HB 67-FILM PRODUCTION TAX CREDIT    10:26:41 AM CHAIR HERRON announced the next order of business would be HOUSE BILL NO. 67, "An Act relating to transferable film production tax credits; and providing for an effective date by amending the effective dates of secs. 3 and 4, ch. 63, SLA 2008." 10:26:47 AM ANDREW OKPEAHA MACLEAN, writer and director of the movie On the Ice, expressed his support of HB 67, which will extend tax credits for the film industry. He said his film was shot entirely in Barrow with the support of the Alaska Film Office (AFO), Division of Economic Development, Department of Commerce, Community & Economic Development (DCCED), and the tax credits offered by the state were instrumental to the making of the film. 10:27:45 AM CARA MARCOUS, producer of the movie On the Ice, said the tax credit incentive was crucial in finding their first cash investor, because the investor knew that one-half of his investment "would be coming back to him at a certain point for sure." After the initial investment was found, other investors became comfortable, and completed the budget for the film. Ms. Marcous observed that the impetus for the commitment from the first investor was the incentive, and that was the catalyst for the project. 10:28:37 AM MR. MACLEAN added that he was born and raised in Barrow and Fairbanks, and the film was shot entirely in Alaska, using almost all Alaskan actors. Much of the crew was from Barrow, and some were flown in from Anchorage. The film was premiered at the Sundance Film Festival and he and Ms. Marcous are in Berlin to show the film at the Berlin International Film Festival. In response to Chair Herron, Mr. MacLean said the movie has been seen by several thousand people at both the Sundance and Berlin events. MS. MARCOUS noted that the audiences "have no awareness of Alaska and the diversity within the state, so it's really fascinating for them." 10:30:31 AM CHAIR HERRON presented two clips from the movie. After the presentation, he asked for the most interesting comments from the Berlin audience. 10:33:00 AM MR. MACLEAN relayed that people are curious about growing up in a small town in rural Alaska, and about the environment of the state. The film provides an opportunity for others to see what life is like; in fact, two of the Barrow actors are in Berlin speaking about their experiences. MS. MARCOUS offered that audiences are also curious about language and communication. REPRESENTATIVE FOSTER asked for the location of the film. 10:34:37 AM MR. MACLEAN said the film was shot on the Arctic Ocean and in and around Barrow. REPRESENTATIVE TUCK asked whether the language spoken by the grandmother in the film was scripted. MR. MACLEAN said the scenes played by Rosabelle Rexford were improvised around the theme of language between generations. 10:36:01 AM REPRESENTATIVE FOSTER moved to adopt Amendment 2, labeled 27- LS0356\A.2, Bullock, 2/14/11, which read: Page 2, following line 5: Insert a new bill section to read:  "* Sec. 4. AS 44.33.235(c) is amended to read: (c) In determining the amount of the tax credit, the percentage provided by (b) of this section shall be increased by the film office based on the following criteria: (1) an additional 10 percent of qualified expenditures that are wages paid to Alaska residents; (2) an additional four [TWO] percent of qualified expenditures made in a rural area; and (3) an additional two percent of qualified expenditures made in the state between October 1 and March 30." Renumber the following bill sections accordingly. 10:36:57 AM REPRESENTATIVE TUCK objected for discussion purposes. REPRESENTATIVE FOSTER explained that Amendment 2 increases tax credits for filming in rural areas from 2 percent to 4 percent in order to encourage filming in remote and rural Alaska, even though there are high fuel costs and logistical issues. 10:37:49 AM REPRESENTATIVE TUCK agreed that filming in rural areas has the challenge of additional expense, but it is important to share Alaska's culture with the rest of the world. He expressed his concern about the public's perception that increasing the total tax credit from 44 percent to 46 percent "sounds like a big number." He removed his objection. There being no further objection, it was so ordered. 10:39:29 AM REPRESENTATIVE OLSON moved to adopt Amendment 3, labeled 27- LS0356\A.3, Bullock, 2/14/11, which read: Page 3, following line 9: Insert a new bill section to read:  "* Sec. 5. AS 44.33.239(7) is amended to read: (7) "rural area" means a community with a population of 1,500 or less or a community with a population of 6,500 [5,500] or less that is not connected by road or rail to Anchorage or Fairbanks." Renumber the following bill sections accordingly. 10:39:43 AM CHAIR HERRON indicated there being no objection, it was so ordered. 10:40:19 AM DEBORAH SCHILDT, Co-Founder and Program Administer, Alaska Crew Training, Inc. (ACT I), provided a PowerPoint presentation titled, "Training Alaska's Workforce for Film Production". She informed the committee that her training program would not exist except for the success of Alaska's film incentive legislation. Ms. Schildt gave her background in the film industry and said she is now based in Alaska, and was one of two casting directors on the feature film Everybody Loves Whales. A few years ago she helped form the Alaska Film Group, Alaska's film and video trade association, which saw a need for training a larger workforce, and in 2009, co-founded Alaska Crew Training, Inc. (ACT I). She displayed a slide titled, "The Film & TV Production Dynamic," and described Alaska-based reality programming that has been broadcast since 2005. Film- and TV-induced tourism is a measurable fact, as noted by the increased visits to sites sensationalized by movies or TV. In fact, last month Discovery's latest reality series about Alaska garnered 2.6 million viewers. Ms. Schildt stated that no other state has more cable TV shows per capita, and said, "We've entered our next gold rush, and this one isn't taking any resources out of the ground." However, to support the TV and film industry Alaska still needs a film office with a website that works for producers, a sound stage, and a larger, trained workforce. The workforce needs a basic understanding of how film productions work and on-the-job training, in order to earn the generous salaries paid to background extras and others. Alaska Crew Training has focused its courses on feature films because they hire the most crew. For example, incomes for those working on Everybody Loves Whales varied from minimum wage to $2,000 per day, and most skills needed are not found in a typical university curriculum. Her company based its program on successful training programs that could grow with Alaska's workforce needs, but did not offer classes until there was an opportunity for placement, thus it launched "Production 101 Bootcamp" in 2010. 10:45:06 AM MS. SCHILDT indicated that ACT I has offered six courses, and almost 100 students have completed the program. In 2011, her company hopes to offer online Level 1 and Level 2 classes to communities beyond Anchorage. Besides training a successful workforce, ACT I has trained others such as those working in the visitor industry and at Native corporations. Several examples of the successes of some of her students were given, and she pointed out that ACT I focuses on training markets for both rural and urban areas; in fact, 2,471 residents from 50 towns and villages were employed as extras for Everybody Loves Whales. Another benefit from the tax credit incentive may be to bring back to Alaska those who have migrated out of the state for jobs and training in the film industry. Ms. Schildt further described the courses available from ACT I, from entry level to above, with the hope to expand a seasoned and experienced workforce that can support two large feature films simultaneously. Alaska Crew Training has been recognized by the AFO as a training resource and she encouraged anyone with an interest to contact her office. 10:49:04 AM ROBIN KORNFIELD, Vice-President, Communications & Marketing, NANA Development Corporation, Northwest Arctic Native Association (NANA) Regional Corporation, stated that NANA Development Corporation (NANA Development) is the business arm of NANA Regional Corporation, which is owned by 12,500 Inupiaq people originating in Northwest Alaska. She stated NANA supports HB 67 because this legislation will create a new renewable resource industry for Alaska. Ms. Kornfield noted that NANA Development's board of director's extensive study of the film industry supports its investment in infrastructure for the industry; therefore, NANA Development supports the expansion of the tax credit incentive that will lead to private sector jobs and the expansion of the economy. The investment by NANA Development in the film industry is compatible with its focus on Alaska, and the creation of training opportunities and jobs for its shareholders, and with its expertise in the development of new industries. In partnership with Evergreen Films (Evergreen), NANA has formed a new company called Piksik which will provide one-stop shopping for companies that are making movies in Alaska by providing catering, security, transportation, logistics, construction, and lodging; all these are fields that are necessary to the film industry, and with which NANA has success. During the making of a three- dimensional (3-D) movie called Walking With Dinosaurs, WHPacific, one of NANA Development's engineering companies, invested in Light Detection And Ranging (LIDAR) technology used in the film. The system surveys the background for movie animation, and is now being marketed by WHPacific. 10:54:02 AM MS. KORNFIELD displayed a slide titled, "Industry Overview" and relayed that NANA's extensive research has found that the domestic consumer film expenditures have grown, even during recession years, and international markets are expected to outpace domestic growth. For example, in Vancouver, British Columbia, movie production values have grown from $400 million to $1.2 billion, and more than 20,000 jobs have been created. Because of their belief in the future of Alaska's film industry, NANA, Evergreen, and other private sector partners, are investigating the possibility of developing a soundstage in Anchorage, which would include production offices and a "green screen." She opined the construction of a soundstage, combined with the extension of the tax credits, will encourage more producers to film in Alaska, and ensure continued growth in the industry. She displayed a slide titled, "Film Timeline" which indicated it took five years to produce Walking With Dinosaurs from development through release, and pointed out that the extension of the tax incentive program to 36 months is warranted. Also, the increase in the dollar limit on tax credits will allow the industry to grow with the infrastructure and provide private industry jobs. Ms. Kornfield observed that NANA's mission is to improve the quality of life for its people through investment in companies with potential for growth, and by providing opportunities for training and jobs for its shareholders. The tax credit program has provided the foundation for the growth of the film industry, and the future success of the industry is dependent upon producers choosing Alaska, over other states and countries, for film production. She concluded by noting that the contribution to Alaska's economy from the production of Everybody Loves Whales totaled over $4 million for wages to residents, and over $7.5 million for goods and services, and she restated NANA's support for the legislation. REPRESENTATIVE GARDNER asked whether the legislature will be asked for funding for the construction of the soundstage. 10:59:48 AM MS. KORNFIELD answered that NANA and its partners are planning on building the soundstage. 10:59:59 AM JOHN RENSE, Senior Operations Manager, NANA Development Corporation, Northern Arctic Native Association (NANA) Regional Corporation, added that certainty about the duration of the period of time was critical "to start to put some of these investments in place." In further response to Representative Gardner, he said the 10-year extension is important, financially, to investments with a high risk. 11:00:45 AM BOB CROCKETT, President, Alaska Film Group (AFG), stated that HB 67 is important to the economic future of the film industry and the state. The Alaska Film Group is a non-profit trade association, with a diverse statewide membership, that began in 1992. His organization provides a voice for the film and video industry of Alaska, conducts educational forums, promotes Alaska as a film and video destination, and creates economic opportunities for its membership and all Alaskans. Since the inception of the tax incentive, AFG has increased its membership by 40 percent. Mr. Crocket observed that the film industry brings the following to Alaska's economy: employment of the local workforce; local purchases of materials and supplies; room rentals; increased business for caterers, restaurants, hotels, and retail venues; increased transportation services and shipping; increased tourism; increased local tax revenues. He opined Alaskans' goals for the state are progress, productivity, and putting Alaskans to work, along with continued progress in attracting productions to Alaska, crew training, job growth, education, and growth of infrastructure for the film industry. Film and video production is a high-wage industry that employs a large workforce of skilled and high-paying jobs; in fact, benefits for skilled workers can include health care and pensions. He relayed that film industry salaries in 2008 averaged $76,000, which were 72 percent higher than the national average, and businesses "behind the scenes" include air service, catering, hotel, retail, transportation and shipping, maintenance, rental, security, and tourism. Mr. Crockett provided the financial impact that the filming of a TV series can have on a community, in addition to the impact of increased film-induced tourism. Film-induced tourism can be part of a holiday, a primary travel motivator, or a nostalgic pilgrimage, and he quoted supporting articles from Alaska publications. He restated the monetary value to Alaska of Everybody Loves Whales, and advised that independent films are becoming more popular, along with digital video disc (DVD) viewing. An increase in the interest in movies of all types worldwide creates more opportunities for Alaska to be noticed by the film industry. 11:08:28 AM MR. CROCKETT listed the gross receipts for recent movies, and advised the top five were rated Parental Guidance (PG) or Parental Guidance for Under 13 years of age (PG-13). He noted that 607 films were released in the U.S. in 2006 at an average cost of $100.3 million. Implementation of the tax credit incentive encouraged producers to bring productions to Alaska beyond its two largest competitors, Vancouver, British Columbia, and Manitoba. Louisiana and New Mexico have enacted successful film incentive legislation and both states have experienced an annual compound employment growth of 23 percent per year; in fact, film production in Louisiana is third in the U.S. behind California and New York. In 2009, the average cost of filming a high-end, union-scale, studio film was $225,000 per day. Furthermore, addressing the previous trend of shooting films about Alaska in other states can be changed by making a favorable business climate here with the extension of the current tax credit incentive program. Currently, Alaska has filming locations, midnight sun, year-around access to snow and ice, good communications and transportation, a well developed leisure industry, a hospitable business social and environment, and an economic incentive, but needs skilled professional crew, filming facilities, soundstages and studios, crew training, support services, and a long-term assurance of tax credits. Mr. Crockett cautioned that the future is bright, but will not continue beyond 2013 without action. 11:13:54 AM MR. CROCKETT observed that the state has learned how to attract a multi-million dollar global industry to Alaska and opined extension of the tax credit incentive for another 10 years will provide producers with the confidence to plan ahead, allow the construction of infrastructure, and support the training and education of crews. The proposed legislation will continue the successful economic diversification that was begun in 2008, and he concluded that Alaska is poised to create jobs, stimulate business, create new businesses, build service infrastructure, build the economy, increase tourism, and increase its self- sufficiency. 11:15:50 AM REPRESENTATIVE THOMPSON recalled a state had to abandon its program that allowed the sale of tax credits due to a scandal. He asked how Alaska could avoid this problem. 11:17:48 AM JOHANNA BALES, Deputy Director, Tax Division, Department of Revenue (DOR), explained that a scandal in Iowa was a case of collusion on the part of a producer and the head of the state's film office to commit tax fraud. In Alaska, there are controls in place that protect the confidentiality of the corporate income tax payers that buy the credits, although all of the information about the production, the amount of the credits, and the film is available through the film office. She advised that the amount of the credit does not change when it is transferred, and the tax division "keep[s] very close track of those." 11:19:10 AM REPRESENTATIVE THOMPSON appreciated the information. 11:19:20 AM WANETTA AYERS, Director, Division of Economic Development, Department of Commerce, Community & Economic Development (DCCED), regarding Representative Thompson's question, added that there is a review committee process looking at applications before they are advanced to DOR. Furthermore, her division will implement a pre-qualification process to establish an added level of scrutiny, although there have not been any concerns about the process to date. 11:19:57 AM REPRESENTATIVE THOMPSON questioned whether the legislation allows sufficient time for the production of a film. MS. AYERS responded that the length of time is regarding the marketability of the tax certificate once it has been issued, and broadens the window for the buyer and seller to find each other and transact their exchange. 11:21:00 AM MS. BALES clarified that Representative Thompson was referring to the 24-month period that is being expanded to 36 months by the proposed legislation. There is no change in the three-year time period allowed for the sale of tax credit certificates. MS. AYERS addressed the additional length of time - from 24 months to 36 months - for the pre-qualification period, and said that this time is needed to keep track of productions that are not going to utilize the credits for which they have pre- qualified, so that the credits are available to other productions. 11:22:03 AM REPRESENTATIVE TUCK referred to the slide titled, "Film Timeline," and further explained that the tax credits apply when production starts. He opined that lengthening the amount of time to 36 months will provide "adequacy," because productions that utilize 3-D and graphic technologies take longer than 24 months. As a matter of fact, the production of Ghost Vision was a seven-year process. 11:23:18 AM K'DEE MILLER, Owner, Patina Pictures, stated she was a film producer and owner of a Los Angeles-based film production company, Patina Pictures. She grew up in Alaska and moved to New York to pursue a career in film, which has included the production of films screened at the Sundance Film Festival, the American Film Institute (AFI), and a current feature project. Ms. Miller opined the Alaska tax incentive program has created an opportunity for her to return to Alaska and continue to work within the film industry. She expressed her support of extending the tax credits in order to build the infrastructure necessary to meet the industry's needs. Regarding the workforce needed, she described her efforts with Alaskan policymakers, educators, state agencies, unions, and the private sector to encourage workforce development; in fact, all of the parties agree that this is the time to ensure that the film industry puts Alaskans to work. Ms. Miller stated that training programs available in other states are joint partnerships between government, industry, and community colleges. She concluded by restating her support for HB 67 and offered to "help create this necessary workforce development component so that our state can more fully realize the benefits of the investments that they've already made." 11:26:15 AM CHAIR HERRON closed public testimony. 11:26:29 AM REPRESENTATIVE TUCK moved to report HB 67, as amended, out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSHB 67(EDT) was reported from the House Special Committee on Economic Development, International Trade and Tourism.