Legislature(1957-1958)

Committee Minutes


HOUSE LABOR & COMMERCE
Mar 13, 2013

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HB 112-REPEAL FILM PRODUCTION TAX CREDIT

4:35:04 PM

CHAIR OLSON announced that the final order of business would be
HOUSE BILL NO. 112, "An Act repealing the film production tax
credit; providing for an effective date by repealing the
effective dates of secs. 31 - 33, ch. 51, SLA 2012; and
providing for an effective date."

4:35:10 PM

REPRESENTATIVE BILL STOLTZE, Alaska State Legislature, as
sponsor of HB 112, stated this bill would repeal the film
subsidy program with transition language to allow film credits
for those in the queue. While that effort adds cost, he felt it
was fair to transition the program for those in the queue.
Further, he offered his belief that the costs for the film
incentives do not relate to the benefits for this program. The
bill would also keep in place the state's film office. He
supported having businesses talk to Alaskans, whether it is in
the tourism industry or any other industry. In fact, the state
has previously had a film office, which was reenergized with the
advent of the initial film subsidy bill in 2008. Last year, the
[Alaska Film Production Tax Incentive Program] was extended with
a state commitment of $300 million. He acknowledged that he is
driven by his philosophy that this program isn't worth the money
[given in tax incentives]. He advised members that he did not
solicit people to testify on this bill since his district's
constituents are driven by their own philosophy and don't have
any financial stake in the program but speak as citizens. He
asked to read a letter.

4:38:12 PM

REPRESENTATIVE STOLTZE said there was a call to action out and
the subject was, "Urgent - Representative Stoltze to move to END
the Alaska film industry - Importance: high."

REPRESENTATIVE STOLTZE read Mr. Ron Holmstrom's letter, as
follows:

This is an emergency. It is the opening days of the
present 2013 legislature. Representative Bill Stoltze
has introduced HB 112, which will repeal the Alaska
film incentive program. This bill will effectively
end feature film production in Alaska. I urge
EVERYONE to write, call, or e-mail your legislators
immediately to stop this malignant move before it goes
any further. You can find your legislative contact
....

This bill is going to the House Labor and Commerce
Committee this week so now is the time to get
cracking. The hundreds of concerned businesses,
actors, crew, and crafts people who will be directly
affected by the death of the film industry. "Please
pass this along" and help stop this madness!

REPRESENTATIVE STOLTZE pointed out that the word "malignant" was
Mr. Ron Holmstrom's word. He recalled that Mr. Holmstrom is
also a news person. He said lots of people have a financial
interest in this and those who have an interest never want the
funding to end. He said this becomes apparent during the budget
deliberations, as well. He concluded that he expects to be
outnumbered today [by testimony in opposition to the bill]. He
suggested that many people who agree with him are at work or
driving but he wanted to frame the discussion for members to
better understand [the opposition to HB 112.] He offered his
belief the department would likely be neutral on the bill.

4:40:57 PM

REPRESENTATIVE REINBOLD thanked him for bringing up the bill and
indicated she would co-sponsor the bill.

REPRESENTATIVE STOLTZE concluded that he did not like to
artificially [create support or opposition on bills, but prefers
people spontaneously testify].

4:41:38 PM

REPRESENTATIVE SADDLER asked whether the tax incentive would be
the end of the film industry.

REPRESENTATIVE STOLTZE replied he thinks it would be the end of
the subsidy for the type of film industry that exists. He did
not think the film industry [in Alaska] is sustainable since it
is heavily subsidized. He said he doesn't use the term "tax
credits" since the film industry is not an industry that pays
taxes. He offered his belief that the term tax credits is
really a misnomer since the program is a film subsidy so he'd
appreciate the committee adopting the term, as well. He
acknowledged that the film industry has had some benefits, but
he did not think the cost pencils out. He suggested that many
people feel good about the scene being filmed in a stage or
studio in Anchorage instead of Los Angeles or in Alaska instead
of British Columbia, Canada. However, he asked at what cost
these benefits have to Alaskans. He wondered how many people
were truly excited about reality programs, such as Life's a
Tripp.

4:43:14 PM

REPRESENTATIVE HERRON asked whether he had considered any other
options or if this is the best fix.

REPRESENTATIVE STOLTZE responded that the committee could
decide. He offered his belief that this bill is an appropriate
fix, but the committee process will decide. He said he wants to
be sure programs are working and make sure the cost benefit
ratio is good. He said, "If there are better ideas out there -
I would be happy with stopping the bleeding while we still have
a good blood flow."

4:44:26 PM

REPRESENTATIVE HERRON related his understanding triage is
possible, but the sponsor believes it is better to end it now.

REPRESENTATIVE STOLTZE answered yes.

4:45:18 PM

REPRESENTATIVE JOSEPHSON recalled the sponsor saying the
committee would hear from those who have an economic interest
[in the film industry]. He understood the state encouraged the
aforementioned to have economic interest through 2023. He asked
what the legislature should do about that action [taken last
year.]

REPRESENTATIVE STOLTZE characterized [the film production tax
credit program] as a bad idea. He said that the state had a
different economic picture. He indicated [HB 112] has
transition language that would allow the industry an opportunity
to find a "cash cow" somewhere else. He suggested that some
people are really enamored with the film industry, but he is
not. He offered his belief the program should be stopped before
the state has given out more benefits. He further suggested
that the program was a mistake and should be ended.

4:46:42 PM

REPRESENTATIVE SADDLER asked the sponsor to elaborate on the
transition language, phase out of the program, and auditing
provisions.

REPRESENTATIVE STOLTZE deferred to the department.

4:47:26 PM

REPRESENTATIVE JOSEPHSON recalled reading an article by
Representative Costello that indicated the amendments and
reforms were great. He asked whether some members still support
this industry.

REPRESENTATIVE STOLTZE declined to speak for Representative
Costello. He suggested the article could be interpreted on its
face. He was unsure of Representative Costello's position on HB
112. He recalled some of the political issues the committee
faced last legislature. He further recalled that last year's
bill was improved during the process last legislature.

4:48:35 PM

DANIEL GEORGE, Staff, Representative Bill Stoltze, Alaska State
Legislature, on behalf of the sponsor, Representative Bill
Stoltze, stated that the Senate bill that passed last
legislature increased the state's obligation by $300 million.
The fiscal note explains HB 112 would basically stop the
expenditures granted by the Department of Commerce, Community &
Economic Development (DCCED) by the expiration of the current
program, which ends July 1, 2013. The total amount would be $83
million, he said. Thus, the potential savings to the state in
2013-2023 would amount to $217 million. He emphasized that film
producers operated in Alaska prior to the program also went on
the record to say they would operate in Alaska without the
incentives. He further recalled an article in which "Denby's
Catch" actually stated that fact. He concluded by saying,
"There's a lot more here than meets the eye."

4:49:49 PM

REPRESENTATIVE STOLTZE said this bill is about Alaska's fiscal
situation. He expressed concern about last year's bill. He
stated that he supported the bill since it had other measures
attached to it. Further, he also supported last year's measure
since the bill supported economic development in Alaska of a
more real and tangible nature.

REPRESENTATIVE SADDLER asked him to expand on other elements in
last year's film bill.

REPRESENTATIVE STOLTZE did not recollect, but he thought perhaps
the bill contained Nenana Basin tax credits, corporate tax
credits, and LNG storage credits.

4:51:38 PM

REPRESENTATIVE SADDLER asked whether DCCED has a position on the
bill.

4:52:21 PM

ROBERTA GRAHAM, Assistant Commissioner, Office of the
Commissioner, Department of Commerce, Community & Economic
Development (DCCED), said the DCCED is neutral on the bill. She
highlighted that the transition language recognizes the
importance of continuity for the companies, actors, and
businesses that need it. Ironically, the existing statutes
which will go into effect July 1 and transfer the Film
Production Tax Incentive Program from DCCED to the Department of
Revenue (DOR) does not contain any transition language. Thus,
according to legal opinions the DCCED has received, the 55-plus
productions in the queue that have been prequalified for a tax
credit will not be grandfathered in and will need to re-qualify
under a new tax credit regime. This means budgets which have
been approved would essentially need to be retooled, which may
present some legal and financial issues she said. She clarified
that HB 112 contains transition language which recognizes [the
companies in the queue.]

4:54:12 PM

REPRESENTATIVE SADDLER asked for a brief description of the
transition process and timeline for it.

MS. GRAHAM answered that under the existing standards if a
production has not completed its work by June 30 the statute
would be repealed and the new statute goes into effect. Once
the statutes are repealed, the prequalified firms would be in
limbo until they re-qualify with DOR under the new statutes,
which also would include the new tax credit percentages. She
explained that the aforementioned will impact at least 55-plus
another 10 to 15 productions that will go through the
prequalification process between now and June 30, 2013. The
DCCED has been working with the DOR on regulations and the
proposed transfer program to the DOR. Additionally, the DCCED
will retain the function of promoting and marketing the film
industry as a destination.

4:55:40 PM

REPRESENTATIVE HERRON recalled the sponsor anticipates
opposition in the form of e-mails on HB 112 and he noted he has
also been receiving them. He asked whether the department has
received e-mails on HB 112.

MS. GRAHAM said she has not seen them, but imagined the
department has received them. In further response, she agreed
to provide a summary of the e-mails.

4:56:39 PM

REPRESENTATIVE JOSEPHSON referred to page 2, line 17, of HB 112,
which identifies an effective date of July 1, 2013. He asked
whether the effective date would preserve the 55 programs in the
system so they can finish their production and receive the
credits.

MS. GRAHAM replied that she presumed so. The transition
language would allow the Alaska Film Office to proceed to
process the tax incentive credits as they are received, she
said.