the importance of rebuilding the
state's reputation as a film community and of moving
forward with the film industry.
Co-Chair Stoltze remarked that government policy did have
deleterious effects on the economy.
Representative Gara expressed support for the program. He
asked whether a travel credit could work if the larger
program was discontinued. Mr. Holmstrom replied the issue
came down to arithmetic. He had dealt with motion picture
budgets his entire adult life; the issue related to how
much it would cost to get everything to the location for
filming. He stated that there had been a move to improve
the grip, electric, and camera equipment in Alaska, but the
effort was currently not moving forward. He opined that
subsidizing the expenses of moving trailers, dressing
rooms, wardrobe trailers, and other could potentially help;
however, it would be difficult to balance the savings
against the tremendous above-the-line expenses (including
actors, producers, writers, and directors), which made up
at least half of a motion picture budget.
4:40:02 PM
Co-Chair Stoltze commented that the committee would look at
alternatives to the overall elimination of the program.
DEBORAH SCHILDT, PRESIDENT, THE ALASKA FILM GROUP,
ANCHORAGE (via teleconference), spoke against the
legislation. She provided information about the
organization. She stated that 32 films had been shot in the
state since 1924; 24 of the films had been shot the state
subsequent to 2000 and only 7 of the 24 had been entirely
filmed in Alaska. She stressed that all 7 films shot
entirely in Alaska had been made following the
implementation of the film credit program. She emphasized
that incentives were the way the business worked at
present. She stated that HB 112 stifled the industry in the
state. She highlighted that the industry had provided a
positive economic impact on the workforce and businesses in
Alaska. She pointed out that the program included increased
incentive for local hire. There were currently actors,
students, and tradespersons enrolled in training programs
statewide. The organization expected that hundreds of
skilled workers would be added to the state's workforce in
the upcoming year. She wondered where the individuals would
go if the legislation passed. She spoke to the high paying
jobs provided by the industry. She wondered why the
legislature would choose to discourage the industry and
reduce employment opportunities.
Ms. Schildt discussed the program's success and quoted from
the 2012 legislative audit by Northern Economics (page 19):
...the state realizes a positive return on investment
from the AFPTIP. The AFPTIP generates an estimated $2
in Alaskan economic output for every $1 dollar in tax
credits - an economic multiplier of $2.05 per the
consultant's analysis.
Ms. Schildt stressed that the bill failed to take into
account that only $8.4 million out of the $34 million in
issued credits had been redeemed; leaving $27 million in
funds to be utilized by Alaskan corporations. She
highlighted that money spent in Alaska generating the tax
credit amounted to $109 million and that much of the money
continued to circulate in the state. She stated that the
bill was a losing proposition; many producers had pulled
out of production after the bill had been introduced. She
expounded that the state would move backwards with the film
industry if the bill passed, which would lead to the loss
of millions of dollars. She stressed that the film credit
program was new and improved; it was more Alaska-centric,
it offered credits as opposed to subsidies, and offered
proven value to Alaskans statewide. She urged committee
members to vote no on the legislation.
4:46:56 PM
Co-Chair Stoltze made a statement about his influence
related to the legislation.
DIANA FEJES, TAX CONSULTANT, ANCHORAGE (via
teleconference), spoke against the bill. In 2012 she had
been asked by NANA Development Corporation to examine the
economics of the film credit program. She conducted an
analysis using other states as models; projections showed
that over a 10-year period the film industry could become a
$1 billion industry if the state had an experienced
workforce and the infrastructure to support larger films.
She continued that over time almost $4.00 of economic
benefit could be realized for each $1.00 of credit issued.
She stated that indirect spending resulting from an
industry is difficult to predict, but is a widely accepted
concept. She pointed to the 2012 Legislative Budget and
Audit Committee internal audit; the audit had found that
over $2.00 was returned for each $1.00 of credit issued.
She furthered that $50 million of economic benefit had come
directly from the incentive program through February 2012.
She noted that the data was for a period of time prior to
the strengthening of the program, which would provide
additional benefit to the state.
Ms. Fejes stated that total spending during the 4-year
period ending February 2012 was over $58 million, which
included all films produced whether or not the credit was
allowed. She provided an example related to the benefits of
the incentive program; if a film cost $20 million to make
and $10 million of the amount was spent on Alaskan wages
and businesses, the average credit was around 33 percent;
therefore, cash out the door for the credit would be just
over $3 million, but $10 million remained in the economy.
She emphasized that between the multiple economic effects
and the time value of money, the $10 million could have a
significant impact. She relayed that Alaska had one of the
highest corporate tax rates in the U.S. at 9.4 percent. She
stated that buying a credit at a discount of 80 to 85
percent provided industry more incentive to stay and
increase business in the state.
4:50:58 PM
Co-Chair Stoltze turned the gavel over to Representative
Costello.
Ms. Fejes continued to testify against the bill. She
relayed that if the allowable tax credits were to be fully
used over the upcoming 10 years it would cost $200 million;
however, a $200 million credit would generate just under
$600 million in revenue for Alaska's economy. She discussed
industries impacted by the indirect spend of the money in
the state. She observed that the program was not perfect
and that adjustments may be required; however, she
suggested not throwing the baby out with the bath water.
She stated that the program had energized many small
businesses and had helped larger businesses as well. New
productions would keep individuals in the state. She
stressed that starting and stopping a program from year to
year would build distrust. She pointed to other competitive
locations where film companies could take their work. She
asked the legislators to continue the program.
4:53:06 PM
Representative Gara asked what the film production
companies had paid in the state since the credits had taken
effect. Ms. Fejes replied that many companies did not pay
the taxes in state, which was the reason the incentive
credits had originated. She explained that credits were
approved and sold to entities such as banks, cruise ship
companies and others conducting business in the state. The
program helped the businesses to save on their taxes as
credits were purchased at a discount.
Representative Gara remarked that he would follow up for
more detail from the Department of Revenue. He believed
that companies were taxed pro rata for their presence in a
state based on the state's income taxes. Ms. Fejes replied
that the statement was accurate relating to corporations;
however, many of the film companies were constructed as
pass-through entities such as partnerships.
4:54:57 PM
PIUS SAVAGE, OMAYACON PICTURES, ANCHORAGE (via
teleconference), spoke against the legislation. He
discussed his background in the film industry. He shared
that during his work in various locations people had seen
films showing Alaska's beauty; the industry helped small
businesses and tourism throughout the state. He pointed to
current work with producers planning seven films in Alaska
as a result of the film tax incentives. He spoke to one
film that would employ all local actors. He discussed his
work with many famous producers and actors. He was
currently in conversations with investors for a project
with an estimated budget of $10 million. He mentioned
another production that would cost $16 million or more.
4:59:10 PM
Co-Chair Stoltze resumed chairing the meeting.
Mr. Savage continued to speak against the bill. He stressed
that the beauty of Alaska attracted the industry. He
mentioned that the introduction of HB 112 was discouraging
investment and causing filmmakers to look to other
locations such as Iceland. He stated that the decision was
up to the legislature.
5:00:32 PM
GARY ZIMMERMAN, GENERAL MANAGER, ALASKA RENTAL CAR INC.,
ANCHORAGE (via teleconference), spoke against the bill. He
communicated that the company benefited from the money
spent by the industry in Alaska. He relayed that film
production funds provided a substantial economic benefit
statewide. He communicated that the rental car service
industry generated over $22 million in taxes and fees
collected from renters and paid to the state and local
government; when business increased, the money going to the
state increased as well. He relayed that productions
featuring Alaska promoted the state more successfully than
advertising campaigns; the increased awareness helped to
further the state's goal of promoting tourism. He continued
that the film industry was just beginning to gain traction
in the state. He asked the committee to allow the incentive
program to benefit the film industry, Alaskan businesses
and workers, and the state. He asked the committee to not
pass the bill.
5:02:53 PM
KELLY BENDER, LAZY OTTER CHARTERS, WHITTIER; opposition
testimony was read for Ms. Bender by Merna Jenson (via
teleconference):
Good afternoon Chairman Stoltze and the House Finance
Committee. I am not in the film industry; we are a
business that has benefitted from the film industry.
We operate a water taxi and sightseeing business in
Whittier; we also have a small café. We hire Alaskans
to work and live in the community where we operate.
The impact the film industry has sometimes been
direct. We helped out with a film shoot onboard our
boat; the show aired this past fall. But sometimes
it's indirect; like when we took out members of the
cast and crew from movies that have been shot here on
a sightseeing cruise. This was about $12,000 to
$15,000 to our company. Often this business has come
during the shoulder season, a time when were slow and
can use the additional income. This may seem like a
drop in the bucket to some, but to us it meant that we
paid our Alaskan employees, it meant we bought goods
and services from our Alaskan suppliers. To us this is
business or some might say stimulating the economy.
This isn't really about [indecipherable]; it's about
Alaskans and Alaska businesses making a go of it. The
state puts a lot of money into industry that has
finite resources. This industry has infinite reach and
trickle-down effect, not to mention what it does for
tourism like the previous speaker said. As a small
business owner I'm asking you to continue to support
the film industry in Alaska, which really means
supporting business and economic diversity in Alaska.
Please do not pass HB 112. Thank you.
Co-Chair Stoltze asked for a copy of the document.
5:05:29 PM
ROBIN KORNFIELD, VICE PRESIDENT, CORPORATIONS AND
MARKETING, NANA REGIONAL CORPORATION, ANCHORAGE (via
teleconference), spoke against the legislation. She pointed
to the value of programs that encouraged the development of
new opportunities for the next generation of Alaskan
business. She relayed that NANA supported the film tax
credit because the existing program had created jobs for
its shareholders and private sector income for an array of
Alaskan businesses. The organization wanted to be a part of
building new economies in the state. She discussed other
developments the organization had been involved in during
the past including the Red Dog Mine. She furthered that
NANA had looked at the film business as it did with any
other business opportunity; the industry required support
services including construction, food service, information
technology, transportation, hospitality, and security.
Additionally, the industry created specialized job
opportunities that were not yet widespread in the state.
She stressed that the entire state could get involved. The
company had been involved in the production of a
documentary about the people of Diomede, Alaska and whales.
She pointed to various national commercials shot in the
state. She relayed that investment in training and
facilities was made at NANA's own risk and was not eligible
for tax credits; however, the credits were needed to bring
the business to Alaska. She spoke to the global competition
for production locations. She urged the committee to reject
the bill.
5:09:10 PM
STEVE RYCHETNIK, CINEMATOGRAPHER, SPROCKETHEADS LLC,
ANCHORAGE (via teleconference), spoke in opposition to the
bill. He discussed the company's work in the developing
film industry. He stated that because of the tax incentive
program he had been hired on multiple projects and had been
able to remain in Alaska. He had been asked to be involved
in several large budget films working to bring productions
to the state. He recalled working on the film Insomnia in
the past that had been filmed in Canada because Alaska had
no incentive program. He emphasized that incentives always
trumped location; he provided an example. The company was
currently working with over 10 feature films that had
invested years of time and money to come to Alaska. He
pointed to the economic benefit provided to Maryland as a
result of the Netflix original show House of Cards. He
spoke to the benefit a dramatic series would provide
Alaska. He stated that movie making was a business; there
were as many conservatives as there were liberals. He
emphasized that a film business in Alaska represented
aggressive economic development. He urged the legislature
to keep its promise of extending the film incentive program
to 2023.
5:13:21 PM
MAYA SALGANEK, DIRECTOR, UNIVERSITY OF ALASKA FAIRBANKS
FILM PROGRAM, FAIRBANKS (via teleconference), testified in
opposition to the bill. She stated that the university's
film program had been established in 2011; record numbers
of students had applied. She stated that the students had
already demonstrated great successes. She relayed that the
bill would eliminate the university program and the
opportunity for the students to move forward in the career
field. She continued that students interested in the field
had been leaving the state, which was one of the reasons
for the implementation of the program. She furthered that
the industry had turned to the university wondering where
trained students were. She elaborated that the program was
for a Bachelor of Arts to create producers, directors, and
other; the program prepared students for work in the film
industry and provided hands-on training. There had been a
60 percent enrollment increase since 2010 in the number of
student credit hours; there were students enrolled from all
over the state. The credit program provided great publicity
for the state. She shared that the program enrollment was
growing approximately 10 percent per year; the university
anticipated the figure would go up if the tax incentives
continued. She spoke to the diverse population of students
in the field. She stated that 50 percent of the students
had been working on professional productions in the past 30
days.
Ms. Salganek continued that the students would go on to be
leaders in the industry in the future. She estimated that
the tax incentive had doubled the amount of work in the
state and was bringing more labor hours per production for
Alaskans. She stated that the incentives were providing
hands-on training opportunities; internships would prepare
students for higher level positions in the future. She
discussed that the training program had been in development
for over a year. Students would be devastated to learn that
there would no longer be long-term career opportunities in
the industry in Alaska. She continued to speak about
benefits of the program. She implored the legislature to
support the students and the film industry.
5:21:19 PM
CHARLIE HEWITT, MIRROR STUDIOS, ANCHORAGE (via
teleconference), spoke in opposition to the bill. He shared
that he was a Republican and owner/operator of Mirror
Studios (a recording and post production facility in
Anchorage). He discussed an additional revenue stream that
was a byproduct of the film incentives. He explained that
when a production was working in-state, many actors were
needed for the post production process on other projects
elsewhere. For example, during the filming of the movies
Big Miracle and The Frozen Ground there had been numerous
individuals using the studio for other film projects. He
emphasized that the dollars were not insignificant and had
not cost the state a dime. He expended significant money to
bring the studio up to par prior to the implementation of
the film incentive program. He had trusted the
legislature's intent when it had voted to approve the
credit program. He asked the committee to drop the bill and
to keep the film credits until 2023.
5:23:54 PM
Co-Chair Stoltze stated that his concerns about the issue
were fiscal. He CLOSED public testimony.
HB 112 was HEARD and HELD in committee for further
consideration.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 23 2012 Gov TIFIA Letter of Interest (2).pdf |
HFIN 3/28/2013 1:30:00 PM |
HB 23 |
| HB 23 Common Myths of Knik Arm Crossing.pdf |
HFIN 3/28/2013 1:30:00 PM |
HB 23 |
| HB 23 Importance of Legislation for TIFIA Loan.pdf |
HFIN 3/28/2013 1:30:00 PM |
HB 23 |
| HB 23 KABATA Fact Slides.pdf |
HFIN 3/28/2013 1:30:00 PM |
HB 23 |
| HB 23 KABATA Summary of Legislation.pdf |
HFIN 3/28/2013 1:30:00 PM |
HB 23 |
| HB 23 Sponsor Statement.pdf |
HFIN 3/28/2013 1:30:00 PM |
HB 23 |
| HB 23 Testimony Opposition.pdf |
HFIN 3/28/2013 1:30:00 PM |
HB 23 |
| HB 23 Memo to House Finance Kenworthy.pdf |
HFIN 3/28/2013 1:30:00 PM |
HB 23 |
| HB23-KABATA House Finance Presentation (PDF).pdf |
HFIN 3/28/2013 1:30:00 PM |
HB 23 |
| HB23 Traffic Safety Corridors.pdf |
HFIN 3/28/2013 1:30:00 PM |
HB 23 |
| HB23 Pt. MacKenzie Townsite.pdf |
HFIN 3/28/2013 1:30:00 PM |
HB 23 |
| HB23 Answers to Recents Comments.pdf |
HFIN 3/28/2013 1:30:00 PM |
HB 23 |
| CS WORKDRAFT HB 4 FIN R.pdf |
HFIN 3/28/2013 1:30:00 PM |
HB 4 |
| HB 23 DOR Letter SB 80 dated 3-30-11.pdf |
HFIN 3/28/2013 1:30:00 PM |
HB 23 SB 80 |
| HB4-RCAbackground.pdf |
HFIN 3/28/2013 1:30:00 PM |
HB 4 |
| HB 112 Support.pdf |
HFIN 3/28/2013 1:30:00 PM |
HB 112 |
| HB 112 Letters-Opposition Pkt 1.pdf |
HFIN 3/28/2013 1:30:00 PM |
HB 112 |