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

The movie is “The Ides of March,” which Clooney has been shooting in University locales this week. A-list stars Ryan Gosling, Evan Rachel Wood, Philip Seymour Hoffman, Marisa Tomei and Paul Giamatti will be alongside Clooney’s own supernova star wattage.

For much of the University’s student body, it’s a familiar thrill. Thanks to the Michigan Film Tax Incentives passed in 2008, the campus was buzzing as Clive Owen, Adam Brody, Drew Barrymore, Hilary Swank and more of Hollywood’s finest shot movies in and around Ann Arbor over the past few years.

But with Republican Gov. Rick Synder’s recent proposal to significantly reduce the state’s film tax incentives, the days of Michigan movie shoots might be coming to an end. For most students, it means the last of texting friends at Michigan State University that they just saw David Schwimmer in the Law Quad. But for University alum and current students pursuing careers in Michigan’s film and television industries, Snyder’s proposal has completely shattered their world, leaving them with pangs of anxiety about their future in the industry.

The Golden Age of Michigan Movies

The idea for the film tax incentives took root at the end of former Republican Gov. John Engler’s term in 2002, according to Jim Burnstein, screenwriting coordinator in the University’s Department of Screen Arts and Cultures. Burnstein was asked to join the Michigan Film Advisory Commission, which worked to boost film production in the state.

The council’s main goals were to increase jobs by increasing film production, building infrastructure to create a permanent film industry and, as Burnstein likes to call it, reversing the “brain drain” — or losing in-state residents to out-of-state jobs.

“We were trying to keep people who I teach and people who come out of our program and all the other talented students at U of M, MSU, Wayne State and all the other great schools,” Burnstein said. “Get them to stay home, because certainly, there wasn’t anything that was getting our creative class to stay home.”

Burnstein and the council then worked with former Democratic Gov. Jennifer Granholm to finally pass the incentives in April 2008, offering a tax credit of up to 42 percent of a production’s expenditures. Film production in Michigan exploded almost immediately after. In 2007, three movies were shot in Michigan, spending about $2 million in production costs. In the nine months of 2008 that the incentive laws were in effect, 38 projects were filmed in Michigan, including Clint Eastwood’s “Gran Torino” and Drew Barrymore’s “Whip It” — contributing to about $125 million in expenditures.

“For five years, I said, ‘If you build it, they will come’… well they came,” Burnstein said. “And they came in greater numbers than our projections.”

University alum Marc Zakalik couldn’t have finished his Screen Arts and Cultures degree at a better time. He graduated in April 2008, and about three days later, he got a call to work on one of the first movies to take advantage of the incentives — Miguel Arteta’s “Youth in Revolt” starring Michael Cera.

“I started off as an unpaid intern helping out Miguel,” Zakalik said. “But a lot of what I was doing was helping him break down the script and helping him rewrite it … which was cool because I studied screenwriting in college. It was an amazing experience, especially so soon after graduating — I was with him 13 to 14 hours a day for about three weeks straight.”

Two fellow graduates of the University’s SAC program and native Michiganders, Danny Mooney and Eddie Rubin, were able to start their own production company in Michigan because of the incentives. The duo, who first joined forces in one of Burnstein’s SAC classes, launched Deep Blue Pictures and completed two feature films by the time Rubin graduated in 2009.

“We always wanted to stay in Michigan — our crews were here that we loved to work with and obviously our families,” Mooney said. “The tough reality is, in the film industry, L.A. and New York are the places to be … that’s just where the deals are going. That’s where all the shoots were.

“It was a bummer, but when the incentives passed, we were like, ‘Hold up one second, this might actually work.’ ”

Mooney said starting his company in Michigan quickly became the smartest business decision he ever made. He and Rubin have made five films during the incentive program, have given more than 50 jobs to Michigan graduates and hundreds of jobs to other Michiganders to work on films, commercials and music videos.

“If we were in L.A. right now, we’d be getting coffee for someone,” Rubin said. “On top of just getting to bigger fish in a small pond, we had the support of our family and our friends — where in L.A., if we had been on our own, it would have been harder to survive. If we tried to start our own company there, we might have had to get a part-time job bussing tables.”

Films shooting in Michigan also allowed University students currently enrolled to find gigs while taking classes. University alum Yuriy Sardarov, who graduated in December 2010 as a theater major, got his first break last spring.

“One of my professors referred me to these casting agents. It was for this straight-to-DVD action movie,” Sardarov said. “And I had a few callbacks, I got the part, I got into a really good relationship with the casting directors and they kept sending me out to do stuff and I kept getting parts — these were all in Michigan.”

After his debut, Sardarov worked on two other features before landing a role in “The Ides of March.”

‘Black Thursday’

In 2009, film production in Michigan continued to swell. The first full year of the tax incentives led to 43 productions that spent $223.6 million in Michigan. Last year, Michigan’s film industry hit its peak, spending more than $300 million for 58 projects including “Scream 4,” “A Very Harold & Kumar Christmas,” “Transformers: Dark of the Moon” and Hugh Jackman’s “Real Steel.”

“We were in that elite group of regional film industries if you’re looking outside the coasts,” Burnstein said. “And really, we owned the Midwest — we were at the top of the food chain.”

The Michigan film industry locomotive appeared to be unstoppable as 2011 began. The state bagged “The Avengers,” the long-in-the-making Marvel superhero team-up movie featuring Iron Man, Thor, Captain America, The Hulk, Hawkeye and Samuel L. Jackson as Nick Fury, to be partially filmed in Michigan. But with an approximate budget of $105 million, the jewel in the crown was “Oz: The Great and Powerful,” directed by Sam Raimi (Spider-Man) and starring James Franco, to be filmed in Pontiac’s Raleigh Studios — a just-converted facility that was once a General Motors plant, offering over 175,000 square feet for its sound stages.

The incentives appeared to be making a positive economic impact on the state. According to a study conducted by the accounting firm Ernst & Young, film productions in Michigan created more than 2,600 jobs in 2009 and more than 3,800 in 2010 — both direct and indirect jobs combined. Dollar-wise, this translated to a total state resident income impact of $108.9 million in 2009 and $172.5 million in 2010.

But it all came to a screeching halt on Feb. 17, 2011, which Rubin comically coined “Black Thursday.” Snyder unveiled a proposal that would completely restructure Michigan’s film tax incentives. 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. as to whether we were going to give them literally millions of dollars,” he said. “That was not reasonable. Of course the state is not going to approve a request with one day’s notice to give away millions of dollars.”

Burnstein was disappointed to lose such a high-profile project, especially to Michigan’s rivals.

“The governor (of Ohio) is acting like it’s the Ohio State-Michigan game, and he just won,” he said. “And he did, that’s the sad part.”

Moving out of Michigan

Mooney, Rubin, Burnstein and other filmmakers have been working to fight Snyder’s proposal, attending tax policy and budget hearings and talking to state legislators before it passes into law.

“Right now our job is to educate (legislators), to let them know, ‘look how this is benefiting the state, look what it’s creating, look what we’re doing,’ ” Rubin said. “Look at Danny and I, two kids who started a production company and have helped pump millions of dollars into the local economy.”

But it was never just about the money. For Sardarov, the impact of the incentives was shown through the revitalization of Detroit, which has seen a grassroots Renaissance through the city’s youth.

“The government keeps talking about numbers and numbers, but you can’t base society off numbers,” he said. “It’s about the spirit that kind of injects into the society — there’s this hope, and hope is intrinsic. You can’t buy hope with numbers, you can’t buy hope with tax incentives.”

He went on to tell the story of shooting a scene in “The Ides of March” on a bus full of extras.

“We get off the bus, and I think it was George Clooney himself that said, ‘I have never seen this much passion coming from extras — they’re going at it, they’re doing everything we tell them to do, you could just see it in their eyes,’ ” Sardarov narrated. “People in Detroit have never had these opportunities before, suddenly they’re coming in tenfold.”

“This is something where people can go to the movie theater, and they can see their city, their state immortalized up on the screen,” Mooney said. “It’s Robocop, it’s Detroit, it’s Grand Rapids, it’s the gorgeous U.P. That’s something people get proud about.”

Burnstien is frustrated by the resurrection of the “brain drain,” which had been minimized in recent years because of the film incentive laws.

“All those workers that have been trained, all those young people we’ve trained, they’ve got a skill, and they’re going to go where the action is,” he said. “That means we’re going to lose them to states like Louisiana, Ohio and Georgia … and they’ll go to California.”

Michigan filmmakers appear to have the support of the citizens. At a town hall meeting in Livonia, Mich. last month that featured author and Detroit Free Press columnist Mitch Albom, actor Jeff Daniels, Burnstein and others speaking against the proposal, about 4,000 people showed up when the organizers only expected an audience of 500.

Despite their activism, many in the industry are facing the reality that their careers as Michigan filmmakers are potentially defunct.

“I gave my landlord my two months notice that I’m moving out,” Zakalik said. “And I’m going to figure out what I’m going to do. I thought about moving to North Carolina, which has a pretty good business there … I don’t know … It’s like, what was the point? Why did we stay if we’re just going to be told we can’t get a job tomorrow?”

Saradov said he was planning on staying in Michigan until “the well ran dry.”

“If this passes, I’m going to be going to New York or L.A., unfortunately,” Saradov said. “I got on a good roll, and I want to keep going. If things were sticking around here, I’d definitely be here no question about it.”

LSA senior Tian-Jun Gu was planning to stay around Michigan after graduation and work with friends to write and produce viral videos in the vein of “Funny or Die” — hiring Michigan actors and crews, of course. But after the proposal, his plans might change.

“The problem with (Snyder) even proposing it is the fact that it scared businesses off,” he said. “Now studios are going to be looking at Michigan to see if we can be trusted.

“These film incentives, even if they are kept, are always going to be in danger of being cut. It’s looking more and more like L.A. is going to be a possibility for me because of that inherent danger, even if the film incentives are kept.”

Still, in the midst of all the uncertainty, Burnstein sees no reason to give up hope.

“Do I think we have a reasonable shot saving this thing? I do, or I wouldn’t be doing it,” Burnstein said. “Do I think it’s a slam dunk? Of course not. You know, if we lose, I want to walk away and be able to tell my students ‘I did everything I could to try and save this opportunity for you.’ If we fail, we fail, but I’d be damned if I’m not going to try.”

University students, enjoy the celebrity sightings while you still can — they may be soon gone for good. But more importantly, because of the Governor’s proposal, our school’s budding actors and filmmakers may be gone for good too.