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Film, oil and gas taxes mashed into single bill

Production incentive legislation gets rider in final hour deal making

Posted: April 16, 2012 - 11:00pm

A bill extending a film production tax incentive has received much attention since it was first introduced more than a year ago. Now it has the weight of a much-debated oil tax bill attached as it waits for the governor's final approval.

The film tax credit bill sponsored by Sen. Johnny Ellis, D-Anchorage, passed on Sunday evening as House Committee Substitute to Committee Substitute to Senate Bill 23 (Rules Committee). Attached to the bill are House Bill 276, oil tax incentives, and House Bill 289 covering natural gas storage taxation.

Changes made to the bill include increases in the tax credits given based on wages earned by Alaska residents and money spent in rural areas.

On Monday morning Gov. Sean Parnell called for an extended session to begin Wednesday.

“To complete work on a comprehensive oil tax policy,” Parnell said in a press conference, Monday. He said the Senate had not gone far enough by incentivizing new fields and not including legacy fields. This request could postpone the governor’s approval of Ellis’ film incentives as the Legislature discusses the oil and natural gas taxes now attached.

Introduced in January 2011, Senate Bill 23 passed the Senate early in the second session of the 27th Legislature. It was referred to House Labor and Commerce and House Finance committees. It was heard in House Finance on Feb. 23 when chairman Rep. Bill Stoltze, R-Chugiak, referred the bill to a special sub-committee for review. The special committee met six times before sending recommendations back to the full committee. The bill passed the House Finance Committee Saturday with amendments.

Forty states and Costa Rica compete for film productions dollars.

This competition had members of the subcommittee asking questions about whether chasing film industry dollars could lead to greater and greater incentives and less return for Alaskans.

What they decided on and what is awaiting approval from the governor, is to incentivize expenditures differently for “above the line” verses “below the line” costs, and to give greatest incentive to Alaskan hire and rural production.

Above the line expenses include costs for producers, investors, writer and actors. Non-residents in this category receive 5 percent credit plus an additional 50 percent of wages paid to Alaskans and expenditures to Alaskan businesses. Below the line non-resident film workers receive a 30 percent base credit with an additional 20 percent based on Alaskan workers’ wages.

Additional credits include 6 percent for money spent in rural areas and 2 percent for out of season expenditures.

Proponents say a stable, long-term incentive program is the only way Alaska will attract the infrastructure investment, and create local skilled labor for a lasting in-state industry.

Since it was introduced in Feb. 2011, SB 23 has gathered dozens of documents, multiple committee substitutes and four senate committee meetings before passing to the House with 18 votes in favor and one against. Since reaching the House, the bill was heard seven more times before being referred to subcommittee.

The work sessions revealed strong support for incentivizing the film industry in Alaska.

“For Alaska to be competitive,” Joe Mathis, president of NANA Regional Corp. said in special committee testimony, “first and foremost, pass an extension this session.”

Mathis said credits should be transparent to all Alaskans and carefully audited. Competitive incentives, such as these, can establish Alaska as an industry destination to grow infrastructure and local employee base, Mathis said.

NANA invested in at least two film production endeavors.

The corporation’s film services program works alongside NANA’s catering, security, construction and camp services. It has also helped fund a state of the art studio in Anchorage, Evergreen Films Inc, Mathis said.

“This industry can clearly grow,” Mathis said.

In a letter to House Finance dated March 12, Evergreen CEO Michael Devlin said his production company specializes in high-tech 3D projects. Recently, working with BBC Earth, Evergreen filmed exterior shots for the program “Walking with Dinosaurs 3D,” slated for release in 2013, Devlin said. Evergreen expanded into a second production facility in Anchorage that, when complete, is hoped to provide the production company green-screen capability, a 24-seat screening room among other features.

However, Devlin said, Evergreen has ceased investment in expanding its special effects, smart stage and green screen infrastructure.

“Until we are certain there is a future for us in Alaska,” Devlin said.

Devlin said he believed an extension of the film tax credit would give lenders the needed long-term stability to make loans for continued infrastructure growth.

Members of the special committee expressed concerned that continued competition in incentives would result in most benefit going to the film industry.

“Every time someone raises the bar, we’re trying to step up a little higher so that we have the most return to the bottom line of the film industry,” Rep. Anna Fairclough, R-Eagle River, said. Even California, with extensive existing infrastructure, is introducing incentives, she said.

“We don’t want to be in a bidding war, we want to be a quality provider in the film industry,” NANA’s Mathis said, “people and facilities. We don’t have to be the most competitive, but we have to be competitive,”

The bill also provides for a “one-time credit for the first episodic scripted television production in the state,” according to the bill. It also transfers the film office to the Department of Revenue and establishes the Alaska Film Incentive Review Commission.

• Contact reporter Russell Stigall at 523-2276 or at russell.stigall@juneauempire.com.

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