BY MALIA ZIMMERMAN – Motion picture industry giants Relativity Media LLC and Shangri-La Industries, offering to construct “the most environmentally friendly stages in existence” on Maui and Oahu in exchange for a boost in motion picture tax credits, recruited a former President to push for the legislation.
Bill Clinton, who has financial ties to both companies and other motion picture industry executives, sent a letter this week to lawmakers asking them to support HB 1551 and SB 1550.
“The Shangri-La/Relativity commitment to build the most environmentally friendly stages in existence, coupled with the economic benefits of this bill and Hawaii’s timeless appeal, will make Hawaii the most attractive place in the world to shoot a film,” Clinton writes.
The legislation would cost the state an estimated $46.3 million in lost revenues, according to the state tax department, by boosting the film production tax credit on Oahu by 35 percent (from 15 percent) and 40 percent (from 20 percent) on the neighbor islands.
Additional tax credits would be driven by new infrastructure and productions utilizing animated special effects, while the companies could benefit from hotel room tax exemptions, otherwise known as the Transit Accommodation Tax, if their productions require more than one month of filming. They could also rack up rebates if they offer training programs.
Relativity CEO Ryan Kavanaugh and Clinton pledge big gains for the state of Hawaii if the bill passes, estimating television productions and 20 additional movies will be filmed here.
When industry executives pulled up to the Capitol in black SUVs yesterday, they briefly sent Democratic lawmakers, who thought Clinton was there to testify in person, into a tizzy.
But Kavanaugh is a heavyweight in his own right. Relativity Media reported $2 billion in revenue last year, with adjusted earnings four to five times greater than in 2009. “Relativity has established itself as the leading independent financier and producer of the highest profile, commercial films with A-list talent,” its site says.
Kavanaugh’s company, which produced top-grossing movies such as The Fighter at $320 million and Robin Hood at $311 million, often works in partnerships with industry giants Lionsgate Entertainment, Sony Pictures and Universal Studios.
Backed by private equity investor Elliott Management, the Relativity CEO said last year that it is preparing for a possible public offering of stock; It also purchased the distribution and marketing arm of Overture Films from Liberty Media Corp., last July.
Industry reports say the film company plans to release 30 movies this year, including 15 to 18 movies of its own and another eight to 12 with NBC’s Universal Pictures and Sony Pictures. One of the movies announced is a feature film based on Michael Drosnin’s The Bible Code to be released in 2012. The studio wants to release the film sometime in 2012.
As to Clinton, he has good reason to become one of the state’s most famous informal lobbyists. Celebrity web sites report Clinton may become a film star himself beginning with a cameo appearance in the upcoming Relativity Media comedy The Hangover: Part 2.
Besides being featured on the big screen, the William Jefferson Clinton Foundation has been a beneficiary of multi-million contributions from motion picture giants, including Shangri-La founder Steve Bing, who contributed between $10 million and $25 million. Clinton serves on the Shangri-La advisory board.
Relativity partner Lionsgate also has a connection to Clinton. Its founder, Frank Giustra, a Canadian business executive who has investments in the mining and motion picture industries, donated $30.1 million to the Clinton Foundation. He also co-chaired the 2006 Global Leadership Awards dinner in New York when Clinton was honored.
Another financial tie to a Relativity partner: The Center for Responsive Politics reports in 1999 that Clinton’s legal defense fund was partially financed by Universal Studios Chairman Emeritus Lew R. Wasserman. Deemed a ‘titan of Hollywood,’ and the ‘godfather of the film industry,’ Wasserman was honored for promoting civil rights before he died in 2002.
Lowell Kalapa, president of the Tax Foundation of Hawaii, isn’t shocked or awed by the film giants’ proposals or celebrity endorsers.
He said many national studies show that film tax credits don’t pay for themselves, rather a handful of people “walk off with the bacon.”
These tax credits would benefit a small number, while taking money from important educational and social service programs: “The cost is really born by residents,” he said. “Meanwhile the rich get richer.”
While the film industry claims to provide jobs, Kalapa said they are just temporary jobs that don’t have a longer term gain for Hawaii’s job market or its economy. “This is not a beneficial mechanism to attract economic development,” he said. “Instead of getting ga-ga and awed because stars are involved, we need to step back and see what this proposal means for Hawaii’s resources.”
The key to attracting more business to Hawaii – even film business – is not subsidies, rather it is a stronger business climate that is more friendly for all businesses, not just those who get subsidies and rebates, and a tax burden that is shared equally by all businesses.
HB 1551, introduced by Reps. Tom Brower, Angus McKelvey and Keith Agaran, was heard in the ERB committee on February 10, and decision making was postponed until Tuesday, February 15.
Introduced by Senate Vice President Donna Mercado Kim, the Senate companion bill will be heard by EDT and TSM at 1:30PM in on February 14 at 1:30 p.m. in conference room 016.