Alaska Film Incentive: Boon for Californians, Bust for Alaskans

Alaska Film Incentive: Boon for Californians, Bust for Alaskans

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The Alaska Legislature, in its infinite wisdom, is considering a bill to extend the state’s generous film incentive for another 10-years with an additional $200 million in funding (on top of the $100 million allocated in 2008).  In a rare act of selflessness from those in the film industry, some Alaska filmmakers and industry workers are standing up to OPPOSE the film incentive.

An op/ed in today’s Anchorage Daily News written by Alaska filmmaker Mark Brinster caught my attention.  In his piece, Brinster makes many of the same arguments that appear on this site.  Brinster’s piece also reminded me of producer Gavin Polone’s piece in opposition to film incentives.  Brinster questions the long-term logic of trying to build a sustainable film industry through a costly and unsustainable incentive:

Film subsidy promoters tell us Alaska has to pony up $200 million over the next 10 years — otherwise Hollywood will roll up their sets, load the glitz and glamor in their gleaming trucks and flee to other states willing to offer bigger subsidies.

What they don’t tell you is that New York, London, India, Hong Kong, California, Berlin, Paris and Rome have been building the film industry for over 100 years. Forty states and several countries offer film incentives — Louisiana for 10 years, Canada for over 30 — and not one has achieved what promoters claim these tax credits will provide: enough critical mass, steady flow of production, investment in infrastructure and living-wage jobs to be self-sustaining.

Not even California itself, with abundant talent, technology, film schools and capital — more infrastructure than anywhere in the world — can sustain a film industry without large subsidies.

Is it realistic to think Alaska can?

No, it’s not realistic at all.  Brinster knows this to be the case, but good luck convincing the Alaska film incentive backers.  Like film backers in most states, facts do not seem to matter; only the incentive matters.  When your job depends on an incentive, I suppose its natural to ignore things like facts, rational argument and reality.  And who does not sympathize with job concerns?   Sympathy, however, cannot cloud out an objective analysis of the factual situation.  Brinster does an excellent job pointing out some of the key facts (emphasis added):

Movie production is a zero sum game: The amount of production in the world is largely fixed. (FACT: indeed, the number of films produced is shrinking, not growing)

Promoters initially claimed that for every incentive dollar, Alaska would get back $3 in wages, but so far the state of Alaska is giving away millions in tax credits for productions that pay millions to nonresidents while the few Alaskans who do get hired are expected to work at the lowest positions for minimal pay. Over 80 percent of wages go to nonresidents. (FACT:  I have never seen another film incentive so disproportionately benefit non-residents than in Alaska)

In every independent study the results are the same: Film tax credits do not do what promoters say they will, cost states in lost revenue, do not create long-term, living-wage jobs. The return on investment is pennies on the dollar.  (FACT:  the verdict is in people, all the reports show the same thing…film incentives do not make more than they cost and are a very inefficient use of scarce public dollars)

None of the film backers in Alaska have addressed any of these facts.  Instead, most of the comments to Brinster’s piece attack him personally.  Way to keep it classy.

Finally, Brinster points out the obvious:

Hollywood is fickle, spoiled, unreliable and transient. They don’t care about Alaska; they’re here for one reason — the money. Alaska cannot win a film subsidy competition critics are calling the “Race to the Bottom.”

Yup.  Sad, but true.  Hollywood is the industry I love, but it is a selfish bitch.  No incentives means no Hollywood.  It’s literally that simple.

It turns out Alaska does one thing very well when it comes to their film incentive:  it is very transparent.  One would hope, at some point, film backers will stop ignoring facts.  According to the Alaska Film Office, Brinster’s claim that 80% of all wages paid under the program have lined the pockets of non-residents (often from California) rather than Alaskans is correct:

Film backers in Alaska argue that things will start to tilt for the benefit of locals as the program matures.  Eventually, there will be enough talent in Alaska and the percentage of the wages going to locals will increase… the film backers claim.  Once again, reality is interfering with the film backer’s argument.  The percentage of wages going to Alaska residents is actually decreasing as the program matures.  In 2010, just over 32% of all wages paid went to Alaskans.  In 2011, Alaska’s share of the wages plummeted to under 16%.  And, by 2012, Alaska’s share of the wages dropped to around 14% of the total. Rather than improve and become more efficient over time, the Alaska film incentive is actually becoming more inefficient and more wasteful each year.

On a micro level, the detailed expenditure reports on the film office website reveal how costly and inefficient the program is at job creation.  I sampled four of the more well-known productions awarded a handout from the Alaska taxpayers.  The results were not pretty:

The jewel of the Alaska film incentive thus far is “Big Miracle”, the $29 million Drew Barrymore movie about freeing trapped whales from the arctic ice.  I did a cost vs. benefit analysis of the spending hoping the $68,000 per-job-cost would be offset by some other economic impact to the state.  No luck.

The film spent $29 million “in Alaska”.  What is the benefit?  Well, just over $9.6 million of that $29 million was from the Alaska taxpayers in the form of the incentive.  In short, the impact of “new spending” in Alaska is reduced by the $9.6 million incentive award, as that was already the state’s money and could have been spent on something else, like a school. That leaves just under $20 million in new spending to “benefit” Alaska.  But of that $20 million, $13.5 million was for pay to out of state residents who spend there money where they live, not Alaska.  Drew Barrymore spends her money in Beverly Hills, not Barrow.  That leaves roughly $7 million that stayed in the state for the benefit of a small group of people in the private economy.  The  $7 million in “net benefit” came at a COST of over $9.6 million.

To be fair, I did the math on some of the other projects listed on the film office site and some offered a cost-per-job of around $50,000.  If that sounds like smart spending for a job that lasts a few weeks to you, do us all a favor and don’t run for office.  Clearly the most wasteful money spent on a given production was the $93,273 for Alaska State Troopers, which employed ZERO Alaskans.  For the record, the average annual pay for Alaska State Trooper is around $50,000, which is well shy of the $93,000 in taxpayer money that, had it been put to better use, could have offered the troopers on the show a slight raise.  You know, using taxpayer money for things like public safety rather than reality television shows.  How novel.

Since a huge number of the imported film workers are from California, it’s not clear whether Californians should be angry at Alaska for causing runaway production or thankful for all of the Alaskan taxpayer money being spent in California by returning film crews.  To be fair, films like “Big Miracle” should be shot in Alaska.  Many of the runaways going to Alaska are, in fact, set there.  As I have said many times, I have no problem with films going to the places where they are set, as that is how it should be.  Ideally, films would not need to be bribed with public money to go to the places where the actual story takes place.  That sort of competence shouldn’t cost taxpayers a dime.  You Betcha.

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