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State data shows most movie investment goes for wages Outside

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Posted: Saturday, November 5, 2011 10:43 pm | Updated: 1:33 pm, Wed Jan 16, 2013.

FAIRBANKS — In the first three years of the Alaska film subsidy program, the state has paid out more in tax credits than the companies spent in Alaska, when you subtract the $28.6 million in wages that went to movie stars, film executives and other employees from Outside.

Wages paid to non-residents and Alaskans on movie-related jobs are counted as part of the “Alaska spending total” from which the film tax credit is calculated.

If you subtract the $28.6 million from “Alaska spending,” the 30 productions that have received credits so far have spent a total of $12.3 million in Alaska and received $13 million in tax credits, according to state figures.

Of that $12.3 million, about $3.1 million was for Alaska wages and $2.5 million was for food and lodging. The film companies spent $1.2 million on intrastate transportation and $622,000 on interstate transportation, which is also counted as spending in Alaska.

I’m glad to report that after numerous requests, the state Department of Commerce, Community and Economic Development has released more details on the subsidy program.

The overall statistics provide the first real breakdown on the movie investment pattern in Alaska. The Legislature did not ask how much in film wages is going to people in Alaska, so the annual reports have not included that detail.

State officials have told me the next annual report will include those numbers.

I am continuing to seek more information, however, as there is no reason why the Alaska spending totals for tax credits on individual productions should remain secret.

This is not taxpayer information and the relevant statute department officials cite as the reason for secrecy has nothing to do with this program.

I have speculated in the past that the state’s reluctance to release information may have something to do with an attempt to conceal the reality that most of the money spent to make movies in Alaska, with the state paying about one-third of the bill or more, is going Outside.

I’m not arguing that the attempt to create a film industry in Alaska is a bad idea or that the program should stop. I believe, however, that any judgments about its success or failure should be made with full public disclosure of the economics. That has not taken place in Alaska because the statistics have been withheld. I am glad to see that is changing.

Proponents of the film program argue that as the film business is a newcomer to Alaska, it can only be attracted here if we underwrite about one-third or more of the wages and salaries for movie stars, directors, producers and others.

In their view, subsidizing high-paid actors is the price of admission and Alaska can afford it.

They also say the state money is going to good use in spurring the creation of new jobs and infrastructure. It means more hotel rooms are filled, cars are rented and extras are hired. On top of that, the publicity value is priceless and will lead to more tourists, they argue.

These are all relevant points. But there should be a clear analysis and review about the opportunity cost of using state money in this fashion. According to the state statistics, about 70 percent of the “film investment in Alaska” so far has been in the form of wages paid to people who don’t live here.

The state film office can use this data to make the case that film companies should increase their hiring of Alaskans, as the program will lose political support with such a low percentage of Alaska hire.

If filmmakers want to get in on the state subsidy, they ought to be required to spend more of it here.

The program won’t last if every dollar actually spent in Alaska costs the state a dollar or more than a dollar in reduced general fund revenues.

A more precise analysis would include an estimate of how much of the money paid to people Outside gets spent in Alaska. Food and lodging and transportation are already separate categories and those are the most likely things to spend money on.

The film office needs to revise the way in which it catalogs and keeps track of the Alaska jobs created by the movie business. It should reject forms submitted by companies in which they leave the line blank about how many jobs were created in Alaska.

As to what those jobs are and how much they pay, we need to see more details and a better explanation.

The new information released by the state says that 695 direct Alaska jobs were created in the past three years and 516 non-Alaska jobs were created.

The problem with these numbers is $28.6 million went to the people from Outside in wages and $3.1 million went to the higher number of Alaskans.

There has to be some way of presenting this in a way that doesn’t treat a job with a seven-figure salary as equal to a minimum wage job.

The companies making movies in Alaska form limited liability companies that don’t pay state taxes. Once they receive the tax credits, the movie companies sell them to corporations that do pay Alaska taxes, such as oil companies or a wide range of other corporate enterprises.

The state doesn’t release details on how much the tax credits are sold for and who ends up with them, but the credits are sold at a discount, perhaps for 80 or 90 cents on the dollar. The tax credit is redeemed at full value by whichever taxpayer ends up buying it.

 The biggest movie production in Alaska last year was “The Big Miracle,” the Barrow whale picture, which is not included in the totals because the company has not filed the final paperwork. The biggest production this year is “The Frozen Ground,” the serial killer story being shot in Anchorage. That production also is not reflected in these numbers.

Columnist Dermot Cole can be reached at cole@newsminer.com or 459-7530.

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