Lawmaker blocks vote on tax credits for film studios - East Valley Tribune: Arizona

Lawmaker blocks vote on tax credits for film studios

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Posted: Monday, March 21, 2011 5:52 pm

Saying he fears "possible attempted bribes" of legislators, a veteran state lawmaker is blocking a vote on a measure proponents say will lure filmmakers to Arizona.

Rep. Jack Harper, R-Surprise, is using his position as chairman of the House Ways and Means Committee to kill SB 1159. The measure, which passed the Senate on a 19-11 vote, would provide tax credits to those who spend money building film studios in Arizona and make their films, advertisements and music videos in the state.

Harper said the experience the state has had with similar credits prove they are a money loser.

A study prepared for the Arizona Department of Commerce said the productions given credits generated 317 full-time jobs in the industry in 2008. And another 413 jobs were created indirectly from spending by filmmakers in the state.

All totaled, that generated about $2.3 million in additional state and local taxes.

But Arizona gave out more than $8.6 million in credits to get that gain.

Those credits have since expired. Now Sen. John Nelson, R-Litchfield Park, has proposed what he said are a better set of credits, ones designed to actually generate more cash than they cost.

"We're pretty much following what New Mexico has done," he said, citing that state's 9-year-old system of tax credits.

He said that state now has seven different film production facilities.

"They're making money," Nelson said, saying if Arizona copies what New Mexico has done it can siphon some of that off.

"We're closer to California," he said. "We can stop them on the way, hijack them if you will, and get them to stop here."

Harper remains unconvinced this will be any better.

He said one of the most onerous provisions of the original plan remain: that these are "refundable" tax credits. What that means is the state actually sends a check to a company if the firm's Arizona tax liability is less than the credits it earned.

And that, Harper said, is what led to his fear that "felony quid-pro-quos are bound to materialize."

He said this legislation could give away up to $50 million.

"When entities get desperate to swindle taxpayers out of tens of millions of dollars, they'll resort to dubious means," Harper said.

But Harper, pressed for evidence, said he had none.

"I don't know if anyone in particular has been doing that," he said.

Nelson, however, remains convinced that Arizona would benefit by taking the New Mexico model and "improving" on it.

SB 1159 would provide filmmakers a credit equal to 20 percent of anything they spend above $250,000. An additional 5 percent bump would be available for firms that use a privately funded production facility in Arizona, one that costs at least $50 million with half of its staff made up of Arizona residents.

Any individual credit would be capped at $15 million.

Separate credits would be available for construction of film studios.

Among the more visible results of New Mexico's ability to attract filmmakers was the production of the 2008 movie Hamlet 2. The story about a high school drama teacher is supposed to take place at a Tucson school; a New Mexico school filled in as a replacement.

But there is some grumbling even in that state: The Legislature there approved a bill last week to cap the total credits at no more than $50 million a year, though lawmakers refused a proposal by their governor, Susana Martinez, to cut the credit to just 15 percent rather than the current 25 percent of expenses.

Requests to Arizona Gov. Jan Brewer's office seeking a comment were not immediately returned.

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