I Screen Studies

Apparently there’s been a bit of a stoush in Wisconsin over the returns to the state from films made in the state since tax credits and incentives were put in place there. Most prominent among these films is the Public Enemies, Michael Mann’s latest film which tells the story of notorious gangster John Dillinger, played by Johnny Depp. Public Enemies was shot in Wisconsin last (northern) summer.

The Chief, aka “Oshkosh’s best blogger”, has taken on the state governor and the state’s commerce department over the proposal to cut the scheme ostensibly to reduce the state’s budget deficit. The Chief views these moves as efforts to stir and then be seen to be listening to “populist rage” against the tax credits. The commerce department’s executive assistant, Zach Brandon, was quoted in the Journal Sentinel on 20 March as saying that the scheme provided “a horrible return on investment” to the state. On 13 February, Brandon told the same paper that the scheme was “a wash” (which I think is Wisconsonian for “washout”, or rank failure).

The Chief disagrees, in detail, and at length.

On 24 March The Chief wrote an entry entitled “Why the Tax Credits are Good for Wisconsin” that refutes, point by point, criticisms of the scheme. The Chief contests the figures put out by the Commerce Department in an effort to show the failure of the scheme. He goes on:

Objection: If a big budget, Hollywood movie like “Public Enemies” can’t prove the film tax credit is worth it, than nothing will.

Contra Objection: In fact, it’s just the opposite. It was something of a coup to have “Public Enemies” be the first film to get a shot at the tax credits because most of the movies that will be made in Wisconsin will be small independent movies that are looking to take advantage of cheap stage labor. In many ways having such a high profile project like “Public Enemies” being the test case for the credits was harmful because it feeds into the kind of populist rage so prevalent these days that “rich Hollywood types” are getting a “bailout” or “handout,” so evident in this asinine editorial in the State Journal. That argument ignores the smaller films that will be the backbone of a budding Wisconsin film industry

A much better case study for the film credits will be the significantly lower budget, less than $1 million, “Feed the Fish.” The movie is being produced by local Wisconsinites, starring Wisconsinites (they even took out a casting call in the Green Bay Press Gazette), being filmed in Wisconsin and features a respected Wisconsin-native. “Project Solitude” also just finished filming recently in Green Bay and “Nephilim” (which has the biggest budget of the bunch with a whopping $6 million) is set to start shooting in a few months. All three of these are much better examples of films that will be attracted by the incentives, but are almost never discussed when it comes to the tax credits.

And the next day, Wednesday 25 March, The Chief had more to say in a post entitled “How the Commerce Department is Killing the Film Tax Credits“. Here he has some interesting things to say about the figures used to justify the proposal, and makes a valid point about the potential negative impact on local, independent films that are so necessary to building filmmaking capacity in a location:

By Commerce’s own reckoning, the state put up $4.6 million and got $5 million in return. That means the “horrible return on investment” Brandon is talking about is actually a net gain of $400,000 or roughly 8.7%. For one film. In the first year of the program. There are tons of small business owners who would kill to make any kind of profit their first year in business, to say nothing of almost 9% on their initial investment. Making matters worse is that Brandon is completely ignoring the potential for growth and continued returns on the state’s investment from future productions.

Commerce’s numbers are so questionable and it’s arguments for augmenting the program are so objectionable that they could just as easily be turned around to advocate that the film tax credits are a huge success with limitless potential. Instead, the Governor is taking the other tack.

Why? I don’t know for sure, but I have two guesses.

The first reason is bureaucratic. Of the eight films that received credits in Wisconsin last year “Public Enemies” was far and away the highest profile with the highest budget and yet it was the only film that the Commerce Department claims received a 1:1 reimbursement. Here’s just a quick look at ahow a few of the smaller films fared:

The Appleton native has already completed on project under the existing tax credit program. Her $750,000 psychological thriller called “Project Solitude” is due out in the fall. The film was shot in Green Bay in December and received about $120,000 in state tax incentives, she said.

That means “Project Solitude” recouped about 16% of it’s budget from the state.

“Nephilim,” a science fiction thriller based on a comic book about a priest and a detective searching for fallen angels during the end of the world was to shoot for about five weeks in Milwaukee and Green Bay starting in May, she said. It was slated to get about $750,000 in tax breaks, Moses said.

We’ve noted earlier that “Nephilim” has a budget of about $6 million, which means it would be getting 12.5% back from the state.

So how in God’s name did “Public Enemies” get back 94% of it’s costs from the Commerce Department (again, this is using the Dept.’s own disputed numbers here)?

My guess is that the accountants and financiers of “Public Enemies” have done this before; in fact, they do it for a living and simply ran circles around the Commerce Department who has little experience, if any, auditing films. If a film can assemble A-list talent in front of the camera and behind it, I’m going to guess that they can get some ninja accountants with black belts in expenditure voodoo as well. Instead of looking at the reimbursement request carefully, they cut a check before they could say “What was that for, again?” If Commerce doesn’t seem capable of presenting the public with numbers that make sense now, what are the chances that they were able to use them correctly back when it came time to pay the piper?

Instead of admitting that there’s going to be something of a learning curve to these credits, Commerce is covering itself during a time when the state has a $5 billion budget deficit by holding “Public Enemies” up and saying “All films are going to be like this, so it’s just not worth it.”

Again, that’s just speculation based on what’s available in the public record. I sincerely hope this is not the case.

The second reason is political. Sticking it to those rich fat cats in Wall Street/Washington/Hollywood seems to be all the rage these days — and there’s no one better for politicians to pick on than folks who don’t vote here. That makes the “Public Enemies” producers easy targets. I’m worried that this might be a classic example of someone seeing an angry mob roaming the streets and saying to himself “I must follow them, for surely they will need a leader!”

Doyle’s probably running for re-election next year and you can probably bet the house that a phrase you’re going to hear over and over again is “$5 billion budget deficit.” (Hell, it might even be $6 billion by then.) So now would probably be a good time to start flexing some fiscal muscles. While not exactly loved by the Left, Doyle’s got some capital to burn and this is a convenient way of riding the current wave of populism in an attempt to poach moderate voters. I have to admit, from a political perspective, it’s not a dumb idea.

Again, this is all just idle speculation.

As US states struggle with massive budget blow-outs, it is entirely likely that other states will take New York’s (and now Wisconsin’s) lead and look to cut these programs to save money. If The Chief is right, this may be seriously misguided.