Our View - Film tax credit just tip of a credit iceberg

Printed in the Iowa City Press-Citizen, Oct. 12, 2009

Our View - Film tax credit just tip of a credit iceberg

For the last few weeks, we've heard friends and patrons of Iowa's fledgling film industry complain that state leaders have overreacted to the recent discovery of gross abuses of Iowa's two-year-old film tax credit program.

They've been saying, "Don't throw the baby out with the bath water," and, "Fix, don't scrap, the program." They've also been urging the state to look what a small percentage the abuses represents when compared to the money being brought into the state by this rapidly growing industry.

But in the few weeks since the state's director of economic development resigned over the financial irregularities within the program, it's become readily apparent that the film tax credit was flawed from the beginning. Rather than help incrementally grow an industry that would improve Iowa's image and support an infrastructure of local actors and technical staff, the program gave qualifying filmmakers tax credits beyond the amount of tax that they actually owed.

Then filmmakers -- even some of the few who actually turned in their receipts -- proceeded to sell off those extra tax credits to other companies who had nothing to do with the film industry. Rather than simply lessen a filmmaker's tax burden to make Iowa slightly more competitive, the program created an additional marketplace in which filmmakers made money by helping to reduce other businesses' tax liability.

Back in 2007, the lawmakers were somewhat aware of this possibility, but the non-partisan Legislative Services Agency estimated that the credit would cost less than $800,000 in revenue losses this fiscal year. Now -- because so many filmmakers have applied for the program -- the Iowa Department of Revenue and Finance estimates that this year's loss will be nearly 33 times that amount: $26.3 million. Thankfully, lawmakers capped the program at $50 million last year or the potential loss -- during a time when the state is slashing 10 percent of its budget -- could be worse.

But the film tax credit is just the tip of the iceberg. Iowa also has a similar problem with its research activity tax credit, which gives qualifying companies 6.5 percent credit on their research expenses in the state. The problem is that companies like Rockwell Collins are able to claim more in research expenses than they owe in state taxes. Rather than just have the credit cover the taxes owed, the state actually writes out a check to these companies for the extra amount. (And state law says that the public doesn't have the right to know who is applying for the credits and how much is paid out.)

So we're not surprised the film industry folks -- like the research folks -- are worried about drying up this cash cow. We're just sorry that it took so long for our state leaders -- and for us -- to realize that this was a deal too good to be true.

And it's a painful lesson for everyone who agreed with the original intent of the legislation. The film tax credit deserved to have proper oversight -- not to be left largely in the hands of a single state employee who originally was hired for marketing the state and not for overseeing contracts and calculating tax liability. The program also deserved to have state officials higher up the political food chain making sure that the watchers were watching the watchers.

Now that every state dollar seems to count more than ever, it's time to make sure Iowa stops bleeding tax money through these tax credits.

Our View - A price too high to pay for Iowa's close up

Printed in the Iowa City Press-Citizen, Sept. 22, 2009

Our View - A price too high to pay for Iowa's close up

Last month, we wrote an "Our View" explaining how Iowa's tax incentive program has worked well to put the state on the map for filmmaking projects. Roughly 50 new movie projects were in the pipeline before Iowa legislators decided to cap the credits at $50 million in July.

Some readers responded that the issue required more sophisticated analysis. It's not enough to say that incentives are "necessary" to attract such business; it's more important to demonstrate that incentives provide a good return to taxpayers. And given the increased number of states who have been implementing incentives for the film industry, we need to look beyond the flash and sizzle that comes with promises of bringing Hollywood to Iowa (Hawkeyewood?) and to provide substantial answers to questions such as:

• If this is a good investment for private industry, why does it have to be made by the public sector?

• And if a public investment is necessary because the private sector is not able to do what it normally would in better times, how does this incentive produce an actual public benefit? And are there better choices being passed up?

Now it seems that Iowa's film incentive program might have a more basic problem: There's not enough oversight to ensure that participants aren't abusing the program. The Des Moines Register reports an internal audit found that receipts were provided for only two of 18 movie projects. And the unfolding story is starting to sound more like the plot of "The Music Man" -- out-of-state hucksters coming to bilk small-town Hawkeyes -- than a viable economic development program.

On Friday, Iowa Department of Economic Development Director Mike Tramontina suddenly resigned after informing state leaders of a list of abuses in the program. And Tom Wheeler, the manager of the program, was placed on administrative leave.

On Monday, Gov. Chet Culver asked Auditor David Vaudt, Attorney General Tom Miller and Revenue Department head Mark Schuling to investigate abuses in the program. Burlington Sen. Tom Courtney, who heads the Government Oversight Committee, also announced Monday that his committee would investigate the matter.

Auditors have suggested movie producers and executives took huge advantage of an overwhelmed, largely one-man film office while state administrators paid little attention. But given the egregious nature of some of the alleged violations -- executives on one film project supposedly bought a new Mercedes-Benz and Land Rover that were not used in production of the film -- we think state leaders need to put a moratorium on providing tax credits to any future productions until Iowans can be assured the state isn't selling the farm for a mere 15 minutes of fame on screen.

We'd love to see a thriving film industry develop in Iowa, but not at the expense of fiscal responsibility and effective government oversight.

What do you think?

• What steps should state leaders take to add more accountability to Iowa's tax incentive programs for the film industry?

• Send letters to opinion@press-citizen.com.

Iowa getting its close-up in '16 to Life'

Printed in the Iowa City Press-Citizen, Aug. 26, 2009.

One of the highlights of this week's Landlocked Film Festival will be Saturday's Iowa premiere of "16 to Life," a film written and directed by Iowa native and UCLA film professor Becky Smith. Smith and the film's star, Hallee Hirsh ("E.R.," "Jag") are scheduled to attend.

"16 to Life" is Smith's freshman foray into feature filmmaking after her broad experience in television ("Queer Eye for the Straight Guy") and documentary ("The Daring Project"). She said she had written about 10 screenplays for feature-length films, but she tended to focus only on developing the storyline and never really paid attention to budget concerns. When she started working on "16 to Life," she focused on telling a story she would be "proud to tell" in a way that would be affordable for a low-budget production.

"I had this idea that if I worked really hard and if I developed a good reputation, then someone would ask me to direct a feature film," Smith said in a telephone interview Monday. "But the industry doesn't work that way. If you develop a good reputation, you are more often pigeonholed into the thing you are already doing."

After spending a year writing and rewriting her script, Smith started fundraising and was lucky enough to get a grant to scout for locations. That's when things started falling together and when "16 to Life" became even more of a labor of love to the Okoboji-born California transplant.

Filming in Iowa

At first, Smith had intended to shoot only a few exterior scenes in Iowa. But during trips to her native state, two factors came together to make it possible for Smith to shoot the entire film here:

• Iowa passed a tax incentive program for film productions with budgets more than $100,000 and

• Iowa businessman Terry Trimpe, who helped produce the Iowa-based "The Final Season," agreed to become a partner.

Suddenly, Smith realized her story of a teenage girl who reads more and who dreams more than the other residents of her small town -- a story that very much comes out of Smith's own Midwest upbringing -- actually could be set and filmed in the Midwest.

"I, of course, think Iowa is gorgeous," Smith said. "It's a perfect place to film. I was always disappointed that 'What's Eating Gilbert Grape,' which is supposed to be in Iowa, was filmed in flat, dry Texas -- which doesn't look like Iowa in any shape or form."

Because the story called for a resort town near a lake, Smith considered various sites, including Storm Lake, Clear Lake and the Okoboji area where she grew up. After "making a big circle around Iowa," she decided on McGregor, which she said is her mother's favorite place and where Trimpe had property on which they could film.

"So, I rewrote some of the script for a river rather than a lake," Smith said, "And it turned up to be the best possible idea. We were able to also film this great footage of the rolling hills and the surrounding farms. It was spectacular."

'16 and never been kissed'

"16 to Life" takes place on the 16th birthday of the main character, Kate (played by Hirsh). The tight focus surely helped reign in the film's low budget -- Smith said the film came in at less than $1 million -- but it also helped contain some of the craziness that happens to Kate and her friends on that day.

Smith's film clearly strives to fit into the "indie sitcom" genre opened up by "Little Miss Sunshine." With the main plot focusing on Kate's attempts to change her status of being "sweet 16 and never been kissed," the film feels similar to "Juno" (penned by University of Iowa grad Diablo Cody) and the uniforms featured on the movie poster seem designed to bring to mind the late Adrienne Shelly's "Waitress."

But Smith manages to put her own stamp on the genre. In between the events of the day, she shows Kate reading from "Duck Farm No. 13," a book written by a teenage girl who lived through China's Cultural Revolution. To make the comparison as clear as possible, Smith often cuts from Kate's everyday world -- which includes many beautiful images from around McGregor -- to images from Kate's daydreams about how her teenage, angst-filled problems would look if transposed to China 40 years ago.

Because Smith is writer and director of "16 to Life," she has more control over the final product than many filmmakers have. But she said even she was surprised at how the actors brought depth and sincerity to a story she thought of as "a lighter comedy."

"I wrote it as a comedy very much based on my sense of humor -- which is hard to describe, but has a very droll quality to it," Smith said. "But people after (screenings) would come up and say that it wasn't just a comedy; it was moving. That is something that I have to give the cast full credit for."

There are some remnants of that earlier, lighter comedy. The voice-over narration at the beginning and end of the film, for example, seems to belong to another film altogether.

But in the end, "16 to Life" is not only a film Iowans can be proud of; it's also a film the Iowa Film Office should send out as an advertisement for why other directors should follow Smith's example and start thinking about making their films in Iowa.

Opinion editor Jeff Charis-Carlson can be contacted at 319-887-5435 or jcharisc@press-citizen.com.