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Thursday, July 18, 2013
Godzilla invades Waikiki, devours tax credits
By Malia Zimmerman @ 4:45 PM :: 2464 Views :: Tax Credits

by Malia Zimmerman  Watchdog.org, July 17, 2013 

WAIKIKI – Godzilla is stomping through the streets of Waikiki, Hawaii’s prime tourist hub, as Legendary Pictures and Warner Bros. put the final touches on the American-made reboot of the classic daikaiju eiga, set to be released in May 2014.

AP file photo AP file photo   TAX-EATING MONSTER: Producers of the newest version of Godzilla are getting some hefty tax credits from Hawaii taxpayers.

The oversized, fire-breathing “King of the monsters” may be a little less cranky when he learns that Hawaii lawmakers passed legislation, approved by Gov. Neil Abercrombie, which ups the percentage of tax credits motion picture productions can claim when filming here.

As of July 1,  Hawaii has a new, expanded production tax credit, which grants motion pictures, digital media and film productions, an income tax credit of 20-25 percent.

Productions that qualify can claim tax credits equal to 20 percent of production costs from the island of Oahu, and 25 percent on neighbor islands including Hawaii Island, Kauai, Lanai, Maui and Molokai. That is an increase over last year of 5 percent for each category.

Act 88 and Act 89 also boost the credit cap from $8 million to $15 million per production and qualify productions with Internet-only distribution. In addition, state and county location and facilities fees are now qualified expenditures.

Hollywood producers have been aggressively lobbying lawmakers for the increase to the film tax credits for at least the past four years. The industry brought $400 million into the economy in 2012, with $245 million in direct spending and creating 2,500 jobs, state film office officials say.

The economic impact is likely to increase with the television production of Hawaii 5-0 in its fourth season, and films like Jurassic Park 4, Deep Tiki, Pirates of the Caribbean (part 5) and Angelina Jolie’s film, Unbroken, being filmed here.

Donovan Dela Cruz, chair of the Senate economic development committee Donovan Dela Cruz, chair of the Senate economic development committee

Donovan Dela Cruz, chairman of the Hawaii State Senate’s Economic Development Committee, said he isn’t a fan of giving away “free money”, but agreed to the legislation because he said he wants to see the industry develop and not “move backward.”

Dela Cruz said Hawaii needs a long-term strategy to develop the industry by syncing the education system at the high school and college level with the industry base.

He said he’d like to see the students go through the award-winning Sea Rider Film Production program at Waianae High School be able to attend a film production program at the University of Hawaii and secure a job in the film industry here.

But, he has another idea. He said he would like to see a public-private partnership where the state invests in building a film school at the university’s West Oahu campus and a larger film studio for the industry on Oahu, as well as housing for the workforce — all within a 1-mile radius.

The privately-owned Maui Film Studios LLC in Kahului, Maui, already opened its 21,000-square-foot facility in March. Hawaii Island also will open Lokahi Studios, a sound stage and production house that includes a 30,000-square-foot center, concert hall and cinema. Oahu’s Diamond Head facility is too cramped, Dela Cruz said.

Dela Cruz is critical of the Hawaii Film Office, a state agency charged with helping film and television productions get the permits and locations they need to film in the state.

The film office also should be developing a long-term plan that helps diversify Hawaii’s economy, reverse the brain-drain and create jobs, Dela Cruz said.

The Democrat said like to see Hawaii be the “Hollywood of the Pacific.”

However, if there isn’t a long-term plan put in place soon, Dela Cruz said the film credit should be revoked until one can be developed with the industry. The credits will sunset in 2018 unless lawmakers renew them at that time

‘Godzilla of a film credit’

Rep. Tom Brower serves on the Hawaii tourism and economic development committees Rep. Tom Brower serves on the Hawaii tourism and economic development committees

State Rep. Tom Brower, D-Waikiki, hasn’t seen Godzilla in his district yet, even though the monster is filming nearby, and some would say, hard to miss.

But he said he is in favor of the monster stomping through his district and getting tax credits to boot.

Brower, who serves on the House Tourism and Economic Development committees, said people in the film industry have told him that while Hawaii now has a movie or two and a television show filming here at any given time, the state could become much busier with the new tax credit incentives.

The credit will make Hawaii more competitive with other states, he said, and help build the industry.

Brower said his only disappointment in the legislation is that it offered productions that film on neighbor islands a 5 percent higher tax credit than on Oahu. He said he would have like to see the credit evenly distributed at 20 percent.

He’d also like to see a better way to track the benefits that the credit brings to the state.

Lawmakers wowed by celebrity, critic says

While House Speaker Joe Souki touts the film credit legislation as a top accomplishment during the 2013 legislative session, not everyone says the film tax credits are good for Hawaii or the taxpayers.

Lowell Kalapa, Tax Foundation of Hawaii Lowell Kalapa, Tax Foundation of Hawaii

Lowell Kalapa, president of the Tax Foundation of Hawaii, has been an outspoken critic of the tax credit, and said he’s watched lawmakers be wooed by Hollywood celebrities into giving taxpayer money away.

“Lawmakers fail to mention that in order to give away these goodies, Hawaii remains in the top 10 percent of states with the heaviest per-capita tax burden, with one of the most onerous sales tax among those states that impose a sales tax, albeit at a misleading low rate of 4 percent,” Kalapa said.

“Hawaii also has the distinct honor of having one of the highest personal income tax rates, surpassed only by California,” Kalapa said.

Because Hawaii is such a small state highly reliant on capital from the outside through tourism and federal defense dollars, Kalapa said the state’s heavy tax burden makes it difficult for families to survive and for new business activity to develop.

“The advocates of those tax incentives argue that is the goal that they are trying to achieve — creating jobs. But then again, one has to ask, at what price?” Kalapa said.

“There is no doubt that lawmakers need to take a close look at how they are using their constituents’ hard-earned tax dollars,” he said. “And they are using those tax dollars when they hand out tax credits to favored groups as tax credits are just another way of spending tax dollars.”

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