Filmmakers still seeing stars after incentive cut

Once upon a time, Michael Jones had a career in Michigan. He was a location manager for print and TV advertising, finding, securing and running the spaces where commercial shoots set up temporary shop. Then things got very bad, when the auto industry collapsed, throwing its ancillary industries into chaos.

But then, things got very, very good: Hollywood came to Michigan.

Lured by a tops-in-the-nation incentive for film and TV production, the trucks were rolling into Michigan before the ink was barely dry on Gov. Jennifer Granholm’s signature of an April 2008 law, aiming at places to shoot movies about corrupt politicians, superheroes, zombies and rock ’em-sock ’em robots.

Success didn’t happen overnight -- with no film experience, Jones needed to prove he could handle the job -- but once it came, it was very sweet.

“I increased my standard of living and worked a lot harder, but ... I could take my kids on vacation. That was nice," he said.

Ultimately, he became union steward for his local chapter of the International Alliance of Theatrical Stage Employees  International Brotherhood of Teamsters, Local 337. Jones said. The union once had only a handful of members, but swelled to around 90 during the boom. Today, he added, “none are working.”

Jones is, but he had to leave Michigan to do so. Along with his wife, Kim, a make-up artist, he’s in the process of moving to Georgia, where Kim most often works, at Tyler Perry’s studio in Atlanta. Michael traveled between there and Troy, where they now have two houses for rent, until their children finished school.

They are among the most reluctant Michigan transplants to the South.

“Schools in Georgia suck,” he states, matter-of-factly.

The same might be said about Michigan's film industry these days. The abrupt conversion of Michigan's uncapped tax credit program to a limited system of direct grants under Gov. Rick Snyder has led to a reversal of fortune for filmmakers and their work force just as dramatic as the rush of a few years ago. Even with an increase in grants for next year, few who make their living in the industry are more than cautiously optimistic. They say the abrupt curtailment of the original program, along with other changes made under the Snyder administration, have spooked the very people it’s designed to attract.

When he proposed the elimination of the film credits in 2011, Snyder said the state could not afford them -- and that they would be superfluous after the passage of broad-based business tax cuts.

"Our goal here is not to create undue havoc, but to recognize there is an industry here. But it needs to move out of the incentive model at some point," Snyder said in an MLive.com report.

In 2011, 25 projects were in production in the state, spending an estimated $202 million, according to the Michigan Film Office’s annual report. They were awarded a total of $75.6 million in incentives (under the old tax credit program) and are credited with 766 full-time equivalent jobs. (For context, in the last two months, Michigan's overall economy added 4,000 jobs in April and then lost 5,000 jobs in May. Between May 2011 and May 2012, total non-farm employment is up 47,000. Total employment now is 3.98 million.)

Michigan's film industry peak was 2010, when 58 projects shot in Michigan. The Film Office says those productions spent $293 million in the state, and were awarded $115 million in incentives.

But the last major motion picture to shoot here under the credits was “Oz: The Great and Powerful,” directed by Royal Oak native Sam Raimi, which received just under $40 million. When it wrapped in late 2011, a lot of people in the biz settled in for a long, idle winter.

Jones, for example, filed for unemployment for the first time in his life. And then he and Kim made the decision to leave.

Today, the picture is brightening for Michigan filmmaking. Michigan's new incentive program, once capped at $25 million at Snyder's urging, will be doubled to $50 million in next year’s budget, which starts Oct. 1.

'Category 6' and beyond

Only one big-budget production -- a drama about tornadoes formerly known as “Category 6” -- is considered a good shot for employment, although others are lining up.

By June 1, the only production approved for an incentive for 2012 was “Beside Still Waters,” about “a young romantic named Daniel Thatcher, who invites a group of estranged high school friends to his summer home in the U.P. They enjoy one last weekend in the home where they spent their childhood summers, rekindling old friendships and creating new memories,” according to a Michigan Film Office press release. It qualified for $79,324 in incentives.

"Waters" cleared a review process that carries a new wrinkle for subsidy seekers asks, asks, among other things: Does the project have the “ability to show Michigan in a positive light and promote the state as a tourist destination?"

Jones said, “It sounds like a Pure Michigan commercial.”

Big incentives go from boffo to shelf

The inconsistency of the program -- once rich, then not, then richer -- has sent a message, producers say, that Michigan isn’t serious about being a filmmaking center.

“I'm more of a fiscal conservative than not,” said Bob Brown, a Michigan-based producer whose company, Charity Island Pictures, has made movies in the state, before and after the big-time incentives. He was on the committee that helped design the package Granholm approved, a process that involved comparing state programs nationwide. “Candidly, I’m not comfortable to be in a business dependent on the government to make it work. But whenever you're trying to create an industry, incentives played a huge role in taking it from a business to an industry.”

According to the Tax Foundation, in 2010, 40 states had some form of financial incentive for filmmakers, a number that has subsequently fallen to 35, with other states curtailing or not funding existing programs. When Michigan’s was in place, it was among the most generous in the nation, by design.

Granholm, Brown said, asked, “If we want to be No. 1, what would it take?” It would take a 42 percent refundable tax credit -- an enticement that led to the state sending checks directly to film producers.

“I thought that if we're going to do it, then we should do it right,” he said. “We decided to design a program to put us at the top of the heap. It was signed on April 7, and we had four movies on the ground April 8.”

Brown points out that government has an active role in all sorts of economic development, and subsidizing the film industry isn’t different from any other.

The question of how tax incentives affect local communities is open to debate. By the strictest calculation, the state paid lavishly for each job created by the program; the “Category 6” production, for example, is approved for $12.1 million in incentives and is expected to create 171 full-time equivalent jobs -- $70,790 per job. But Brown and others argue the math isn’t that simple.

“The Mackinac Center will look at it one way. I think they said the state got 20 cents back on every dollar spent. But Ernst & Young” -- in a study commissioned by the convention & visitors bureaus of four Michigan cities -- “said they make $6 for every buck,” he said.

“When a movie comes to town, everybody is touched,” Brown added. “When 'Oz' was shooting at Raleigh (Studios), (the production designer) hit every antique store in Michigan and cleaned them out. They had a huge truck and trailer, and spent a couple million on antiques.”

Brown says an analogous business might be construction, which is similarly project-based. Road builders come and go, but spawn affiliated businesses as they work.

“In 2007, we had three movies, in 2008 it was 40, in 2009 there were 90 projects and in 2010, 120,” Brown said, referring to all projects in production, not just those receiving money from the state. “Businesses were starting as a result of that -- prop houses, caterers. It was growing.”

But not every production receiving incentive money shoots in Michigan. The Film Office's annual report shows that “Spy Kids 4” received $1.6 million in credits on expenditures of $4.5 million, but the project was entirely post-production -- a 2D-to-3D conversion done at a Birmingham production house.

A September 2010 Senate Fiscal Agency analysis found Michigan was spending big bucks to generate not quite so many bucks. For fiscal 2009, the state spent $37.5 million to generate $21.1 million in "private sector activity." The same report estimated the figures for fiscal 2010 would be $100 million spent to generate $59.5 million in activity. (Overall, in fiscal 2012, Michigan state and local governments will engage in $33.6 billion in tax expenditures.)

“The nature of the credit and the resulting activity is such that under current (and any realistic) tax rate the state will never be able to make the credit 'pay for itself' from a state revenue standpoint, even when the credit generates additional private activity that would not have otherwise occurred,” the report stated.

Five months later, newly elected Gov. Snyder backed the end of tax credit system.

Childhood fascination 'patches together a living'

Navigating these plot twists have left some Michiganians in interesting places.

Dan Phillips is, in many ways, the epitome of the sort of Michigan worker the film subsidy was intended to create. A former autoworker, he took a buyout from Chrysler in 2008 and went to make-up school to learn the craft used in the horror movies he loved as a child.

Starting on small productions such as “Detention of the Dead,” (“zombies invade the Breakfast Club”), he worked in the “Oz” make-up department and, early this year, spent several weeks in New Zealand on “The Hobbit,” under the direction of Oscar-winner Peter Jackson. Today, after the rush, he’s making his living by diversifying -- he now runs his own school in suburban Detroit, teaching everything from fashion make-up to making latex knife wounds for horror movies.

“I don't care if I work with Johnny Depp,” he said. “I’m patching together a living. (But) if it weren't for the schooling at this point, I’d be working for the man somewhere.”

Staff Writer Nancy Nall Derringer has been a writer, editor and teacher in Metro Detroit for seven years, and was a co-founder and editor of GrossePointeToday.com, an early experiment in hyperlocal journalism. Before that, she worked for 20 years inFort Wayne,Indiana, where she won numerous state and national awards for her work as a columnist for The News-Sentinel.