Were film tax incentives too good to last?

No one knows yet what the final economic impact will be when the film once known as “Category 6” and now called Untitled Tornado Project wraps production at Michigan Motion Picture Studios some time down the road, but Michigan taxpayers will be paying, one way or another.

The studio, which was built as Raleigh Michigan Studios, part of a worldwide chain, has been dark since “Oz: The Great and Powerful” wrapped in late 2011. But because of a complicated financing deal using public and private money crafted at the studio’s inception, the burden of its dire straits fall in part on the state’s public employee pension system, which had to make a $630,000 bond payment earlier this year, when the studio couldn’t.

It is assumed new business coming in through the state’s goosed-to-$50-million film incentive will help pay the next one, due in August. But that’s a big assumption.

The studio has some big names behind it -- Detroit business tycoons A. Alfred Taubman and John Rakolta Jr., as well as Hollywood bigshot Ari Emanuel, brother of former White House Chief of Staff (and current Chicago Mayor) Rahm Emanuel. It’s unknown what their liability would be, should the studio collapse. But it’s the state’s role that’s so perplexing.

In a 2010 Crain’s Detroit Business story about a Raleigh open house near the end of construction, the deal was noted as being “one that has never been attempted before,” according to Rakolta, CEO of Detroit-based Walbridge, one of the world’s largest construction companies.

“We're creating the path to a closing on a project like this,” he said. “From now on, other projects will be able to look at how we have done this.”

Raleigh and other infrastructure projects, including one in Allen Park that never got off the ground, the debt for which may yet drive the city into the arms of an emergency manager, appear to have been predicated on the belief that Michigan’s generous film tax credits would never go away. How realistic was that?

“The film incentives were passed and backed by strong bipartisan support, so with that as the background for the law, we did not anticipate the magnitude of the change that occurred last February (2011)," Steven Lemberg, Raleigh's chief financial officer, told the Detroit Free Press earlier this year.

That’s true. But the economic meltdown of late 2008, the financial reckonings of a shrinking state and the well-known opinions of new Gov. Rick Snyder should have given someone a clue.

I had my own brush with this program, in 2010. A number of people I know work in the business, and together we’d made a couple of just-for-fun short films. (I was the screenwriter. I’m told I have an ear for dialogue.) One of our number, an assistant producer, arranged a meeting with our whole little clan -- visual effects and make-up artists, cinematographers, editors -- and a French producer/director named Philippe Martinez, who had a sketchy past, but had just opened his own studio in Livonia.

He explained his dream was to set up his own old-Hollywood-style operation there, with people working as staff, not contractors. We’d turn out one ultra-low-budget flick after another, on a 10-week schedule, and with the state subsidies and our own hustle, make a little bit of money -- and maybe some art, too.

I had in my hands that night two half-baked horror treatments I’d thrown together at the last minute: “Wolf Lake” and “Deer Camp,” both conceived to be shot in the woods of Northern Michigan, with lots of spurting blood and non-union actors. If neither of them were exactly Oscar bait, I like to think I was ahead of the curve on werewolves. “Deer Camp” was just a bloodbath with a little bit of “Deliverance” stirred in. (Anyone want the option? Let’s make a deal!)

I left without pitching anything; I couldn’t figure out where the money would come from, and Martinez was vague on the subject. It didn’t seem worth quitting a job where I knew the paychecks never bounced.

But I vividly remember one thing from that night: “These incentives,” he said with a Gallic shrug, “they will not last.”

As it turned out, Maxsar Studios stayed around for about a year, and never made anything. Martinez announced plans for a digital feature called “Scar 23” in February 2011, just days before Gov. Rick Snyder called a wrap on the whole program. The studio closed quietly and everyone was laid off.

The film-production picture is supposedly brightening, but the Raleigh studios only will be able to make its interest payment if it gets the subsidized work brought by the tornado movie. If it doesn’t, the state’s pension system will have to cover it, again.

In any other world, this would be the craziest business deal you could make. In Michigan, these days, that’s showbiz.

Staff Writer Nancy Nall Derringer has been a writer, editor and teacher in Metro Detroit for seven years, and was a co-founder and editor of GrossePointeToday.com, an early experiment in hyperlocal journalism. Before that, she worked for 20 years in Fort Wayne, Indiana, where she won numerous state and national awards for her work as a columnist for The News-Sentinel.

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