Minnesota Film & TV Board gets $10M for incentives; boon or boondoggle?

In some ways, the modern era of film and television production started in Minnesota. In 1997, the Legislature passed an incentive program hoping to lure producers to film in the North Star State. Prior to that, the Minnesota Film and Television Board had used the state’s homegrown charms, such as scenery and a competent workforce, to romance the makers of Hollywood films such as “The Mighty Ducks,” “Grumpy Old Men” and “Fargo,” which, despite its title, was filmed in Minnesota.

With the launch of the incentive program, dubbed “Snowbate,” Minnesota became the first state to offer a financial sweetener as part of its efforts. The program, relatively modest, was designed to be temporary. But it also turned out to be revolutionary: 41 states now offer some kind of financial incentives for production recruiting, with some putting tens of millions of dollars on the table each year.

Minnesota’s program was funded at varying levels over the years. It was eliminated altogether and later reinstated under Gov. Jesse Ventura; Gov. Tim Pawlenty vetoed appropriations passed in 2010. Last budget cycle, the film board got by on $1 million worth of incentives  passed by Republican majorities at the Legislature as part of the Legacy Amendment funding.

This year, Snowbate came roaring back. Thanks to strong backing from Senate DFLers, the board has $10 million to offer production companies in the new biennium. Board director Lucinda Winter knows that some legislators and economists are skeptical of investments made in movies and television shows, but she argues that the rebate program is the only way for the state to compete with others in this sector of economic development.

“You really do need to have a rebate or tax credit,” she said. “And to be competitive, you need $10 million — or more.”

How much of the film and television production industry is based on these kind of incentives?

“All of it,” Winter said.

Senate pushed $10M package

The $10 million figure, which is split evenly at $5 million for each of the next two budget years, was arrived at only after a contentious debate between the House and Senate. As they had on so many other issues this year, the DFL majorities in the two chambers had landed on different outcomes in passing the 2013 omnibus jobs bill. On the House side, the bill that passed off the floor contained $1.9 million for film production incentives in fiscal year 2014, and none the following year.

A much more enthusiastic Senate passed $10 million in Snowbate funding, meeting the number the film board had requested at the beginning of the session. When the two sides entered conference committee, the House tendered an offer that left the film rebate untouched, but Sen. Dave Tomassoni, DFL-Chisholm, and other Senate conferees fought for the higher figure.

Rep. Tim Mahoney, DFL-St. Paul, the House lead on the conference committee, said he found members of the chamber to be “pretty adamant” about the film money. “There was a push from the Senate that they wanted to make sure this happened,” Mahoney said. “They found the money for it, and so I just went along with it.”

Winter said Tomassoni and Sen. Teri Bonoff, DFL-Minnetonka, were strong champions for funding the rebate at the higher level, as was Sen. Richard Cohen, DFL-St. Paul. Cohen has been a supporter of the arts throughout his tenure and has been involved with the Minnesota Film and TV Board since its inception in 1983.

As evidence of a recent success in production incentives, Cohen referred to “North Country,” a 2005 film starring Charlize Theron. The movie, based on a true story about a sexual harassment lawsuit against a northern Minnesota mining company, was actually filmed in the same region, thanks in part to a $200,000 incentive passed by the Iron Range Recovery and Rehabilitation Board (IRRRB).

Though Cohen is less than convinced about the film’s merit as high art — “I thought it was so-so,” he said — he thinks its economic effect on the area was undeniable.

“They took over northeastern Minnesota,” Cohen said, describing towns overrun with film crew, actors and production teams. “Hotels and restaurants were full.”

Hoping to recapture some of that success, IRRRB Commissioner Tony Sertich oversaw the creation of a new film program specific to the region. Passed by the IRRRB last December, the incentive program sets aside $800,000 for production rebates worth up to 20 percent of total costs, with a cap on each individual project.

Combined, the two rebates offer two layers of encouragement for another Iron Range film. As passed this year, the state film board’s new maximum rebate of 25 percent (up from 20 percent) will be available to productions in the seven-county metro area only if they have total costs of more than $1 million. Meanwhile, outstate productions of any kind will be eligible for the 25 percent rebate.

The exact guidelines the board will use to grant the new round of enticements are still being approved by the Minnesota Department of Employment and Economic Development (DEED), which assumes oversight of the film board this year, taking over from the Minnesota Office of Tourism. Winter said the new location in state government is appropriate, given the program’s intent of creating jobs.

Cohen echoed that sentiment.

“I think it’s one of the better economic development tools the state’s ever utilized,” Cohen said. “You can easily show cause and effect, in terms of payment of public dollars and what you get back.”

Economic benefits dubious

The arms race for film and TV projects to relocate has endured criticism from economists of various stripes. The Tax Foundation, a conservative-minded economic think tank that typically supports lower taxes, funded one recent paper that labeled such plans “blockbuster support for lackluster policy.” Other economists think states are making a mistake by spending money for tax windfalls that might not materialize.

Bob Tannenwald, a professor at Brandeis University, takes a dim view after years of studying the topic. Tannenwald said he’s not aware of any study that has ever shown a state making its money back in tax proceeds. When asked about a Minnesota Film and TV Board estimate claiming that investments of $4.6 million from 2007 to 2011 generated a combined $1.8 million in tax revenue, Tannenwald said that the number “sounds high” and that most states generate only about 13 to 16 cents per dollar invested.

As for potential to boost the state’s stature as a destination, Tannenwald said there are examples of films that probably led to a direct increase in tourism, citing pilgrimages made to New Zealand following “Lord of the Rings” or to Iowa after the release of “Field of Dreams.” But such instances are the exception, not the rule.

“For every one blockbuster, you get a lot of duds ,” he said. “And some of them are very costly, and they don’t get any tourism.”

Tannenwald said that rebate programs have proliferated and that they likely will continue to do so, because state legislators want to create jobs and to do so quickly and visibly.

“Benefits from film production are geographically concentrated,” he said, “and they can get up and running quickly. The costs are spread out across taxpayers across the state.”

The state backers of Minnesota’s film and TV industry are well aware of the criticism and the potential for flops, both commercially and economically. Cohen said that’s why he has instructed the board to track its impacts meticulously: Winter said the board collects receipts on any expense in excess of $20, to track exactly where money relating to a project was spent.

Cohen thinks the state is on solid ground investing in the entertainment industry, so long as accountability measures are in place and the state incentives stay within reason.

“Where you have to be careful is, you don’t want to put yourself in the situation of a Michigan, or maybe a Wisconsin, with an open-ended incentive program where you can’t afford it.”

Winter, who took over as board director in 2005, admitted to being both surprised and thrilled to receive full funding. “It’s very weird to get what you ask for,” she said, “and I’ve been there seven years.”

Senate Majority Leader Tom Bakk says that he was initially skeptical of the idea of production rebates and that he voted against the “North Country” funding when it came before the IRRRB. While it’s still “not a high priority” for him, Bakk came around to supporting the $10 million budget, saying it’s the only way for the state to compete for industry money.

“Minnesota is a wonderful place to film a picture,” Bakk said. “Unfortunately, if you don’t offer incentives, you don’t get considered.”

To Bakk, the main knock against subsidizing films is that the jobs are short-lived and the gains only temporary. Winter, though, wants to work toward a film-friendly atmosphere that encourages production companies to use Minnesota for long-range projects such as scripted television shows.

She realizes that the $10 million allowance puts pressure on the board to produce results, but she’s already confident she’ll have something to show for the outlay. News of Minnesota’s rebate landed on the front page of the Los Angeles Times’ entertainment section, and Winter is already in talks with producers for nine different projects, “one of them quite bigger than the others,” she said.

For his part, Bakk said that the idea of consistently funding the board at this level would be made later and that it would be up to Winter to prove the incentives are a wise investment.

“If the film board comes back to the Legislature in a year and a half with a request, I think it will be highly scrutinized,” he said. “They’ll have to make an argument that would be able to show that the incentives created real economic activity.”