$1.5 Billion In Taxpayer Funds Go Directly To Movie Studios Each Year… And Very Few Jobs Created

Movie Industry

from the and-they're-complaining-about-what? dept

If you’ve been following MPAA boss Chris Dodd ever since the death of SOPA, you’ll be aware of his stump speech. He seems to give it every chance he can: “the movie industry is all about jobs, jobs and more jobs.” Of course, he lies about the number. He usually trots out his favorite 2.1 million figure, ignoring the fact that the Congressional Research Service showed it’s really 374,000 people employed in the movie business.

What isn’t mentioned so much (though, it depends on the audience) is the fact that various tax subsidies that different states pay to movie studios means that $1.5 billion in taxpayer money goes straight to Hollywood studios. Perhaps that would be justifiable if it created jobs. But the evidence there is actually lacking. That link involves the NY Times looking closely at Michigan, which not too long ago put in place massive subsidies for Hollywood to make movies in their state. The cost? Suffering Michigan citizens foot the bill. However, Michigan Governor Jennifer Granholm thought it was worth it because a local movie director wanted more work at home (and because, when she was younger, she had hoped to be a movie star). Lots of studios are looking to make movies in Michigan now, because the cash back from the state is way too lucrative to pass up.

Within two months, 24 movies had signed up to film in Michigan — up from two the entire year before. The productions estimated that they would spend $195 million filming there, and in return they would be refunded about $70 million in cash.

Before long, residents were rushing out on their lunch breaks to catch a glimpse of celebrities like Drew Barrymore, who was filming her movie “Whip It” in Ann Arbor, and Clint Eastwood, who was shooting “Gran Torino” in the Detroit area. Even Michael Moore, who was filming a movie about corporate welfare called “Capitalism: A Love Story,” sought and received incentives.

But does it create jobs? Not really. The story is horrifying. It involves Hollywood hotshots continually demanding more and more subsidies from the state and insisting that jobs would be plentiful as soon as they could get things up and running, but balking any time anyone asked them to put the job promises in a contract:

Ms. Granholm declared the city in a financial crisis in February 2009 and appointed an emergency manager, Fred Leeb. The city’s budget was $54 million a year, but it was overspending by an estimated $7 million to $12 million. Pontiac was also still weighted down by old incentives it had given to businesses like G.M.

The movie studio was an added challenge, since it was seeking financial incentives from the city — not to mention from other branches of the government. It won redevelopment tax credits from the federal government and separate aid from the state that included incentives for technology companies that hire residents.

Job creation became a point of contention with beleaguered Pontiac, which was being asked to waive virtually all property taxes for the studio. The investors claimed that thousands of people would be employed, but Mr. Leeb said that when he asked for job numbers to be written into the contract, the investors refused. “We started seeing some backpedaling,” said Mr. Leeb, who added that the negotiations featured “knock-down, drag-out fights.”

But wanting to bring the big lights of Hollywood to Michigan, eventually the state agreed to it. Who paid for the subsidies? Former state workers basically were forced to bet their pensions on Hollywood:

Over the objections of some local officials, the state agreed to use the state workers’ pension funds to guarantee the bonds. If the investors failed to pay, the retirees would be on the hook.

And the promised jobs? Keep looking. Sure, some crews from LA flew in, but for locals? Almost none.

The studio had created only 200 positions by the summer of 2011, according to correspondence between the company and local officials. And when temporary construction workers were excluded from the tally, Pontiac’s records show, the studio reported only two employees in 2010 and 12 the next year.

Earlier, in the article, they note that this particular project was pushed through with the promise of 3,600 jobs. You don’t do that by hiring two people one year and a dozen the next.

How about tax revenue from the local operations? Yeah, big Hollywood studios have ways of avoiding paying that sorta thing, even as they’re collecting millions in local subsidies:

The city later had problems collecting some of the taxes because Disney operated through a separate business entity that was difficult to track down, he said.

“This is a glamorous industry if you want to talk about Hollywood, but it’s not very glamorous for the municipality that wants to collect something,” Mr. Schimmel said. Pontiac, he said, was outgunned.

Disney declined to comment.

And… soon after that, the studios moved on to other sexier states that suddenly offering up bigger incentives than Michigan. And who did it cost? Oh yeah: remember those state workers’ pensions? Yup. Them.

When the bill for the studio’s bond interest came due in February this year, it paid only a portion, $210,000. The state pension fund had to pick up the remaining $420,000….

In August, the studio defaulted on the entire $630,000 payment on the bond, despite a decision by Mr. Snyder to temporarily allocate some film incentives.

All around, it’s a horror story that’s being repeated in other states and countries around the globe. Hollywood studios go around pitching “jobs!” and demanding special taxpayer-funded incentives, offering giving them millions to film in a certain location. The filmmakers take the subsidies, bring in crews from LA, hire a couple people here or there… and then move on, leaving a mess in their wake. And this is the industry that is demanding even more protection from the federal government via copyright law? When is enough enough?

Filed Under: chris dodd, economics, jobs, michigan, movies, subsidies, taxpayer
Companies: mpaa