Print subscriber but without online access? Activate your Digital Account now.
Afraid that Hawaii may be losing financial allure as a Hollywood locale, state lawmakers are interested in sweetening the state’s tax incentives.
The state House and Senate have traded bills that could extend the life of a film production tax credit, bump the incentive up by 5 percent, offer a new infrastructure credit to lure film studios to West Oahu and Maui, and establish a workforce development training program that could offset the wages of new hires on film productions that claim tax credits.
With many states and countries now offering increasingly attractive tax breaks, lawmakers have been tempted to expand the film tax credit for the past two years. But a lack of state money, and the perception that Hollywood moguls were jumping ahead of the needy who had suffered through the recession, kept lawmakers from acting.
This year, there may be enough state money, but the Abercrombie administration has only been willing to support an extension of the film tax credit, which is set to expire in 2016, not an increase.
House Speaker Joseph Souki (D, Waihee-Waiehu-Wailuku) has cautioned lawmakers not to fall for the marketing hype behind tax credits. But he has urged a serious and thorough look at film tax incentives because of the potential revenue from film production in the islands.
"I look at what they can bring to Hawaii," he said. "The visibility they’ll give Hawaii. The jobs that will be provided for local people — good paying jobs, for the most part."
Sen. David Ige (D, Pearl Harbor-Pearl City-Aiea), the chairman of the Senate Ways and Means Committee, believes Hawaii is becoming less competitive for film projects. He cited reports that Disney would shoot the fifth installment of "Pirates of the Caribbean" in Puerto Rico rather than Hawaii, where the "Pirates" franchise has mostly been filmed. Scenes in "Pirates of the Caribbean: On Stranger Tides," the fourth installment, were shot in Puerto Rico, a U.S. territory that has aggressively expanded tax incentives.
"So the question really is, ‘Do we want to have a film industry in Hawaii?’" Ige asked.
The state Department of Business, Economic Development and Tourism, which oversees the state’s film office, has recommended extending the film tax credit until 2025. The department has also supported raising an $8 million cap on the tax credit per production to $12 million. The department has favored removing from the tax credit the exclusion of commercial advertising that is distributed only on the Internet.
But the department opposes a 5 percent increase in the film tax credit — which is now 15 percent for productions on Oahu, 20 percent for the neighbor islands — arguing that any increase would not be fiscally prudent given the state’s economic situation. The department also opposes offering an infrastructure credit only for studios in West Oahu or Maui, preferring a feasibility study to determine the best location, size and scope of any new studios.
The state’s film office has asked lawmakers for construction money to upgrade the Hawaii Film Studio at Diamond Head, which is badly in need of repair.
The Tax Foundation of Hawaii and other critics have lampooned the film tax credit as a subsidy for Hollywood that drains the state treasury.
Yet the success of Hawaii-made films and television shows, and the prospect that the islands could host a digital media industry that would create higher-paying jobs, has sold many lawmakers on the tax incentives.
Film production brought $245.6 million to the state in 2012, up from $184 million in 2011 but below the record $384 million in 2010, according to the state’s film office. From 2006 to 2012, according to the state, film production generated more than $1.4 billion in revenue with an estimated $2 billion in related economic impact.
Sen. Glenn Wakai (D, Kalihi-Salt Lake-Aliamanu), the chairman of the Senate Technology and the Arts Committee, said an infrastructure tax credit could help Hawaii capture some of the studio and post-production work on movies, television shows and commercials that are filmed in the islands. He would like to have studio facilities near the University of Hawaii at West Oahu.
"The Diamond Head footprint is far too small for where we want to take this industry," he said. "So my view is let’s put a couple of Band-Aids on the Diamond Head facility, because we still need it for ‘Hawaii Five-0,’ but the long-term goal is to create something for ‘Hawaii Five-0′ and other films that will come here. And place that, and put them all together, at UH-West Oahu."
Rep. Angus McKelvey (D, Lahaina-Kaanapali-Honokohau), the chairman of the House Consumer Protection and Commerce Committee, said the outlook for expanding the film tax credit could depend on the state Council on Revenues forecast on Wednesday.
State tax collections are coming in higher than the council has projected for this fiscal year, but the council has yet to factor the potential impact of federal budget cuts from sequestration into the revenue forecast. If the revenue forecast — which calls for growth — holds steady or improves, an expansion of the film tax credit and other tax incentives could stay on the table. If the forecast is downgraded, lawmakers will find it difficult to approve any new tax incentives this session.
"Hopefully, there will be enough room where we can do a slight bump," McKelvey said of a 5 percent increase in the film tax credit. He also said the existing differential between Oahu and the neighbor islands is not sufficient.
"The 5 percent difference is not enough to get productions to the neighbor islands," he said. "There have been many TV series where the mayors have met with them and they said we just cannot come out for that small of a differential."
Donne Dawson, the state film commissioner, said extending the film tax credit beyond January 2016 is the Abercrombie administration’s priority.
"The credit is extremely important to the state of Hawaii," she said. "And it’s extremely important to the ability of our industry to develop further and to get to the next level.
72
