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The Honolulu Advertiser
Posted on: Thursday, January 30, 2003

Infrastructure buildup urged

 •  Hear audio excerpts of John Duchemin's interview with producer Chris Lee. Real player required.
 •  Why 40-something kama'aina are returning to Hawai'i
 •  A project he plans for the UH film school
 •  UH students' skills and the islands' work ethic

By John Duchemin
Advertiser Staff Writer

Hollywood is a growing presence in Hawai'i. A recent spate of big-budget movies filmed here has excited local talk of creating a viable motion-picture industry in the Islands.

Chris Lee, founding co-director of the Cinematic and Digital Arts Program at the University of Hawai'i, is a longtime Hollywood producer whose films include the Julia Roberts' hit "My Best Friend's Wedding."

Deborah Booker • The Honolulu Advertiser

But the presence of movie productions including Warner Bros.' "The Big Bounce," Universal Studios' "Blue Crush," John Woo's "Windtalkers" and the Bruce Willis vehicle "Tears of the Sun" raises questions about Hawai'i's long-term suitability as a site for movies. Can the state build a lasting movie industry without drastic changes? Can Hawai'i compete with other "exotic" locations, or does it need better tax incentives?

Veteran film producer Chris Lee, a Hawai'i native, is one of the few locals with the executive Hollywood credentials to answer these questions from an insider's perspective. Now co-director of the newly minted University of Hawai'i Cinematic and Digital Arts Program — the "film school" — the 46-year-old Lee is a longtime movie producer whose titles include "Jerry Maguire," "My Best Friend's Wedding," and 2002 summer movie "Ballistic: Ecks vs. Sever."

In an interview with The Advertiser, Lee discussed Hawai'i's assets and weaknesses as a movie location, his plans for the film school, and ways to nurture a Hawai'i entertainment media industry.

Lee also weighed in on Hollywood's use of Act 221, the controversial state tax incentive that has been used by investors in several movies to claim millions of dollars in tax credits. Lee's take: That's probably not the intended use of the act, which was created to help high-tech companies.

Q. What are Hawai'i's strengths and weaknesses in attracting films here?

A. After 9/11, business definitely has picked up because people don't want to be going overseas. The insurance issues outweigh the costs of shooting here. If you're going to be shooting something in an exotic location, then Hawai'i is the place — it's definitely in the United States, people feel comfortable here, they can bring their families...

But I think we can make the effect more permanent by building our internal infrastructure to support the film industry. Which is to say, we have great crews, but they're primarily in the areas of construction and electricians and greensmen. We don't have the camera crews, the sound crews, we don't have the digital crews.

Q. How does our infrastructure compare with other places?

A. When I worked in Vancouver (producing summer 2002 movie "Ballistic: Ecks vs. Sever), I had 500 Canadians on the payroll and only 10 Americans. And I was one of 25 shows in town at that time, and that town isn't much bigger than this town.

Vancouver, 15 to 20 years ago, didn't have anyone. And then (Hollywood TV and film producer) Stephen Cannell went up there and said, "I'm going to start shooting '21 Jump Street,'" and took over a warehouse. Now there are four studios.

But when John Woo came to Hawai'i to film "Windtalkers," they had to bring in 300 people — and John films a long time, so ultimately, per diem pay for that many people starts to add up. The issue is, you can't hire 500 people here and only bring in 10 from the Mainland.

Q. The movie industry's use of Act 221 investment credits has drawn both criticism from the technology industry and legislative calls for reform of the Act. Should Act 221 be modified to restrict movies' use of it?

A. They should leave Act 221 alone, but simply just apply it as written. As I read it, there's some certain basic questions that have to be answered before you can be granted these rulings. Is there equity in the company or the product? Is there real estate, payroll, infrastructure that's intended to remain here? I think that's pretty simple.

I understand why these amendments are being suggested, but I don't think they're necessary, simply because the law already covers the issues of abuse. They even have sections on recapturing the credits.

I just think the law needs to be interpreted properly. As I read the definition of what constitutes a technology business — obviously, Square USA (the now-defunct Honolulu company that produced Lee's computer-animated movie "Final Fantasy: The Spirits Within") is an excellent example of the kind of company that transcends technology and entertainment.

Q. So is Act 221 useful for drawing movies, and is it an appropriate method by which to do so?

A. Well, in the first place, Universal's on the record saying they didn't come (to film surf movie "Blue Crush," whose investors received millions of dollars in Act 221 tax credits) because of the money. You have to look at who benefited directly from that deal. Yes, you could say Universal did, but they were coming here anyway.

To get to the question, should Act 221 be used in the way it's been used in these two instances (by investors in "Blue Crush" and Warner Bros.' "The Big Bounce")? It seems to me that, as I read the law, this is not the intention of the law. And again, I think it's an application issue, not about amending it; it's really just about applying it as written.

Q. But could the tax credit actually help attract movies, if investors are regularly able to claim millions of dollars of tax credits with each production?

A. I'd come, too, if I could get that kind of money. Sure.

But I think that you have to look at the cost and benefits of it. Of course, that's one of the great mysteries of Act 221. Nobody really knows what the real figures are. There's an unfortunate lack of facts.

But I do think the tax department should give a closer look at what these deals are, and just read the law, or have a better understanding of the law.

Q. What about the state's other tax incentives for drawing movies. Are they competitive?

A. Are we competitive? No.

We're at a disadvantage to begin with. When I was running a studio, the last place you'd want to go shoot was Hawai'i. It's just inherently more expensive for television and for film. That's because of the distance, and the crew issues.

But there are creative issues that tend to outweigh the financial ones, and frequently, the main reason movies have come here is that big stars, big directors have been the ones to say, "I want to shoot in Hawai'i," and then the studios don't have a choice. But they can make it surgical — they'll say, "OK, you can go there for two weeks."

So I don't think we'll ever have a level playing field. But you can't beat what we have to offer in terms of location. I do think you'll see more shows coming here, because even though it's more expensive, it's not horribly so.

Still, the bottom line is very important. It does become an issue.

Q. What should be done to improve our incentives?

A. I absolutely think there are more ecumenical tax credits that could be put in place, so that everybody could take advantage of them, so that there's not even a process of having to go to attorneys and be approved.

We already have a 4 percent production tax credit and a 7 percent transient accommodations tax rebate, but it's got this weird structure where you have to put a Hawaiian word in your title to get 100 percent of it. That's counterintuitive to me. We want people to come here and shoot Hawai'i not as Hawai'i, but as anywhere in the world — but on the other hand we're saying they have to shoot Hawai'i as Hawai'i.

At the least, I'd look at that law and take out that provision. I think that provision was driven by the tourism industry. But it's irrelevant if a movie took place in Hawai'i or not. People will still want to go see the place that "George of the Jungle" or "Jurassic Park" was shot. Movies automatically create a multiplier effect. You don't have to gild the lily, especially in a way that retards the ability of films to come here.

I also think the state should adopt a 22 percent employment tax credit on the first $25,000 of a (movie industry) employee's payroll. That's sort of the benchmark held by a number of states. A bill was submitted to the Legislature last year, but it didn't go anywhere; it's being re-submitted. That's the kind of tax credit situation that everybody can apply; any production can add it to their budgeting & computer system.

Q. What's the purpose of the film school, and what are your plans for it?

A. My whole goal in doing the school is to create a new industry for the state. I want to see development of software and 3-D animation continue to grow here.

The film industry here is limited by the fact that this is Hawai'i — but not for the traditional reasons. People always say it's very expensive to film here, which is true — we don't have the crews, don't have a lab; we're a long way from the Mainland. But the real reason why they don't come here is the beauty of our landscape.

No one comes here to duplicate Washington D.C. or L.A. or San Francisco or New York City. They go to Canada for that. But digital filmmaking allows you to demolish that notion of location and place and time.

That was one of the geniuses of Square. They made this movie set in outer space and in a devastated New York City, and they made it in Hawai'i. And that's what I think of when I talk about building an industry.

What I say about film is, great, let's do everything we can to build traditional filmmaking in the state. But the technology is moving beyond traditional filmmaking. So much of film these days is driven by digital technology. You can't tell "Lord of the Rings," or "Harry Potter," or "The Ring," or "Cast Away" without digital technology.

Now, you can have 10 programmers in a room come up with something like (hit video game) Grand Theft Auto and make hundreds of millions of dollars. That's an entirely different employment paradigm from the more transient, surgical nature of the film industry, which will come in, film for three weeks and get out.

And I know we have the skill sets to really be a player in this area. You don't have to be as massive as Square; you don't need a $200 million investment. You can have a firm, with 10 to 20 employees, and they could make a huge impact by creating a killer application or a useful piece of software.

Here at UH, the largest major is computer sciences — there are more than 800 students majoring in that — and that number could swell. And a lot of them really don't want to use computers just to crunch numbers or be accountants. They want to use programming to be artistic.

I know we could build that industry here, but UH has to be the anchor for it. It's the same way Stanford is the anchor for Silicon Valley. It has to be the heart of all of this.