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The Honolulu Advertiser
Posted on: Monday, March 8, 2010

$16.2M in Hawaii film, TV tax credits created 4,000-plus jobs

By Sean Hao
Advertiser Staff Writer

Hawaii news photo - The Honolulu Advertiser
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State tax breaks helped finance a bank commercial, a Merrie Monarch Festival television special and music videos produced by a Honolulu Symphony Orchestra affiliate.

Twenty-two film and television projects are expected to get up to 20 percent credit on state taxes for the roughly $120 million they spent last year, according to information obtained via a Freedom of Information Act request.

The biggest is the ABC hit show "Lost," which spent $78 million last year.

The credits given to film and TV producers resulted in an estimated $16.2 million in forgone tax revenues for the state and the creation of more than 4,000 jobs.

Lawmakers boosted the production credit from 4 percent to 15 percent on O'ahu and 20 percent on the Neighbor Islands in 2006 to attract more film and television productions to Hawai'i and compete more effectively against states that offer similar incentives. Hawai'i also offers a separate 100-percent tax credit for film and TV investors.

At the same time, the state opened the credits up to TV commercials by lowering the minimum budget for qualifying productions to $200,000. Productions that sought tax credits last year include a Bank of Hawaii commercial and the TV broadcast of the annual Merrie Monarch Festival.

Film and TV industry proponents contend the economic benefits from those productions more than offset the loss in tax revenue. The credits keep Hawai'i competitive with other communities that are vying for film and TV productions, said Georja Skinner, administrator of the state Department of Business, Economic Development and Tourism's Creative Industries Division.

The credits also boost local production companies involved in making smaller-scale independent films, commercials and TV productions, she said.

"What you're seeing is that it's not only benefiting a production outside of Hawai'i but it's also benefiting independent productions here," Skinner said. "It's really helping us to strengthen our local independent community as well as attract this important business from offshore."

Critics contend the credits subsidize activity that would have occurred without credits. Local TV commercials and that shows such as the Merrie Monarch Festival would occur without the credits, said Lowell Kalapa, head of the Tax Foundation of Hawaii.

"That's stuff that would have been done anyway," he said. "Now, you're just subsidizing that cost."


Just how many jobs were created and how much each production got in tax credits is being withheld by the state Department of Business, Economic Development and Tourism, which administers the tax credit program.

However, productions seeking the credits hired 3,662 residents and 613 non-residents overall (figures based on production registration forms). The state does not track how many of those jobs were permanent, though many people in the industry are typically employed on a project-by-project basis.

ABC's "Lost" alone created 1,305 jobs last year, according to Erin Felentzer, an ABC spokeswoman.

About half — $8 million — of the projected production tax credit claims likely are attributable to the "Lost" TV show. That's because $8 million is the most that any one production company can receive in one year. That's also a figure that's below the show's $78 million budget in 2009. About $30 million of that went to salaries.

That's the first time "Lost" has disclosed details about the show's budget. Overall, the show spent more than $400 million in the Islands through its first five seasons, according to the state.

Another production that sought the state tax credits last year was the upcoming sci-fi feature film "Predators." The remaining productions consisted of 11 TV commercials, episodes for three reality TV shows, two independent films and a TV special.

That TV special was the Merrie Monarch Festival, which has been held in Hilo since the mid-1960s.

Ruben Carillo, a partner in 4 Miles LLC, which produced the TV special, said the festival attracted its largest audience ever in part because of the credits.

However, the Tax Foundation's Kalapa said the Merrie Monarch Festival likely would be aired on TV  even without a state subsidy.

"It's money that has been spent before and that's going to be spent again this year because it has an audience," he said.


Tax credits also were sought in conjunction with the production of TV commercials for Bank of Hawaii and to produce music videos for a company launched by the Honolulu Symphony.

Bank of Hawaii spokes­man Stafford Kiguchi said the cost savings generated by production tax credits allowed the bank to shoot one more commercial than it would have without the credits. That commercial allowed nine full-time workers and three high school interns to expand their skills because it required added training to include the production's complex animation, Kiguchi added.

Overall, film and TV production spending last year totalled an estimated

$135.5 million — a figure that includes productions that didn't seek or qualify for production tax credits, according to the state.

That figure is expected to climb to $180 million this year when five feature films and at least one TV show pilot are expected to be filmed locally.

Major motion pictures expected to film in Hawai'i this year are:

• "Hereafter," a supernatural thriller directed by Clint Eastwood.

• "The Descendants," starring George Clooney.

• "Heart of a Soul Surfer," based on a book by local surfer Bethany Hamilton.

• "Battleship," based on the Milton Bradley board game.

• "Pirates of the Car­ibbean: On Stranger Tides."

Additionally, CBS is shooting a pilot that could revive the "Hawaii Five-0" TV series and it's speculated that NBC and ABC could shoot pilots as well.

It's hoped that at least one potential pilot will evolve into an ongoing TV series that can help offset the loss of "Lost," which is in its final season.

"It is a big impact," said the state's Skinner. "That's why we're hoping 'Five-O' or one of the other series will go.

"There's no question that if you have a series it's a tremendous shot in the arm."

Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.

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