Michigan film industry rises and falls as tax credits come and go

The new movie Oz: The Great and Powerful comes out next spring.

But this land of Oz was shot in Michigan.

Oz — directed by Sam Raimi, starring James Franco, and distributed by Disney — was the high-water mark of an ambitious program to convert some of the state’s abandoned auto plants into film studios. State taxpayers funded 42 percent of the filming costs at Michigan Motion Picture Studios in Pontiac, outside Detroit, in hopes it and other productions would establish a new industry in the state.

But the studio has largely been idle. Michigan’s Republican Governor Rick Snyder vowed to cut back the state’s film subsidy program, and Hollywood studios began taking their business elsewhere. Now Michigan’s pension fund, which guaranteed bonds to finance the struggling movie studio, is left holding the bag.

State governments across the country are trying to lure Hollywood dollars resulting in steep inter-state bidding wars for big film productions.

“The definition of mental illness in Hollywood is making a large-budget motion picture without some kind of tax incentives, which we call euphemistically soft money,” said Peter Dekom, a prominent Hollywood entertainment attorney.

He should know; he’s helped states like New Mexico build its film incentive program. On average, he says, major movies look to incentives to finance about 13 percent of their budgets.

It’s easy to inveigh against tax breaks as corporate welfare, but Dekom insists there’s a right way and a wrong way to foster the film business.

The Michigan program, he says, tried to build a film industry overnight.

“When you don’t have local crews and you don’t have local infrastructure, all you’re doing is incenting people from other jurisdictions to come and take advantage of your credits, and then leave,” he said. “It’s kind of like heroin addiction without the benefits.”

A well-designed program, he says, builds opportunities for local crews who put money back into the economy.

The United States is one of the few industrialized nations that does not have a strong national incentive program to back its native film industry, and Dekon doesn’t see that changing.

“Right now, you’re not going to see anything from the federal government. It’s just not happening,” he said.