As WW reported today, Gov. John Kitzhaber wants to extend and expand a subsidy for film and video production for companies that shoot in Oregon. The governor is proposing to bump the existing credit, which costs $7.5 million annually up to $12.5 million per year.
The way the credit works is that taxpayers buy credits—at a discount of five to 10 percent from face value—and use them to offset Oregon income tax liabilities. Critics, such as Chuck Sheketoff of the Oregon Center for Public Policy say that discount is unnecessary and leaves on the table five to 10 cents of every dollar spent on the program. That could mean $1.25 million annually if Kitzhaber's bill passes, or enough to cover the costs of salary and benefits for more than a dozen school teachers.
Here are the lists of those fortunate taxpayers who not only made enough to have considerable tax liabilities in 2009 [PDF] and 2010 [PDF] but also, thanks to the film credit program, got a five to 10 percent discount on their tax bills.
For those who don't have time to scan the lists, the biggest purchaser of the credits during the past two years was Ryan Finley, of the Internet firm Survey Monkey. Records show he purchased $3.785 million worth of credits for $3.6 million, thus getting a $185,000 discount on his taxes, in addition to earning an admirably large amount of money.
At least one lawmaker, Rep. Ben Cannon (D-Southeast Portland) agrees with critics that if the program is going to continue, it should be converted from its present form of discounted credits into a direct expenditure. That way, the five to 10 percent discount would disappear.
Here's a memo Cannon sent to the budget-writing Ways and Means Committee yesterday: (Note: there is confusion over the amount of subsidy Kitzahaber wants. House Bill 2167, which has the governor's name on it, calls for a $20 million annual subsidy. Cannon puts the number at $17.5 million annually and Tim Raphael, Kitzhaber's spokesman, says the right number is the one in the governor's budget, $12.5 million).
Sen. Richard Devlin, Rep. Dennis Richardson, and Rep. Peter Buckley
Co-Chairs of the Ways and Means Committee
Oregon State Legislature
900 Court Street NE
Salem, OR 97301
Re: Film and Television Tax Credit
I am writing to urge you to include the Film and Television Subsidy within your co-chairs budget as a direct expenditure rather than a tax credit. At the subsidy level proposed by the Governor for 2011-2013, cutting out the middleman in this way would free up at least $1.75 million in General Fund.
As you know, the Oregon Production Investment Fund reimburses qualifying filmmakers for a portion of their expenses related to film and television production in Oregon. Uniquely, the Fund is capitalized through an annual fire sale of discounted Oregon income tax credits. As a result, in 2009-2011, the issuance of $15 million in tax credits produced just $13.8 million for the Fund. The difference between the two figures -- $1.2 million – represented unearned, guaranteed income for several hundred Oregonians who made a contribution to the Fund in July and were reimbursed the following year with a tax credit that was larger than their contribution by between 5.3 and 11.1 percent.
The Governor has proposed increasing the subsidy to $35 million for 2011-2013. Appropriating these funds directly rather than selling the tax credit would reduce the General Fund impact of this program by at least $1.75 million. Administrative overhead (processing grant applications and reimbursing filmmakers) for the Film and Video Office would be unchanged.
My purpose in writing is not to question whether or not Oregon should be subsidizing the film and television industry, although this is certainly an important issue for the Legislature to carefully consider. Rather, I merely mean to suggest that we should make this subsidy more efficient by eliminating the costly and cumbersome business of selling tax credits at a discount in order to capitalize the fund.
The film and television industry will argue that the current structure of the program provides greater certainty that funding will continue to be in place to support ongoing film projects in Oregon. I would suggest that our schools, health care providers, and public safety system would love to enjoy a similar level of certainty with respect to continued funding, but they are required to go before the Ways and Means Committee each biennium to make their case. Oregon Film should do the same. Moreover, any uncertainty created by the current sunset (1/1/2012) has not appeared to disrupt Oregon Film’s ability to put the subsidy to work in 2010-2011.
Please include funding for the Oregon Production Investment Fund within your co-chair’s budget. If this moves forward, we could allow the current tax credit to sunset.
Thank you for your consideration,