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19 responses so far ↓

• 1 Bill Callahan // Dec 21, 2008 at 3:35 pm

  Carole, I always get nervous when the big revelation in a narrative comes in the passive voice, e.g.. “It was also implied that the Governor…” Who implied this? How did that individual imply it? Did your cousin hear this with his own ears?

  I haven’t been following thr film tax credit bill much, as you have, so most of the arguments are new to me. But “This may cost the state more than it will produce” and “This should be considered within the state’s overall revenue and economic incentive plan, not on its own” are not irrational positions. And if I read the history correctly, the Governor has been “communicating his stance” — i.e. opposition to HB 196 for these reasons — for months now. So why is his veto announcement such an outrageous surprise?

  “There’s no revenue to be lost because there won’t be any Ohio film business without the tax credit” is what people who want new special-interest tax breaks always say. But if the market for Ohio film locations and services is so weak that it vanishes without a particular incentive, what’s the point of having a Film Commission? There must be a dozen non-existent Ohio industries that could be given marginal life by writing public checks to support them. Why is this one such a special case?

  In truth, there is going to be some filming here with or without the tax credit, so the credit will cost the state some money it would otherwise collect. In exchange, the credit may produce some additional filming, jobs, contracts, local revenue, etc. — just like any other state business subsidy. How much it will cost versus how much it will produce is the correct question to be asking.

  The Governor and some others, including the Legislative Services Commission, apparently believe the cost will be greater than the benefit. (See the LSC analysis at
  http://www.lbo.state.oh.us/fiscal/fiscalnotes/127ga/HB0196SR.htm.) It doesn’t appear that the Film Commission has produced a convincing answer — convincing to the Governor or the Development Department, anyway. Maybe they’re wrong, maybe they’re right, but is it “posturing” to take the question seriously — especially when the state’s about to slash all kinds of services for lack of revenue?

  Across-the board tax credits for investors are generally a really messy and easy-to-abuse method for delivering economic subsidies (I say this based on some first-hand experience with low income housing tax credit deals). If the taxpayers of Ohio want to throw some money at a film production company to help it justify a Cleveland location, I’d personally prefer to have the Development Department write a check. Special tax loopholes are easier to pass than appropriations, but they both cost the state money and they should receive at least the same scrutiny.

  Bill Callahans last blog post..Hamilton commissioners call for state foreclosure freeze

• 2 Carole Cohen // Dec 21, 2008 at 3:44 pm

  Hi Bill. Passive voices make me nervous too, plus I didn’t hear it my cousin heard it from another person.

  My stance however is not related to that. It’s related to the fact that it can’t possibly cost us any more money to get a film industry here than it would any other industry. And yes, Strickland keeps saying it will cost money but how? I don’t understand that. He needs to communicate why it will cost anything. Because if they set up shop for a movie the film company financiers pay the money. And if they establish an industry here and bring in jobs, why does that cost money? Under the current Bill, it brings in 75% of whatever is generated which is more than if nothing is generated.

  Maybe I’m dense, but I just don’t get it. We need jobs, they want to bring jobs here. Seems like a no brainer to me.

• 3 Carole Cohen // Dec 21, 2008 at 3:57 pm

  And Bill, ty for the link. I just finished reading through it. Two immediate questions which I am going to have to look into.

  Why does administering one tax credit (per industry) cost 250k?

  And when CT says they get an additional revenue of 8 cents per tax credit dollar, that means just an accounting of tax revenues yes? Because I’m thinking about the jobs created permanently which bring about business for other NE Ohio establishments because now these full time employees have money to spend. And when the films are made here, more people are in town and they spend money.

• 4 Bill Callahan // Dec 21, 2008 at 4:39 pm

  Carole, HB 196 would allow an Ohio taxpayer to realize an Ohio income tax credit of 25% of the amount he/she invested in a film production company, multiplied by the percentage of the company’s production expenditures that occur in Ohio. So, in effect, the state would be absorbing (through tax reductions for the investors) up to 25% of Ohio production expenditures of that company.

  That’s potentially a much greater cost to the state treasury than any offsetting state/local tax revenue from the subsidized production.

  Of course there are other potential payoffs — jobs, contract spending, hotels, etc. — and these are, arguably, good reasons to accept the loss in tax revenue. But there are a lot of ways the state can spend money to buy economic activity. Are the payoffs in the case of the film industry so much greater that it should have irs own, special, free-standing tax credit? I don’t think I’ve heard the argument for that proposition.

  In any case, the “give up 25% to gain 75%” argument confuses little apples (state tax revenue) with jumbo oranges (total economic activity).

  As for the $250,000 in administrative cost — the LSC obviously thinks this scheme would require a lot of auditing to avoid abuse. Sounds right to me.

  Bill Callahans last blog post..Hamilton commissioners call for state foreclosure freeze

• 5 Robert Stockham // Dec 21, 2008 at 9:10 pm

  I am a firm believer in tax abatement in a down economy. I am not going to go on about it, but in the big picture, stimulating the economy in the short term is an investment in the economy in the long term. We are currently losing a potentially large economic boost by not attracting talent and industry to the region. Doesn’t Cleveland, and Ohio in general, have a history of deciding not to give tax incentives? Looking at our current economy, there are few states that fall below us in economic growth. It is important to take a long term look at the issue. As to Bill’s comment about getting film work with or without incentives, on that point you are misinformed. More than one recent movie was filmed out of state, because it was cheaper (one reason being incentives). The industry in general films outside the country on a regular basis as Canada has a great incentive plan.

  Not being a politician, I don’t even claim to know how this bill works or doesn’t. I am sure there are arguments either way. What is fascinating in this economy is the lack of action by politicians to face facts that Ohio is in the middle of a severe economic downturn and needs a helping hand to attract new businesses. With plenty of real estate across the country, and a workforce that is hungry for work, new business will set up shop where they are welcomed and encouraged. One great tool to do that is through incentives.

  That being said, I find it interesting to read this story shortly after hearing that Ohio is ranked in the top ten states for corruption.

  Robert Stockhams last blog post..Paper Made from Poo! Saving the Elephants-One Dungball at a TIme!

• 6 Carole Cohen // Dec 21, 2008 at 9:27 pm

  Hi Robert and ty for your comments. You know, Bill is always someone who researches issues thoroughly; I think we three just happen to disagree on what should happen in this instance. I really agree with you that our economic times call for action that is going to bring jobs here.

  I keep thinking about how we used to have all our eggs in the auto industry/steel industry basket and how now we need to establish a bigger basket with a variety of eggs. I truly think the film industry would help us a lot.

• 7 Roldo Bartimole // Dec 22, 2008 at 10:24 am

  The Arts & Culture tax is bringing in about $20 million a year. If there truly is a film project that can be made in the Cleveland area and needs some financial help – beyond free space – take the money from that kitty.

  Further, Cleveland has many, many foundations with plenty of money. If someone can prove to these foundations that jobs and revenue can be produced from a film, let the foundations seed the projects.

  Finally, let’s not open another front from which tens of millions of tax dollars can be siphoned away.

  Thank you, Gov. Strickland for your wise decision. I don’t often say that to a politician because they are first in line usually to give something away.

  And allow others to pay the bill.

• 8 Bill Callahan // Dec 22, 2008 at 11:25 am

  Robert, the economic landscape of this community is littered with tax abatements. Key Tower and the Marriott are tax-abated. All of Gateway is tax-abated. The Ritz-Carlton is tax-abated (through this year, I believe). Virtually every new house built in the city in the last fifteen years is, or has been, tax-abated. The county has tax-abated dozens if not hundreds of manufacturing operations. “Doesn’t Cleveland, and Ohio in general, have a history of deciding not to give tax incentives?” Um, no, we sure don’t have a history of that.

  So a reasonable person might say: “We give tax breaks to everybody else, why not the film industry?”

  And another reasonable person might say: “All these subsidized sectors are still shrinking despite decades of ‘tax abatement entitlement’. What makes you think a new film industry is going to sprout from a new set of tax breaks?”

  To which the first reasonable person would reply: “Well, all these competitive states do it and the industry demands it, what do we have to lose by giving it a try?”

  And the second reasonable person would answer: “I’m not entirely sure, but if it matters that much to the studios there must be some actual tax money at stake, which is tax money the state won’t get from the next Spiderman 3, Traffic or Soloist. And every business can make a case for lowering its taxes. And this state has a very, very big revenue hole opening up, and all those businesses also want better schools and better roads. So if you don’t mind, I’d like to consider film incentives as part of the state’s overall budget and investment strategy, not as a special case.”

  Neither of these positions is self-evidently right or wrong. Neither position is self-evidently ignorant, or venal, or partisan, or pro- or anti-Cleveland. They’re just two reasonable positions that reflect different perspectives and priorities, and need to be resolved.

  Of course people whose jobs are tied up with promoting local film are impatient with the delay, and concerned about losing a project or two. Frankly I think this is a weakness of the tax credit model; it requires the state to adopt a broad tax structure change with unpredictable effects, when it might be cheaper and more effective to just put some actual cash on a production company’s table. (How much money does “Torso” need to justify shooting in Cleveland, and how much employment and spending will it produce?) If the proposal was to put some dealmaking money in (for example) the Film Commission’s hands to get some specific projects negotiated, I think it might be an easier sell.

  But in any case, a few short-term projects are not an industry. Moviemaking jobs aren’t about to replace auto jobs, or metalworking jobs, or banking jobs in this region’s economy. It’s a modest, niche sector — nice work when we can get it, but no more important than a dozen other small sectors. We need to figure out effective ways to support all of them.

  Giving each one its own special provision in the state tax code doesn’t seem like the best possible approach.

  Bill Callahans last blog post..Is Strickland’s movie tax credit veto another outrage against Cleveland?

• 9 Carole Cohen // Dec 22, 2008 at 12:49 pm

  Roldo, I look at the precedent set by other states and I see tax abatement is the way they have provided an incentive to the film industry. I hate losing tax monies as much as the next person, but this is how business operates, give us an incentive to choose Cleveland over some other place. If we pick a different vehicle with which to provide the monies, it sounds a lot more temporary than a permanent commitment to the industry. So why wouldn’t they just take their business somewhere else? I’m not one to say well it’s been done this way before so let’s keep doing it, really I’m not. And I feel the residential tax abatement program did what it was supposed to do over the last 20 years but now should be refined to limit abatements and not provide a broad brush to all new construction projects. But this is a totally different issue.

  Bill, it sounds to me like the movies we have already lost and ones we still could lose are more than just individual movies.

  If we are treating each individual project like you suggest, and basing the incentives we provide on each individual project, then we are still treating the entire industry like a temporary fixture. At least that’s how I see it. I just don’t see a 25% or 35% tax abatement as Ohio rolling over on it’s belly and saying walk all over me, but please come here. It sounds like a sound economic investment for our State.

• 10 Roldo Bartimole // Dec 22, 2008 at 1:07 pm

  Carole, I wish you would address the fact that there is an arts tax and shouldn’t this, if it is so productive, apply.

  Also, there are many foundations and other charitable groups that hold fantastic amounts of money in Cleveland. If it is important to offer give-aways to promote films, why not via this private money, which really is evaded tax revenues.

• 11 Roldo Bartimole // Dec 22, 2008 at 1:10 pm

  Tax abatement is a perfect example of something that might be useable but once offered becomes a necessity.

  I’ve watched the abatement issue since the 1970s and see that it has become – instead of an instrument that might serve a purpose – a right demanded and extended without any real discrimination of whether it is necessary. It become an automatic, it has spread from deprived communities to those not deprived, thereby dimishing the original purpose.

• 12 Carole Cohen // Dec 23, 2008 at 2:19 pm

  The one big question I have for the two of you, is what about your creative suggestions for handling this issue would make the film industry want to establish permanent roots here?

  I’m talking about not dealing with each project individually, but allowing them to come to Ohio and have permanent staff doing project development here, as opposed to just dealing with movies as they come along? If you can tell me how not doing a tax credit but instead say, getting money from a non profit or the arts fund, would make the Film Industry want to come here?

• 13 Chris Carmody // Dec 25, 2008 at 3:21 pm

  Hi Guys -

  Bill & Roldo – I respect both of your opinions a lot. But as someone who examined this issue exhaustively for a decade, I have to say I’m mystified by the Governor and Lt. Governor’s approach to this issue.

  Roldo – to answer your question first – the law behind the arts tax specifically directs the revenue only to non-profit, Cleveland area organizations who go through a competitive process. It can’t be used for the private sector, and doesn’t have any bearing on the film industry (or other private sector economic development, for that matter).

  Bill – and All: This is an approach Democrats ought to love. First – companies don’t see a penny on this kind of break until *after* they have brought the jobs, spent the money, and documented it to … the Governor’s Office! That’s dramatically different from most other tax breaks, abatements and grants given over the years where taxpayers are asked to put up money first in the hope jobs will come.

  Next – these jobs high value – mainly union jobs with great pensions and benefits. On any movie or commercial shot here, it’s local truck drivers, carpenters, painters, electricians and others on the job. As I understand it, the AFL CIO decided to support this after considerable study – and they can attest to the wages, pensions, and other benefits involved.

  Finally, the underutilized Cleveland Convention Center has already proved to be attractive to film and television production. It’s within 75 minutes of New York and is considerably larger than all but one of New York’s motion picture facilities. The combination of the Convention Center with the credit would make Ohio unusual in the country and would catalyze much more than short term projects. This pairing wouldn’t make Ohio one of 50, but one of about five states outside of California (with New York, New Mexico, Florida and North Carolina) to have both the tax and the physical infrastructure to gain a significant share of one of few growing blue collar industries in the U.S.

  (Check out http://www.youtube.com/watch?v=T5NgSMzB2D8 for background to see an example – Spider Man 3’s use of the facility).

  So to add this all up: In an economically struggling state, there’s an opportunity to turn a giant, currently underperforming downtown asset into a magnet for primarily union jobs in the heart of one of the poorest cities in the country – and companies involved will only see a break after the jobs have been created.

  If there’s an alternative that better leverages good jobs and holds companies to a higher standard of accountability for government assistance, Ohio deserves to see it immediately.

  Until recently, the lead Democrats on House and Senate Finance agreed.

• 14 Carole Cohen // Dec 25, 2008 at 5:47 pm

  Chris, you make the best case for doing it as a tax abatement when you say ‘companies don’t see a penny on this kind of break until *after* they have brought the jobs, spent the money, and documented it to … the Governor’s Office! That’s dramatically different from most other tax breaks, abatements and grants given over the years where taxpayers are asked to put up money first in the hope jobs will come.’

  I thank you so much, and I truly hope people will urge Governor Strickland to change his mind on this point.

• 15 Roldo Bartimole // Dec 25, 2008 at 7:57 pm

  Chris: You are right about profit films but there are non-profit films too. So the arts money could apply there.

  The pie in the sky jobs and economic activity for abatements have proven over and over again to be a mirage.

  The fact that the tax breaks can be sold to profitable businesses to reduce their taxes makes this just another gimmick for those who have to get more and lay off their taxes on the rest of us. It’s bad public policy.

  Since we have thrown poor people off of welfare I don’t see the percentage of creating new welfare programs for the non-poor, particularly when they should be making their own way.

  Your argument is similar to the one for casinos, others have it so we should too.
  It’s not a winning argument for me.

  Finally, the monitoring of abatements has never been satisfactory in my experience.
  “Documenting” by the governor’s office or any other political body doesn’t impress me at all.

• 16 Bill Callahan // Dec 27, 2008 at 10:27 am

  Hi, Chris. Look, since you presumably know the nuts and bolts of the proposed transaction, let me ask:

  Do I understand correctly that the intention of the bill is to allow a production company’s investors, by selling the tax credits to people with enough Ohio income to use them, to recapture up to 25% of the money they spend on Ohio production — including travel to the state, salaries paid to people who are here for a few weeks (“resident and nonresident cast and crew wages and fringe benefits” ), “out-of-state goods purchased or leased and ultimately consumed in full or on a pro rata basis in this state”, etc.? So that, in effect, the state would be offering to pay up to 25% of the company’s gross costs of filming here?

  And if I do understand it correctly, isn’t it possible that the proportion of a film’s “Ohio shooting budget” that actually goes to local actors, technicians, service contractors, hotels, etc. could actually equal less than that 25%?

  Bill Callahans last blog post..Cincinnati sues Deutsche, Wells Fargo

• 17 Bill Callahan // Dec 27, 2008 at 11:43 am

  Carole, as for what kind of incentives “would make the film industry want to establish permanent roots here”, I don’t have a clue. But I don’t see why having a project-based tax credit subsidizing 25% of local production is going to do the trick when (as everyone keeps pointing out) lots of competing states are doing the same or better. (Of course I can see how it would provide permanent jobs for a few lawyers in Columbus.)

  Look, let’s assume that the Film Commission folks have a larger strategic vision and that the tax credit plan is just part of their plan. If that’s true, they haven’t explained it very well — at least any place where I can find it. (Certainly not on their website.) All I’m hearing is: We must have this tax credit NOW or we’ll lose “Torso”! With all respect, that’s not much of an argument for rushing through a long-term structural change in the tax treatment of an industry.

  (Yes, I know HB 196 has been sitting around in a House committee since May 2007. But the committee didn’t budge on it until a month ago. You can hardly blame that on the governor.)

  Between the lines, it looks to me like this is really about the Commission’s negotiations with Nehst to get them to site a production facility here (i.e. in free space in Public Hall). This might be a terrific idea and the Nehst people are probably wonderful partners. But Nehst Creations didn’t exist when HB 196 was written (it was introduced in May 2007, the same month as Nehst’s formation was announced) and the City just announced the Public Hall offer two months ago. So this great potential deal can’t survivc a few more months of working with Strickland, Fisher and the new General Assembly leadership to work out a subsidy strategy they can support?

  Bill Callahans last blog post..Cincinnati sues Deutsche, Wells Fargo

• 18 James Renner // Dec 29, 2008 at 2:28 pm

  Luckily, Strickland realizes this Bill was much to do about nothing. I think Christina Grozik, over at newly-formed Ohio Film Office is keeping him informed about the dirty politics and positioning that are truly behind the creation of this package (which is essentially a crummier bill than most other states have had for a decade or more–kind of like coming to the party an hour late with a case of O’Doul’s). I look forward to Strickland’s plans for boosting film production–not just in Cleveland, but in Ohio, because I think it will be more favorable to the middle-class taxpayer in the long run.

  A lot of this is noise that is being made to put Ivan Schwarz and the Cleveland Film Commission in the papers, again. It’s a strategy Carmody perfected and which Schwarz, unfortunately, is following. And all this talk about space to film movies in the convention center is mind-numbing for us who have actually worked on these movies. The space is not conducive to much more than office space. Also, Spiderman 3 shot like thirty seconds of film, here, so maybe we don’t want to use that as the example of business that will save Cleveland.

  What’s more frustrating is all this talk about Nehst leaving if we don’t give them some incentive to stay. Who the eff is Nehst, anyway? And I don’t want to hear about how their founder has some credit for location scouting for some HBO show or something. What have their producers done to show their worth that we should invest in them?

  Sadly, those covering the local film scene do not ask these questions and do not understand how to see through the smoke and mirrors of Hollywood spin.

  I’d love to have more movies filmed here. Don’t we have a commission to look into that sort of thing?

• 19 Adam White // Dec 31, 2008 at 4:14 pm

  Hello there,
  I for one actually DO work on these movies, and in technical positions, not just as a PA, Yes, when they use the convention center also.

  I am in strong favor of HB 196, the Film Tax Incentive, recently passed by both legislative houses of our State.

  HB 196 is not an abstraction. If the bill was signed by Gov. Strickland, films would come here, namely the $100 million movie about the Torso Murders. Veto the bill, they will not. It’s that simple. The Cleveland-based story will shoot in Michigan instead, where they have a tax incentive.

  The chief complaint from the Governor’s office has been that HB 196 would, in the short term, lose the state money. If this line of thinking is true, no city in Ohio should have built ANY sporting arena professional or collegiate. It would be just hundreds of millions we flushed away without any immediate economic benefit, right? This type of thinking would have you believe that The Horseshoe would lose Columbus money, or that building Jacobs Field in the 1990’s didn’t help the city of Cleveland. To help our state we must be creative and think long-term. Gov. Strickland’s office has made no mention of any long term repercussions the bill would have towards economic development to the state. This ignores the very point of the bill, not to turn a quick buck from film productions, but to build a self-sustaining long-term film community and industry.

  House Bill 196 is a Republican sponsored bill. Gov. Strickland’s, and the state’s Democratic Party’s, resistance to this bill smacks much more of political hardball rather than fiscal concern. When pressed at the Ways and Means committee hearings, the Governor’s tax team didn’t really have detailed answers to the members’ questions. In both the House and the Senate, the bill has been greeted by largely party –line votes. So, is this REALLY about crafting a tax plan that benefits the people of this state, or making sure the Republicans do not get a “win” before the first of the year? I have seen Ivan Schwartz’s approach with this bill and if anything, he would LOVE for someone else to take up the fight. He is NOT after more headlines. Conversly, I would not trust one word that would come from the newly formed Ohio Film Commission, which is an office of the current Governor.

  I’d love to work on more movies as well, since its my primary source of income.

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