29 Apr WTN Interview: Sen. Ted Kanavas champions Wisconsin Film Tax Credit – Part 1
Wisconsin State Sen. Ted Kanavas (R-Brookfield) last year championed the Wisconsin Film Tax Credit now under consideration for elimination in the biennial budget now winding its way through the state’s Joint Committee on Finance. Kanavas sat down with Wisconsin Technology Network recently to discuss his views on the tax credit, what it means for the birth of new industry in Wisconsin and the political climate surrounding this now-controversial provision. In a second installment next week, Kanavas will discuss his thoughts on innovation and Wisconsin’s information technology industry. Before elected to the State Senate in 2001, Kanavas worked for 12 years in the software industry and now works in the industry with Broofield’s HarrisData.
Mike Klein: (WTN News) Please provide background on the Wisconsin Film Tax Credit and economic incentives for the film and television industry. How did they come about, and what the status today in terms of the Governor’s proposed budget?
Senator Ted Kanavas: The film tax credit came about by a series of people getting together to describe to each other how we could create an industry in Wisconsin, which would attract and retain our most creative people. George Tzougros, executive director of Wisconsin Art’s Board and Film Wisconsin’s Executive Director Scott Robbe, and me, as well as a few others, came together and described a film tax credit that would allow companies to use Wisconsin resources to build media content. My interest in this initiative was a result of the work I had done for the initial investment tax credits in the software industry and biotech industries. Basically it is the other side of the coin. These industries are really all about intellectual property
WTN News: So, this goes beyond just Hollywood coming to Wisconsin and getting a tax credit. Is there is an IT or digital media creation component to this tax credit?
Kanavas: That’s what this industry is! I think of Hollywood as an interesting side bar in this whole industry in Wisconsin. It’s really not about Hollywood, it’s about what’s happening right here at home. Whether it’s video game production, film or TV, or having a full-blown studio getting created out of a transformed World War II facility. We have had a transformative process happening in Wisconsin for quite some time. This tax credit was intended to be the yeast necessary to grow our media creation industry and help build it into something a lot more powerful and broader. We’re excited about this success we had in the first year.
WTN News: Is there a lack of perception on the impact of this tax credit for Wisconsin’s media creation and IT industry that is just starting to be realized?
Kanavas: Absolutely! If you look at what has happened already, we have had basically eight feature films, a dozen TV shows, a TV pilot, and TV commercials that have integrated with different curriculum at different schools. What’s happening is that all of this content is being produced and what happens with that content. That content is stored, that content is distributed, and that content is edited. All of these things are digital assets that are being shared and worked on by multiple firms throughout the state of Wisconsin. That’s the start of an industry. The pre-production, and the post-production, with all of these different pieces coming together; it’s fascinating to watch how fast this happens.
What I think is misunderstood by many people is that this is a project industry. There are these arguments from Wisconsin Department of Commerce (Commerce) and other people asking if these are permanent jobs. These are permanent careers. That’s like saying that a roofer isn’t a roofer if he is not putting a roof on that particular day. It’s a project business. It’s one at a time. And we have to be savvy enough to understand that this is a complete integration between IT, creativity, and we need to let the industry blossom.
WTN News: Specifically, what are the incentives for the media creation industry versus Hollywood?
Kanavas: We need to reform the existing bill so we can be able to take the wage credit and apply to in-state wages versus out of state wages. That’s been one of the things that Commerce has argued. We need these changes in order to make this more Wisconsin-centric. I think that’s probably true, and I would encourage that reform as we move forward. I would also encourage that we create a system to monitor capital production credits so we can get more bang on multiple productions going forward. What the Governor said is that he just wants to eliminate the entire program. That kills an industry that’s really in its infancy. And we have tremendous horizontal industry growth that comes from each one of these productions, and each are a slice of different pieces of Wisconsin’s economy.
WTN News: With the success of companies like Human Head Studios, and Raven Software that employs 185 people, do you think that Wisconsin has the opportunity to be a national hot bed for the game and media creation industry?
Kanavas: I think we already are. I just don’t think people understand that. The media and IT asset base here, in gaming and creativity is broader than many places around the country including California, in some ways. The relationships, and the depth of the relationships that have in the gaming industry with the titans of the industry, whether it’s Microsoft or, you know, pick a gaming company, are so deep and so broad that we will, by virtue of our talent base, be a major player for a long period of time. And this industry is, in its infancy.
WTN News: So what is the next step in terms of the Wisconsin Joint Committee on Finance (Finance) recommendations?
Kanavas: Finance has to take up the Grigsby motion, Representative Tamera Grigsby is making a motion to reform the film credit, pass it, and get this back into the budget. If they do that, and if we’re successful at making that happen, and I will be working with the Republicans and my friends in the Democratic Party to get it passed out. If we’re successful, then I believe the governor would be hard pressed to delete it from the budget.
It’s one of the few things that I think that has had such broad support. If the Governor were to remove it, we know that, it would be subject to an override, and we would potentially have a successful override. So, I would think that if it makes its way back in, that it would stand, and that we would be able to preserve this nugget, which is a big part which will move from being a nugget, into a major industry and a major building block of our future economy.
I think everyone who supported the bill and its original draft, Republicans and Democrats, are supportive of some of these reforms. Having said that, we debated and successfully inserted reforms in the original bill. So, we’re excited about the future of this industry, and we’re going to do what it takes to keep it.
WTN News: If Governor Doyle eliminates the film tax credit, what impact will this have on attracting the business in Wisconsin or keeping the businesses here? WTN News has heard from several senior executives that the incentives from other states are so strong, that these companies will have to take another look and are considering leaving Wisconsin. What is the impact on existing as well as new business?
Kanavas: We could loose whatever industry we helped build in the last year because roduction facilities would relocate and you would see a lot of movement. I would say that I’m not one of these people that believes there’s going to be arms raised with tax credits to attract the film industry. The State of Michigan is desperate and they made available a very aggressive film and creative content tax incentive program there. The problem is, ultimately, our industry here will grow for a variety of reasons including Wisconsin’s proximity to Chicago and Minneapolis. The asset base that is growing includes companies, people, ideas. And because of that, much like other industries that have formed in Wisconsin, they are here for a reason, because the asset base is better to work with here than in other places
WTN News: In terms of job creation, do you have any specific numbers on how many jobs had been attracted and created to Wisconsin, and how many communities have been affected?
Kanavas: Film Wisconsin indicates that 759 jobs were created in 2008 as a direct result of film incentives in 14 communities from Milwaukee to Wisconsin Rapids, to La Cross to Green Bay. But, more importantly than that, all you have to do is take a look at what specific organizations like the union labor say. They said look, this thing worked! You know we had carpenters working, electricians working, we had members of all the trades working by virtue of this thing, and that was about economic stimulus. We created an industry out of thin air, basically by changing the law by how tax treatment work as it relates to this kind of intellectual property and that’s impressive. We’ve done it in other areas – credits. We’ve created thousands of jobs in the companies that were helped by these investment credits. So cutting taxes works, and we have proof in two industries now. The Governor, apparently, for a variety of reasons, some seem political, thinks some of these are just headed in the wrong direction.