Hollywood or Bust?

Hawaii has long competed with other tropical film locations for a piece of the production pie. Today, Governing Magazine's 13th Floor blog has a post the subject of film tax incentives, focusing on the "success" of New Mexico, and the generosity of Michigan. This is significant because Hawaii is currently facing the sunset of Act 221 in 2010, a technology tax incentive package, from which Hollywood has benefitted due to its use of digital technology in film production and post production.

As taxpayers, we are investing in an industry that promises to create jobs for local people and develop an infrastructure on which to stand on its own, eventually. The question is, what and how much is the return on that investment?

Just talking film now, New Mexico granted $32.8 million in tax rebates for productions which generated only $5.5 million in "public" revenue. (I assume that means tax revenue.) That's a 14.4 cents return on every dollar. On the plus side, New Mexico's overall film and television production activity has increased ten-fold in the past decade and that has attracted new soundstage facilities to the state.

Michigan offers 42% rebate on production costs (wow!) and New Mexico offers a 25% rebate.

In Hawaii, in addition to Act 221, the state offers through Act 88, a 15% rebate (20% for neighbor islands). Proponents of the tax incentives argue that the benefit is manifold, and that mere tax revenues generated is not the true impact of the incentives. There are also indirect, but potent, benefits of tourism marketing and jobs created by supporting the film productions in other industries (accounting, construction, miscellaneous rentals, etc.)

Given the struggling economy across the world, municipalities are questioning the value of millions of dollars going toward production that might have come there anyway. Will the economy lead us to let Act 221 fade into the sunset?

Governing concludes that no state or city has been able to come up with a formula that can show whether there is a net economic benefit for the locality.

PROGRAM NOTE: Next week, Bytemarks Cafe, the public radio show hosted by Burt Lum and Ryan Ozawa, will focus on Act 221. Senator Carol Fukunaga will be one of the guests. It airs on KIPO, 89.3 FM, Wednesday, January 7, 2009, 5-6 p.m.