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Incentive could lure filmmakers to Ohio
By Dennis J. Willard
Beacon Journal Columbus Bureau
Published on Wednesday, Dec 03, 2008
Democrats usually embrace Hollywood and its stars, but Republicans in the legislature are carrying the klieg lights for the industry in Ohio these days.
The Ohio House is scheduled to vote on a bill today that is designed to entice film-production companies to work in the state in return for a 25 percent transferable tax credit.
Bring us your luminaries, your directors, your scripts, your extras. Rent our hotel rooms, dine in our restaurants, hire locals full and part time, purchase your set materials here, call on area caterers, pay sales taxes, income taxes and any other applicable taxes.
In return, Ohio will provide you with tax credits for 25 percent of the money you spend.
These transferable tax credits are as good as gold, because they can be brokered and sold like any other commodity to people with deep pockets, high salaries and the need to write off income on their taxes.Republicans are for it. A number of Cleveland officials and that city's area film commission support the idea.
Democratic lawmakers from Cuyahoga County, Lt. Gov. Lee Fisher, from Shaker Heights, and Gov. Ted Strickland and his tax department are against the current proposal, at least the passage of such legislation during a lame-duck session.
Strickland and his tax department believe the state treasury, already facing tremendous cuts because of the economy and lower-than-projected revenues, will take a significant hit by providing up to $100 million a year in tax credits to film production companies.
Fred Church, assistant tax director, maintains the state treasury will recoup 18 cents or less on every dollar in tax credits.
OK, fine, the state loses money by issuing tax credits, but the film-production companies spend millions of dollars locally, so places such as Cleveland, Cincinnati and Dayton would benefit.
Drop in revenue
There is little doubt that state revenues drop when these tax breaks are extended. The question for legislatures, including Ohio's, is whether there is enough money generated locally for the credits to continue.
In other words, Ohio's loss is Cleveland's boom so maybe it is worth it as an economic tool.
Church said he has examined similar tax-incentive programs in other states, and it appears to be an expensive approach to creating jobs.
''From what we've seen in terms of the stimulation results that are out there, states that have these credits, each one of them has said, 'Yes, we think there is some additional employment and income generated by the credit, but it is not as much as you might think for the size of the credit that you are giving up,' '' Church said.
Ivan Schwarz, Greater Cleveland Film Commission executive director, thinks the state is thinking short-term on the tax issue, but in the long run, a film-production industry would create 1,500 jobs just in Cuyahoga County.
Schwarz said Cleveland has an anchor tenant in New Jersey-based Nehst Studios, which just signed an agreement for free rent at the Cleveland Convention Center and plans to spend $100 million a year locally.
Nehst would be the basis for building a film-industry infrastructure, Schwarz said. He envisions Cleveland as a full-service location providing labor, goods and services for shooting, editing and distributing films.
''I would rather have ten $10 million movies a year than one $100 million film,'' Schwarz said.
The ongoing process of filmmaking would create steady, good-paying jobs and develop the local economy, Schwarz believes.
''They keep looking at everything in the biennium. You have to look at this long term. There is a cost to the state to build an industry,'' Schwarz said.
Republicans are embracing the film infrastructure argument. On a party-line roll call, 10-9, the GOP members of the House Ways and Means Committee voted to send the bill, sponsored by then state Rep. Tom Patton, R-Strongsville, to the floor.
Patton said the convention center was open five days in 2007, and Nehst is prepared to convert the building to a full-scale production facility.
''The film industry is a 35 percent growth industry. Nothing is growing like this,'' Patton said.
Patton, who moved to the Ohio Senate after the election, said the bill was stalled in committee while lawmakers waited to hear from the administration.
Opposed to credits
The 10-9 vote occurred shortly after Tax Commissioner Rich Levin told the panel the Strickland administration opposed enacting the tax-break legislation during a lame-duck session.
In his testimony, Levin explained the administration was opposed to the transferable tax credits.
''Transferable tax credits are the equivalent to direct government subsidies,'' Levin said, adding subsidies are more difficult to track for governmental-accountability purposes.
Ohio would join about 16 other states that offer transferable tax credits. About 40 states offer film-production companies some form of tax incentive to bring in business.
Hollywood has rapidly adopted the business strategies of so many companies across this country.
Local communities and states must throw in financial rewards or Hollywood will just scout other locations.
Although Patton's bill might pass through the Republican-controlled legislature this month, observers believe Strickland will veto the measure.
Schwarz said David Fincher, a Hollywood director whose credits include Fight Club and Se7en, wants to shoot a $100 million budget film tentatively about the 1930s torso murders in Cleveland investigated by Eliot Ness after the untouchable brought down Al Capone in Chicago.
He said not passing the bill during the lame-duck session would kill the Fincher movie, because the director is going to scout locations in the next few weeks, and Nehst Studios would also probably begin looking at other states unless there was a strong indication that the governor was going to seriously consider tax incentives during budget negotiations early next year.
''There's still room to negotiate,'' Schwarz said, including on the issue of transferable tax credits.
''We're not adversarial. I'd love to see this happen for the state of Ohio,'' he said.
Democrats usually embrace Hollywood and its stars, but Republicans in the legislature are carrying the klieg lights for the industry in Ohio these days.
Get the full article here.
Comments
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Akron, OH
Posted 08:56 AM, 12/03/2008
Strickland is a 'do-nothing' idiot. Like most politicians he runs on campaign promises saying he will fix school funding-and what has he done...nothing-for two years now. Now he won't even bring the prospect of new business to ohio...get rid of this 'do nothing'!
Akron, OH
Posted 11:10 AM, 12/03/2008
Hmmm, seems that Teddyboy is against the state findin' new ways to raise funds. Mebbe he doesn't understand, that some money is better than no money.
Nice point about the school fundin' Ann. When he ran for office, he stated he had a plan ready to go, and here two years later, we're all still waitin' for it.
