State hopes to
woo film industry

A bill would grant
producers tax credits

By Tim Ryan
Star-Bulletin

Hawaii will have more "Lights!" More "Cameras!" and more "Action!" if the state's elected leaders have their way.

A bill that offers major tax exemptions to lure television and film productions is being pushed by Gov. Ben Cayetano, who has enlisted the support of Senate President Norman Mizuguchi and House Speaker Joe Souki.

In a quickly arranged meeting at Cayetano's office last week, the governor, Mizuguchi, Souki and Seiji F. Naya, director of the Department of Business Economic Development & Tourism, agreed it's time for the state to do more to entice film and television production.

"But this (Senate Bill 1951) is just part of a bigger process," Cayetano said in an interview. Eventually, "There will be a package of incentives besides tax exemptions, including, we hope, lower rates from the airlines, hotels and the unions."

In part, the Senate bill would grant credits up to 4 percent for general excise tax expenditures such as renting lighting equipment, trucking services and general supplies or goods, and up to 6 percent for the cost of hotel and other accommodations.

The percentage will depend on the benefits that the state perceives it will get from the production in terms of, for example, promotion and the number of people employed.

Cayetano said "time is of the essence" in getting the bill passed because of the number of productions scheduled to film here this year - such as a possible "Hawaii Five-0" series - or that are considering Hawaii as a location. He emphasized that tax exemptions would not hurt state coffers because "it's a tax credit against revenues we don't have."

"While all the other tax credits have been set aside already (for specific needs), with this bill we aren't going to miss something because we don't have it yet," Cayetano said.

In a letter to the House Committee on Economic Development and Business Concerns, Naya emphasized that point, saying the bill's financial incentives "will not cause the state to lose existing tax revenues since these productions may not choose to come to Hawaii at all without financial incentive.

"On the contrary, due to the increase in employment (from film productions), the state would continue to gain personal income tax revenue," he wrote.

Sixteen other states and Puerto Rico offer tax exemptions or rebates to the film and television industry as enticements. New York, Louisiana, North Carolina and Florida have seen a jump in film and television production since incentives were created, according to their film offices.

What does Hawaii offer production companies besides beautiful scenery and ideal weather?

The Hawaii Film Studio at Diamond Head rents at low rates, and the state does not charge for film permits. The state once had some tax exemptions, but the law was repealed several years ago.

Cayetano is optimistic about the chances of Senate Bill 1951 passing because of the support from Mizuguchi and Souki. And if it's approved this session, the bill could be implemented immediately, the governor said.

This legislation wasn't hatched in Cayetano's fifth-floor office at the State Capitol, but rather 1,000 feet up on Hawaii Loa Ridge at the home of television producer Al Masini and his wife, April. They have been considering producing a TV show in Hawaii, but wanted to find out how competitive Hawaii is in seeking productions by using financial incentives.

They put together a 38-page analysis detailing what other locations offer, the general cost of producing a television show, and suggestions for Hawaii to increase production revenues.

Then they met with Naya, who was so impressed with the simplicity and win-win aspect of their plan that he requested a meeting with the governor. The Masinis met with Cayetano, Joe Blanco, the governor's executive assistant, DBEDT deputy director Brad Mossman and Hawaii Film Office manager Georgette Deemer.

"Here's this guy who has solid gold credentials after producing shows like 'Lifestyles of the Rich and Famous,' 'Solid Gold' and 'Entertainment Tonight,'" Cayetano said. "He had something to say and offered the state his help without asking for a thing. What he said made sense."

Cayetano acknowledged that neither he nor his executive staff knew what other locations were doing to attract productions, or how risky it was to produce a television show.

"We just took it for granted that ... production was going to (come) here because Hawaii had a new film studio and a state film office. (The Masinis) convinced us that more had to be done."

For maximum exposure, Masini explained, there is "no substitute" for the weekly repetition of a nighttime television series. An average hourlong episode would cost the producers about $1.5 million an episode. A network would pay about $900,000 of that so producers have to make up the difference through other means, including state and city financial incentives.

In such a show, "The subtle, yet strong message (would be) that Hawaii is in and the place to be and be seen, and if you don't vacation in Hawaii, if you haven't become a part of the glamour and the lifestyle, you've missed out," Masini told the group.

That hour show would advertise the state for 52 minutes, he said. And the advertising value of an average prime time show on NBC is $1.9 million an episode, or as much as $6.5 million on a show as popular as "ER," he said.

"Hawaii can't afford that," he said. "A television show is the way to go." He added: "Hawaii has to do something to level the playing field because the state is remote, cost of living is high and production costs (are as much as 25 percent) higher than on the mainland."

Said Blanco, "After that meeting we clearly understood that Hawaii is at a real disadvantage without these incentives."

"Al wasn't trying to sell us a thing," Cayetano said. "He never asked us to do anything for him. He wants to help the industry and offer his expertise."

Masini has volunteered to use his contacts in the entertainment industry to open doors for Hawaii. And Cayetano has vowed to help Masini.

"If he ever finds a prospect where there was real potential to (get a production here)... I would fly (to Los Angeles) with him ... to emphasize we want to make films happen in Hawaii," the governor said. "If (New York's) Mayor (Rudolph) Giuliani can dress up as a drag queen, then I certainly can travel to L.A."

What other states are offering

NORTH CAROLINA

Ranks No. 1 in the nation for film industry growth. In 1980, it had annual film and TV production revenues of $65 million. By 1993, revenues had grown to $504.3 million. Its incentives:

Tax break: Motion picture production companies are entitled to a cap of 1 percent on sales and use taxes.
State has right-to-work status (you need not belong to the union).
More studio complexes, production facilities and sound stages than any state but California.
No standing fees or permits.
Estimated production cost savings are 20-25 percent.
Location scouts get to use state helicopters and airplanes.

SOUTH CAROLINA

Production companies are exempt from sales and use taxes.
A right-to-work state.
In most cases, no location permits needed.

LOUISIANA

There are three television series filmed in New Orleans - "Orleans," "The Big Easy" and "13 Bourbon Street." The city does $3.8 billion annually in tourism. Louisiana's incentives:

Full rebate of sales and use taxes. The amount rebated would be the 3 percent state sales and use taxes assessed on hotel rooms, food, equipment or rental vehicles or purchases of everything except, in most instances, gasoline.
A right-to-work state.
No state fees or permits required.
Except for workman's compensation, no insurance requirements for motion picture productions.

NEW YORK

Since Mayor Rudolph Giuliani took office in 1993, film and TV expenditures have increased to $2.2 billion from $1.43 billion. In 1996, 201 films were made in the city. Its incentives:

Production companies don't have to pay city sales taxes.
If you move a company to New York, there are incentives like special tax structures and breaks on utility costs.
In some cases, use of city police for crowd and traffic control is free.




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