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Study finds film incentives bring millions to state
9:19 AM, Feb 21, 2011 | (DETROIT FREE PRESS) -
Dan Gearig says he would not have a thriving business without Michigan's film tax incentives.
He and his business partner, Kurt Peters, are hiring workers and buying trucks as they grow Chow Catering, a Madison Heights-based film caterer.
"We wouldn't exist without the incentives," Gearig said from Cincinnati, where he was working on the set of the new George Clooney movie "Ides of March," which also will be filming in Michigan. "If the incentives leave, so will Chow Catering."
Gearig's is one of many companies in Michigan that have benefited from the state's movie tax credits. A study released today that was conducted by the accounting firm Ernst & Young says the incentives generate nearly $6 in economic activity for every dollar spent on the tax breaks.
The study's release comes as Michigan's movie-making business stands on the brink of extinction.
Related: The Avengers pulls out of Michigan locations
Gov. Rick Snyder has proposed ending the current tax breaks for filmmakers as part of a broad elimination of special tax credits and exemptions. He plans to allocate $25 million a year for new movie incentives, far below the $60 million paid out to production companies last year.
The study shows that the production of movies and TV shows in Michigan during 2009 and 2010 generated 6,491 full-time equivalent jobs in the state and $812 million in economic output
.
"There is significant growth and economic activity," said Larry Alexander, CEO and president of the Detroit Metro Convention & Visitors Bureau, which teamed up with its counterparts in Ann Arbor, Grand Rapids and Traverse City to commission the study late last year. "This is an industry that has not had a chance to mature (here) yet."
Among the study's findings:
Production companies spent $532 million in the state in 2009 and 2010. Of that amount, nearly 60%, or $310.5 million, impacted Michigan's economy.
Eighty percent of the 4,656 indirect jobs that the movie business has created in Michigan have occurred in five industries: food services, business services, rentals and repairs, personal services and retail
.
The net cost of the tax credits awarded during 2009 and 2010 totaled $137 million. Taxes and fees generated from movie activity, plus reduced unemployment benefits because the filming creates jobs, offset the state's costs, the study says. According to the Michigan Film Office, the state has awarded $304 million in film tax credits since April 2008 and has paid out $96 million so far.
Film productions paid Michigan residents $42.8 million in wages and salaries in 2009 and $66.9 million in 2010. That equates to an average annual salary of about $53,700 per full-time equivalent employee.
The average film production in Michigan lasted 90 days in 2009 and 89 days in 2010.
The state's nearly 3-year-old movie tax breaks are the most generous in the nation, covering up to 42% of production expenses. But with the state facing a $1.8-billion budget deficit, Snyder's budget cutters are targeting the incentives.
John Nixon, Snyder's budget director, said Friday that the state must cap the tax breaks, which reduce money in Michigan's General Fund.
"It's creating economic activity, which is a good thing. But from a budgetary standpoint, it costs us money," he said.
"There is no question there is a cost to the state," Alexander said. "But it does add to the diversification of the state that we have talked about for so long."
The study is the first to show that subsidies for the movie industry have produced positive benefits in Michigan.
In September, the Senate Fiscal Agency released a report saying that the incentives only generate 10 cents in new tax revenue for every dollar paid out. |
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