Posted on: Sunday, December 8, 2002
Act 221: Lingle must adjust, but carefully
One of the more ticklish problems that immediately faces the new Lingle administration is the administration of the state's high-technology tax incentive known as Act 221, particularly as it has been applied to the film industry.
As Advertiser business writer John Duchemin reported last week, controversy surrounding the movie industry's use of this law may jeopardize Hollywood's recent interest in filming here.
The film industry is one business that we want to encourage where possible. It is a clean, high-paying activity that has the valuable side benefit of attracting visitors with the beautiful backdrops we supply to feature films. It's up to lawmakers to ensure that a solid, accessible array of incentives exists to lure filmmakers.
Act 221 may or may not be one of those vehicles. The Legislature in good faith intended that law to attract businesses that would call Hawai'i home. Clearly that didn't happen with the application of the law to the surf movie "Blue Crush," a production that left the state after filming, taking with it $18 million in tax credits. Critics call it a one-shot deal at taxpayers' expense.
Some of those critics may not have seen "Blue Crush," which overcomes a cheesy plot with stunning aerial shots of surfers riding magnificent North Shore waves. We're not sure how you tell whether the Hawai'i Tourism Authority gets any more bang for its buck from $18 million of its advertising program.
Still, "Blue Crush" clearly didn't satisfy the intent of the law. Former Gov. Ben Cayetano called for amendments to Act 221, tightening the rules for films.
But we agree with the position adopted during the recent gubernatorial campaign by both Linda Lingle and Mazie Hirono, that tinkering with the act in its infancy sends the wrong message to high-tech companies thinking about taking advantage of it. No business wants to risk having the incentive withdrawn after it's committed to the move.
We suggest that Lingle's tax department be urged to do a better job of screening, up front, which businesses are committed to moving here, and denying the credit to those that are not.
But that's not enough. The film producers who are turned down for Act 221 credits must be made aware of other incentives — rebates on 4 percent of production costs and on 100 percent of the transient accommodations tax. And lawmakers must continue to look for other ways to attract this desirable industry.
Finally, it's not acceptable that the tax department blames inadequate staffing and misplaced applications for its delay in supplying interested businesses with "comfort rulings," indicating whether or not they would qualify for tax credits. A better sense of priority will dictate that more than two staffers are assigned to this important task.
Making Hawai'i competitive in attracting new enterprises by promoting Act 221 and other incentives must be one of Lingle's first orders of business.
