A Path to Good High-Paying Jobs in Delaware

Filed in National by on June 27, 2010

You may not know it, but there is a jobs bill in Dover that can’t seem to get a vote.  Speaker Gilligan has been dragging his feet on putting the jobs bill on the floor.  I am a little amazed by that fact, since it is a jobs bill that doesn’t even have a fiscal note attached.  It’s a jobs bill that will mean work for union workers.  It will mean work for small businesses up and down the state.  And it is a jobs bill that sells a renewable resource.

We need to vote on the film bill (H.B.490) to create jobs this year and for years to come.

Tom Kovach introduced the bill this year, but it is sponsored by 21 other Reps and two senators.  Here’s how the program would work:

A film would come to Delaware and say, “ I have a film that I am making.  I have secured the distribution rights for the film, once I make it.  I have the actors signed on for the film.  I have 70% of the money to make the film. All I need is the other 30% to get over the hump

Now, I know what you are thinking… No freaking way am I paying for 30% of Ishtar! I agree.  Instead, we cosign for a loan on the 30% (must not exceed $5M).  In exchange:

  • They must film 80% of the movie in Delaware
  • They must be a Delaware corporation
  • The employees must pay Delaware taxes
  • They must be insured to pay back the loan, in case of a tragedy (A Tom Cruise thresher accident isn’t out of the realm of possibility)
  • The loan must be the first thing paid back (before the other 70% investors)
  • Money must be set aside to pay back the interest on the loan (remember, the loan is made by a bank, not the State) for 3 years

Meanwhile, the films are employing caterers, security, local crews, renting facilities, paying tolls, buying fuel, and a dozen other things that films need every day.  They are also paying the crew, who are eating, drinking and being merry when they’re between shooting days.  Not to mention that we can enhance tourism in Delaware once there is a film depiction of the beautiful beaches and farms in Sussex, the awesome gardens and homes of New Castle County and the huge strips of asphalt that define Kent County.

This just needs to get done.  Last year, my sources tell me that Alan Levin pulled the plug on it at the last minute, no doubt because of a failed investment in Waterworld in the 90’s.  I was unable to reach my DEDO contact for comment on where Levin is this year, but he seems to be softening (must resist…).  The Governors office could have the bill on the agenda with a nod of the head, but they have been preoccupied with budget wrangling and other bills of interest.  But this cannot languish any longer.

Besides, this may be my opportunity to leverage my high school acting experience into a lucrative career as a professional extra.

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  1. jason330 says:

    I thought this passed!?!? When I first read about it I thought it was such a slam dunk, no brainer that I had no idea that Gilligan was holding it.

  2. liberalgeek says:

    It has not passed, and it seems like it is Gilligan holding it up. And it should be a slam dunk.

  3. I agree wholeheartedly with the complaint here. WHy the hell isn’t this bill getting to the floor???????????????????????????????

  4. jason330 says:

    I called Tom Kovach on Friday to ask him about this. Of course that was back when I thought it was voted on and passed.

  5. kavips says:

    The problem lies not in that it is a bad bill.. The issue is whether this is absolutely the best investment of very, very tight resources…

    It is having trouble passing that test.

  6. cassandra m says:

    Frankly, I don’t get the *point* of this bill. Unless it is a nose-in-the-tent attempt to create tax subsidies for films.

    NJ, MD and PA all have tax *credit* programs for films shooting the majority of their content in those states. (20%, 25% and 25% , respectively). NJ and MD I think also have some allowances for exemptions for sales taxes. A tax subsidy is real money, while co-signing a loan is not. So unless a film really needs the verisimilitude of Delaware, why would a filmmaker have any financial incentives to shoot here?

    This is the kind of thing where it gets passed and once it is rarely used, folks go back to the GA to argue for competitiveness to level the playing field with our neighbors. There is already a fierce competition among states for who can funnel the most amount of money into these films — and places like Michigan have begun to document the real lack of ROI for these taxpayer dollars. This kind of program may have serious paybacks in places that are already entertainment centers, but that is incredibly unlikely here. Especially since we are only co-signing a loan, not providing real funds.

  7. liberalgeek says:

    Cassandra – I agree that the tax break has been tried and largely does not succeed.

    The target audience is films that are relatively low-budget, indie films (think The Wrestler) that have money from already signed distribution deals (we have Mickey Rourke and Marissa Tomei signed, so will you pay us to distribute the film in Japan?) and loans made on the credit of the producer. The remainder is often funded by an investor at the end of a years-long search.

    We would co-sign for the loan (with proof of insurance and escrowed interest payments) on the condition that they work here. A director that needs $5M in order to start a film, cares not one whit about whether he gets tax breaks once it is finished.

    The only other state currently doing this model of film enticement is New Mexico. They have a more comprehensive offering, but if this bill doesn’t work, what have we lost?

    Kavips – Which tight resources are we expending for this bill?

  8. Geezer says:

    LG is right. The only thing the state puts up is state-owned property (think that warehouse land in Milford) as collateral on the loans. And the loans aren’t given to everyone who sticks his hand out; the standard laid out ensure that we’re dealing with people who know what they’re doing. Even if it doesn’t lure anyone here to shoot films, the risk is very low.

  9. cassandra m says:

    I’m not especially arguing the risk — except this loan as a gateway to full incentives. I just don’t get the business point. New Mexico has a full fledged program that includes all kinds of state help — ranging from these loans (where the state gets some participation on the deal in lieu of interest), training incentives for certain types of crew and tax incentives. A film that has a distribution deal is a valuable commodity already and for a smaller film to have that in advance of festival or other showings is a rare thing indeed. That is why places like Sundance and Toronto and other venues exist. So that distributors can get a look at a film and its audience reaction so they can buy. Even larger films from known quantities can have issues finding a distributor — remember the movie about Darwin that American distributors found too controversial for theaters — even though it had distribution everyplace else. And this is apparently going to get worse for awhile.

    One more thing. Tax credits have alot of ways that they can work and as a refund at the end of filming might be its most banal. Lots of tax credits are tradable and/or transferable — which is why they are often as good as cash. Because they’ve given the filmmaker more money in tax credit than he would owe on the tax bill. Lots of tax credits can be used as collateral for short(ish) term loans.

    So I’m still back to wondering where the competitive advantage is for Delaware to co-sign loans vs. all of our neighbors who are giving money away.

  10. jason330 says:

    In Kovach’s youtube video on this he explains that it is all about the timing. You can’t pay caterers and key grips with tax credits.

  11. Guys, let’s be honest. Gilligan ain’t running Kovach’s bill because Kovach is in a competitive district in a year when the House majority is at stake. It’s as simple as that.

    Ironically, it’s entirely possible that Kovach got the idea from a Democrat running for office this year. I remember when Ciro Poppiti, who is running for NCC Register of Wills, brought a proposal establishing a Delaware Film Office to DDO, probably at least a decade ago. Since Kovach currently represents the district where Poppiti resides, maybe he was the one to suggest the legislation.

    If the House runs the bill at all, it’ll be at the last minute with an understanding with Senate leadership already in place that they won’t run the bill over there.

    That’s just how the General Assembly rolls.

  12. jason330 says:

    Kovach won special because the Dems were sleeping after the big Obama/Markell wins. Is my memory right? Who is he running against this time?

  13. Geezer says:

    As Jason notes, it’s not “money,” which is why other states are so willing to give it away. And the slippery slope argument is the lamest in anyone’s arsenal.

  14. liberalgeek says:

    ES – if that is the case, I’ve got some bitch-slapping to do.

  15. jason330 says:

    Of course it is true.

  16. Joanne Christian says:

    Well LG, open your fist. Heck, when what 25 yrs. ago, and “Dead Poet’s Society” was filmed in Middletown and other parts, the crew was paid in 2 dollar bills just to see the income impact on small town Delaware–I’m on record for crazily saying let’s support some film industry here for years–but no, we’d rather strip earnings at racinos, slots, and steamboats (probably soon), then do anything of building earnings, sustaining development, growth or technology. Hey legislature–did ya know there’s a whole tech world behind that crazy box office smash of bazillions of dollars? Nobody says be have to be the backlot studio, or the filming location–but at least go after the tech end. OK back to my assigned looney pen, so you guys can poke sticks thru the grates at me.

  17. cassandra_m says:

    You can pay key grips (who you will likely import) and caterers (who are here) with the money you can raise from the multiple ways to use tax credits for alternative financing. This is fairly routine.

    But I am amused by the business of using non-productive state lands as collateral for these loans. That ought to sound familiar and ought to raise the hairs on your neck. On the other hand, no one went broke selling an American on a “free money” deal. Other than a taxpayer, that is.

    And no one can explain how this loan scheme makes Delaware more competitive for film-making, which is my question — not whether or not it is money. Of course it is. Which is why people are so interested in it. And alot of states were willing to give away a fair bit of it to lure or nurture a film industry. Alot of states are cutting this back (or thinking about it) due to budget constraints. Some of those states just never saw the return they expected.

    There is a huge bit of the world looking to subsidize and grow an entertainment industry. To be successful at it you have to offer something that gives you some advantage in the marketplace. I don’t get why we’d be interested in jumping into an already overwhelmed field (with loans, no less). It seems to me that you’d want to invest in those places where you are already at some competitive advantage — like alternative energy and research — rather than something you are *very late* to the game with.

    But the *it’s not money* business is a canard of the first order.

  18. liberalgeek says:

    You can import all of those people (although importing caterers is a losing proposition, I suspect). But they will be paying Delaware taxes on the work they do here in Delaware.

    As for the free money, this is not unlike the arrangement that we offer to private and charter schools, where they borrow the money, but we essentially cosign and use our good credit for them.

    Please read the bill and tell me where thet issue is, since I am obviously not seeing it.

  19. Yes, Jason, Kovach has a very credible challenger in Debra Heffernan, who is completing a term as President of the Brandywine School District Board. Here’s her bio:

    “Debra served as Co-President of the Bush School PTA for two years and proudly received the Bush School Volunteer of the Year Award in 2004. Debra is a Co-Founder and executive board member of the Brandywine Special Needs PTA (BSNPTA). Debra’s community volunteer efforts include organizations such as Girl Scouts and the Graylyn Crest Swim Team. Debra received her B.A. in Biology from the University of Delaware and her M.S. from Duke University in Environmental Toxicology. Debra is a member of the Brandywine School District Finance Committee and Co-Liaison with Olivia Johnson-Harris to the BSNPTA.”

    The only real negative is that, in the past, serving on a school board has been a one-way ticket to political Palookaville. Members get blamed for everything, but rarely credit for doing a thankless job.

    BTW, Kovach has not yet filed, although I have no reason to assume he won’t run for reelection.

  20. cassandra_m says:

    The *it’s not money* claim isn’t mine — Geezer made it above, so you’ll need to get him to tell you how that works from the bill.

  21. jason330 says:

    El Som,

    Well f*ck Kovachs and his malarky bill. Non-calling back bastard!! I retract everything nice I ever said about him, his bill, caterers, key grips, the whole movie industry and all of Hollywood (excluding Alec Baldwin, foley artists and Star Wars: Episode IV – A New Hope)

  22. Yep, probably just trying to tap into those Hollywood liberal $$’s and maybe get invited to Barbra Streisand’s house. I think he’s a commie.

  23. Geezer says:

    Cassandra: OK, so nobody bites. Where’s the loss to anybody in that? Meanwhile your “slippery slope” argument is just a dumb-ass objection to a bill that shouldn’t get anybody’s nose out of joint. Or are you objecting just because it has Republicans on it?

    You haven’t raised a legitimate objection yet.

    When I said “it’s not money,” I’m talking about your tax-credit scheme — you know, the one that hasn’t worked in most of the places they’re trying it. You obviously can’t get your head around anything but what somebody has pumped into it already.

  24. cassandra_m says:

    It is only a dumb-ass argument as long as no one comes back and asks for sweeteners to make it more competitive. People looking for government handouts don’t stop. Witness the Delaware Casino industry.

    And I have asked a question that none of you choose to wrap your mind around — where is the competitive advantage to this?

    But of course,you can’t answer that. Because there isn’t one. And nor are you accustomed to even thinking this way. I don’t much care about who proposed this thing, but I have been fairly consistently arguing *against* taxpayers ending up as the financiers of last resort in businesses that have no reason not to be able to compete in traditional capital markets. But don’t let that get in the way of your giddy rush to have Tom Cruise high five you at the Shop Rite.

  25. Geezer says:

    “Witness the Delaware Casino industry.”

    WTF? What have they asked for? More forms of gambling? And that’s a “handout” how?

    So there’s no competitive advantage. So what? You’re just talking out your ass here. There are several protections to ensure we don’t become “financiers of last resort.” And I couldn’t care less whether anyone films here or not. You’re the one with the bug up your ass, so I think you ought to be the one with more to go on than “I don’t trust other people.”

    Your paranoid fantasies are pretty ugly, as are the aspersions you keep casting. Grow up.

  26. cassandra_m says:

    The local casinos are asking for the state to restrict the possibility of local competition — this is a thing f great value to them and not much of one to taxpayers. This counts — by any stretch– as a subsidy.

    If there is no competitive advantage(and hey, why not just answer the question rather than making shit up here — there isn’t much here about “I don’t trust other people”. That is just you without being quite up to answering a pretty serious question.) that I ask what is the point of this exercise? Taxpayers footing part of the bill (or guaranteeing the funds) for entertainment products that can’t find funding otherwise is a stupid decision. The marketplace already told you what it thinks of that venture and it isn’t as though you are taking a *risk* on a gamechanging car battery or energy distribution system.

    But this is wasted on you apparently. Paranoid seems to equal being able to follow the money in a way that escapes you. Using taxpayer funds as venture or completion capital ought to be for something that has some competitive possibilities and needs a leg up in the marketplace. But getting in between people’s dreams of their 15 minutes is apparently a bad place to be.

  27. liberalgeek says:

    Competitive advantage – Dunno for sure, but I have been told that it is not unusual for movies to sit on a shelf for years waiting for the last 30%. Maybe that’s 100 films, maybe it’s 10. The person that I spoke to said that there were a number of films that would be on board by the end of the year. I have no way to confirm that, so do with it what you will. The point is that it doesn’t much matter. If no one takes us up on the offer, it doesn’t cost us anything, or risk anything.

    However, if it has the impact that the proponents suggest (based on NM), it will generate 4.9 million in income tax per project, and a total of 8.6 million with all revenue included. It is projected to create 1,820 jobs. And if the film did default on their loan (NM has yet to have a film default) it would have paid itself off by the end of the 3 year interval in increased revenue for the state.

  28. Bill Humphrey says:

    Somebody above said tax breaks (not the same as this bill) for movie production doesn’t work. I’m from Massachusetts. We have a lot of movies being filmed in Boston these days because of the state tax breaks. My dad sees a lot of them being filmed while he’s going to work. I saw “Knight & Day” yesterday, for example, and a lot of that was done in Boston a few months back. The tax breaks can work.

    But as somebody else pointed out, unless some movie is actually set in Delaware, there’s probably not much that can be done to encourage production in Delaware. Boston, while certainly not New York or LA, is still a fairly reasonable/logical place to set a movie, if it helps cut production costs. Delaware, as much as I love it, doesn’t offer that.

  29. I’m not sure tax breaks are enough to get a movie filmed in a state. You also need a population of trained movie professionals I think.

  30. Geezer says:

    Again, Cassandra, I couldn’t care less whether movies film here; I don’t even watch movies, let alone get starstruck by them. And if you want answers to these questions, you’re asking the wrong person. I’m not the one pushing this thing. I’m saying that it seems like an extremely low risk. The question is why you’re so bent out of shape about it. Once again, THERE IS NO MONEY TO FOLLOW. Why don’t you research the bill instead of spewing your ill-conceived fears?

  31. Hi all, Brian Sowards here, one of the architects of the bill. Cassandra has got a great point actually. Over 40 states offer “free money,” so why would veteran, Hollywood film makers be interested in this kind of funding?
    I can personally confirm that they are interested, very interested. The film financier who helped design the tax rebate model used by these states (and who has personally overseen $1 billion+ in film financing) called our incentive one of the smartest programs he has ever seen.
    Why?
    Because independently produced feature films have a very specific financing problem. Through established film finance channels the best projects can raise about 70% of their financing in the distribution marketplace. To close that last 30%, they have to give up equity to an investor, or use the tax rebate system.
    The problem with tax rebates is, states only give them to a film after completion. So films have been converting these tax rebates to upfront cash by getting loans against them (at about a 20% interest rate). This process is very risky. You can start a film with one set of rules about tax rebates, and by the time you apply the rules can change, negatively impacting your ability to pay back the loan (and your reputation with investors).
    For a certain category of veteran producers in Hollywood, the ability to eliminate uncertainty is very valuable. Those producers want a financing system that they can rely on to complete the financing of their film without having to give up equity.
    In fact, the veteran producers I am referring to have already offered over a dozen projects to Delaware in the hopes that this incentive program would pass. All of those movies were with A-list stars, none of whom will be mentioned (so I don’t get letters from their agents doing Google Alerts) — but think the stars from “Legally Blond,” “He’s Just Not that Into You,” and “Die Hard” and you are starting to get the idea.
    Those movies all grossed over $200M, and those same stars will act in these movies, with budgets of $12-$15M, targeted at winning Oscars. The producers design these films to easily pay back their budgets in the hopes that they are a hit. That’s why they want to keep the equity and eliminate uncertainty. They are playing for big numbers.
    The value of the loan guarantee approach has been proven in the market place. New Mexico has funded over $300 million worth of movies using it (including “The Curious Case of Benjamin Button”), successfully attracting over 15 movies. Now we can do the same.
    I’m happy to answer any questions you have.

  32. Hey Bill Humphrey, you bring up another point that I’d love to address.

    Delaware actually is a place of interest to Hollywood. “The Wrestler” – Oscar Winner 2009 – was set in Wilmington, DE (but shot in Philly), and even Adam Sandler’s recent movie “Funny People” has a lead character from Delaware. Why?

    Because storytellers love lost, forgotten, quirky little places. 🙂

    In all seriousness, Delaware’s landscape offers a great deal of diversity – from rural farms to metropolitan settings, and this has been one of our assets in attracting high-quality projects. I have a long, long list of projects that were *almost* shot in Delaware because the producers loved the setting.

    Now if we could just get the financial incentive in order so they could be made here. 🙂

    BTW, a movie was made here last year “Mayor Cupcake” – even without an incentive, thanks to a local producer’s passion for making films in Delaware. So private dollars can bring projects here too.

    And to Unstable Isotope’s point – Delaware’s close proximity to NYC, Philly and Baltimore make it easy for us to get the film crew we need here. Hey, they are doing this in Wyoming and it’s bringing crews out there! 🙂

  33. anon says:

    If their ability to produce films that contribute to Delaware’s economy is as good as their PR and lobbying – I’m in.

  34. Geezer says:

    “The Wrestler” was set in New Jersey. The final match was set in Wilmington, but not the rest of the movie.

  35. One last answer to Cassandra’s questions – the reason the marketplace doesn’t have a solution to this problem is that states have a financial interest in where a film is made, but a film typically does not.

    Until film incentives came along, most films were made in LA. Thanks to incentives, states are enjoying the promotion a film provides for their location, as well as the millions of dollars in tax revenue it generates.

    That promotion can increase tourism by 5% to 50%. Delaware has a $1 billion plus tourism industry, so you can imagine what kind of an impact that would have for us.

    Most states are essentially trading the tax revenue they generate for the promotion they receive. With the Delaware Film Initiative program, we get to keep the promotion AND the tax revenue.

  36. Geezer, thanks for the correction. Had our incentive program been in place, based on my other experiences with producers, I believe the whole movie would have been moved to Delaware.

  37. Geezer says:

    “…we get to keep the promotion AND the tax revenue.”

    Good thing, because I can’t imagine the promotion would be worth anything. “Come to Delaware for…oh, well, just for the hell of it.”

  38. Awwww. check out this beautiful film of Delaware’s New Castle County that Delaware Film Company did, I think it will change your mind:

    http://www.bringfilmtodelaware.com/delaware-film-company.html

    But if not, go to this blog:

    http://delsocial.blogspot.com/2010/06/videos-from-ignite-wilmington-3.html

    Delaware rocks!

  39. jason330 says:

    I guess the Delaware Memorial Bridge sort of looks like the Verrazano-Narrows Bridge if you squint at it.

  40. Geezer says:

    Um…good luck with that.

  41. I was going to carry a link over earlier today that claimed that some Zombie movie was filmed in Delmar in the eighties but I got sidetracked and now forget where I saw it. And I just read that Josh Charles .of the TV series The Good Wife, made his career start between Hairspray filmed in his hometown of Baltimore and Dead Poets Society filmed here.

    I just think that our state is as beautiful as any other and why not film here? Cass seems to be stuck on some simplistic meme of people wanting their 15 minutes. I would remind her that Geek is probably just joking there. This is not about meeting some hot stars in our Starbucks – it is about potentially putting new jobs and bucks into the mix.

  42. Was Fight Club filmed here or just conceived here?

  43. nemski says:

    No, Fight Club was filmed in the Carolinas (I believe).

  44. a.price says:

    it was supposed to have taken place here in the movie. The book doesnt specify a town.

  45. jason330 says:

    “Tyler Durden 420 Paper St. Wilmington, DE”