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Losing the Incentive: What Gov. Snyder's proposed cuts mean for Michigan's film industry

BY KAVI SHEKHAR PANDEY

Published March 15, 2011

Under the new plan, the essentially unlimited up-to 42 percent tax credit would be replaced by a yearly cap of $25 million — with $75 million in additional honored subsidies over the next fiscal year — to be handed out in appropriations each year.

“When people say (the current incentives program is) a tax credit, they think what that means is you’re reducing your tax liability — instead of what you owe on your taxes, we’re reducing it by 42 percent,” said Ryan Kazmirzack, a spokesman for Snyder. “That is not how it works — it is actually a subsidy. The state of Michigan literally writes a check. Instead of saying, ‘You owe less money,’ Michigan is actually paying out money to Hollywood film producers … we came to the conclusion that the film subsidy right now, is unsustainable.”

Kazmirzack called the Ernst & Young study “flawed,” arguing that it was commissioned by organizations that had an interest in maintaining the incentives. He then explained that, according to the governor, a significant flaw in the current incentives program is that it is not capped. He explained that if a production spent $1 billion, the state would pay out $420 million in subsidies, at the maximum.

“Right there is pretty much the entire amount that has to be cut from education,” Kazmirzack said. “There is no way you can budget not knowing how much you have to give out.”

For Michigan filmmakers, the announcement was a crushing blow.

“To be completely honest — I cried,” Rubin said. “Literally, no joke, no exaggeration. I was devastated, thinking we had built our company off the backs of the incentive and used it to not only benefit ourselves but benefit the state, benefit so many of our friends and colleagues.”

Before Snyder's proposal, Mooney said “everyone in the film industry here was just flying.”

“People were getting new jobs, our friends were buying new places, getting new cars … it wasn’t like people were getting rich off this," he said. "Everyone was making a stable, solid income. But that day, everyone we knew became unemployed besides a couple film sets.”

Zakalik said he felt "cheated."

“I’ve been, for the lack of a better term, busting my ass in this industry trying to make something of it. I’m really happy here, and to hear that my job is just going to disappear overnight is really, really frustrating.”

Snyder had alluded to his dislike of the state’s generous film tax incentives on the campaign trail, so his proposal was not a blindside to the industry. What was unexpected was the extent to which the governor wished to reduce the program.

“I think it’s kind of ridiculous,” Zakalik explained. “It’s a slap in the face — you might as well throw the $25 million out of the window. It’s being wasted.”

“We knew he was going to bring it down to 30, 35 (percent). We were thinking we would still be competitive,” Rubin said. “But with the $25 million cap he pulled the rug out from under the industry. There is no way the industry can survive on the cap.”

Beyond the cap, Rubin is worried about the proposal’s requirement that the incentives will be doled out in appropriations.

“Every year, the film community will have to come before the appropriations committee and state their case, ‘I think we deserve this money,’ ” he explained. “So even if you have say, $100 million in appropriations, you’re never going to have long-term commitments — infrastructure, studios — built because there’s a chance next year that they may not get the money.”

The first apparent casualty of the proposal was “The Avengers,” which pulled out of Michigan to film in Cleveland, Ohio after producers were unsure whether they would be receiving the tax incentives.

But according to Kazmirzack, Michigan let “The Avengers” film crew leave because of the irrational demands of the producers.

“They put in their application and demanded an answer by 5 p.m.