Webathon

This Is Your Government on Corporatism (and Another Reason to Donate to Reason!), Michigan Film Subsidies Edition

|

Granholm's best role

The New York Times today has published a damning blow-by-blow account of how Michigan politicians and the Obama administration combined to squander tens of millions of dollars chasing the phony dream of subsidizing the Great Lakes State's way to audiovisual industry success. Excerpt:

It all started back in August 2007, when Gov. Jennifer M. Granholm met with Mike Binder, a Michigan-born actor and director who was lamenting the state's lackluster program to award financial aid — otherwise known as film credits — to the movie industry. Ms. Granholm, an aspiring actress when she was in her early 20s, became determined to make Michigan competitive, she recalled.

Eight months later, the capital of the flailing auto industry became the capital of film tax credits. For every dollar spent locally, filmmakers would receive almost half back from Michigan.

Nearly $1 million in Michigan subsidies, that one

What could go wrong?

The corporatism hardly stopped there. Linden Nelson, a "well-connected local entrepreneur with a charismatic personality," dreamed up an idea to create a new film studio in Pontiac on the site of a shuttered GM facility. He happened to call his old buddy Ari Emanuel, the well-connected Hollywood agent with a charismatic personality who happened to be the brother of the then-White House chief of staff. "Not to use an L.A. phrase," Emanuel told the Detroit Regional Chamber of Commerce, "I think this is a no-brainer for the state of Michigan." 

The Nelson/Emanuel team so believed in this no-brainer that they agreed to put up "a total of $10 million to $12 million of their own money," bless their hearts. If only the project cost that much! "They would pay for the rest — $70 million or so — using borrowed money and state and federal incentives."

The proposed studio received "redevelopment tax credits from the federal government and separate aid from the state that included incentives for technology companies that hire residents." Naturally, Nelson/Emanuel wanted handouts from the city of Pontiac, but the city of Pontiac had been declared a financial basket case by Gov. Granholm in February 2009, in part because it was "still weighted down by old incentives it had given to businesses like G.M." Still, the city caved.

It gets worse:

Let's have the state pension fund guaranteed a municipal-bond issuance for a bullshit movie studio in bankrupt Pontiac Michigan!

Not long after, he and the other studio investors hit a major hurdle. They would be borrowing around $18 million in municipal bonds, but they needed someone to back them.

Over the objections of some local officials, the state agreed to use the state workers' pension funds to guarantee the bonds. If the investors failed to pay, the retirees would be on the hook.

At the time of the deal, the governor was speaking regularly with Mr. Obama, who was negotiating the General Motors bailout. Edward B. Montgomery, who was leading the White House's efforts on communities and workers affected by the automaker's bankruptcy, was engaged on the studio plans.

Republican Gov. Rick Snyder, elected in 2010, gutted the subsidy program, and a new emergency manager of Pontiac turned out to be a huge critic of industrial tax incentives as well. "Almost immediately," the Times reports, "filmmakers pulled out of Michigan":

When the bill for the studio's bond interest came due in February this year, it paid only a portion, $210,000. The state pension fund had to pick up the remaining $420,000. Mr. Nelson said he and his partners would have made the payment if the state had not changed the tax credit program. "No one would have missed a bond payment," he said. "No one would have missed anything." […]

In August, the studio defaulted on the entire $630,000 payment on the bond[.]

This man thinks he deserves your tax money

But fear not! The investors "are lobbying state lawmakers to put more money into the tax credits and have formed a political action committee," and have enlisted the Teamsters union to help.

This story should be blown up into 500-point type and stabbed onto the closed doors of any lawmaker who ever again talks about public "investments" to goose politically favored and/or sexy business sectors. If an established industry–Hollywood's a century old, people–cannot survive without $1.5 billion in government giveaways, then it does not deserve to survive. Business plans based on political whims are inherently unstable, and usually a net drag on the private economy.

Worst of all, these terrible outcomes are 100 percent predictable. Need another reason to donate to Reason? How about the impressive paper trail we've compiled on the subject of film subsidies and tax credits alone. As Senior Editor Peter Suderman wrote as recently as in our December 2012 issue,

[S]tate-based film tax credits are a big idea without a big payoff. Currently 43 states offer the subsidies, which are worth a total of $1.5 billion. Multiple government reviews of those credits in states such as Michigan and Massachusetts have concluded that the subsidies typically fail to pay for themselves. Instead, states end up losing money paying for film productions that in many cases would have happened with or without the tax incentives.

An America that reads more of this type of analysis is an America less likely to repeat such an obvious mistake. Or to write lines like this chin-scratcher in the otherwise terrific Times piece:

Hollywood may make movies about the evils of capitalism, but it rarely works without incentives, which are paid for by taxpayers.

LOL wut?

Donate to Reason today!

NEXT: Obama Meets With Governors to Talk Fiscal Cliff

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. Didn’t they film Robocop with Dallas standing in for Detroit.

  2. Well, if you can think of a better way to make your state attractive for certain businesses other than shifting tax burdens around, I’d like to hear it.

    1. Well I hear someone did a Kickstarter for a Robocop statue. That should boost tourism.

      1. I bought that for a dollar:

        http://www.kickstarter.com/pro…..of-robocop

  3. Jennifer Granholm on The Dating Game is straight out of the Boogie Nights era.

    OT – http://www.politico.com/story/…..84542.html

    Rand Paul could have a famous junior Senator.

    1. Suspenders and boobs just go together for some reason. Ah hell, boobs go with anything.

      1. Those are nice.

      2. Olivia Wilde in House wears suspenders.

        Amazing!

    2. I’m sure there are plenty of very good reasons for not voting for Ashley Judd, but all McConnell would have to do is bring up her pro-choice stance and she’s toast.

    3. She’s reportedly also weighing whether to wait until 2016 to instead take on freshman Sen. Rand Paul, sources say.

      The dishonesty of Democrats: they would rather wait four more years to challenge someone of lower standing even though he agrees with them on a number of issues, rather than challenge a moral vacuum in two years.

      1. She probably knows she has little chance in a mid-term election in a Red state. Kentucky elected a MLB player as Senator though.

      2. The dishonesty of Democrats: they would rather wait four more years to challenge someone of lower standing even though he agrees with them on a number of issues

        Which issues are those, exactly? Did Democrats actually start giving a shit about the 4th amendment while I was on vacation?

  4. Outstanding article, Matt. Great picture choices, too. Reason’s really bringing their A-game for the web-a-thon. I shall be donating shortly.

  5. I thought I’d heard some people in Hollywood talk about how they should be taxed more. Surely that means they should be willing to go without tax subsidies in making their movies, right?

    Right?

    1. And then they stare at you oddly when you tell them that they can mail as much money as they want to the IRS.

      1. My bad. The Treasury takes any money one wants to voluntarily give the government.

        1. http://www.fms.treas.gov/faq/moretopics_gifts.html

          Funny, they call it a “gift.” I guess it would make a nice Christmas idea for any liberal friends.

          1. I wonder how much it costs them to process donations, and if they have a minimum donation amount. A script doing an automatic donation of $100 one cent at a time could probably rack up some decent fees before they caught it.

    2. No, no, no. They don’t think they should be taxed more. It’s those other evul rich people, you know, the ones who run corporations that produce things who should be taxed more.

  6. Worst of all, these terrible outcomes are 100 percent predictable.

    Foreseeable consequences something something . . . .

  7. Ah, yes. Allen Park (just south of Dearborn) is also essentially bankrupted from a film studio it financed during the Granholm Film Festival. The fact that this dumb bitch still has a job – and that anyone listens to her speak about anything – is a tribute to human stupidity and Team affiliation. What a fucking loser.

    1. I saw her on some cable show a while back explaining how Michigan tried cutting spending and regulations and it didn’t work. Dishonest stupid bitch is the operative term.

    2. She has a job?

  8. PS They shot a couple films out at our [empty, brand new, enneeded] high school near my house. The chief local beneficiary? The booze store up the road said their sales EXPLODED during filming.

    No other impact on the local economy was noted. Jes sayin

    1. When I was living in Oklahoma they filmed Twister up by Ponca City. The sat rented and stayed in this huge historic house built by the founder of Conoco oil. It is this gilded age palace the guy went broke building. Word was they left the place trashed. Hollywood is the worst sort of trash.

      1. Well, we never heard of any damage, but the booze store sales skyrocketed. They loved it!

      2. Word was they left the place trashed.

        Not surprised. It wasn’t their house afterall, and it’s not like Hollyweird fuckwits have any respect for or understanding of the concept of private property rights. Or common sense, or decency, or…

        1. When I was an art dog, I used to hate shooting on location in houses. Most homeowners treated us like their personal remodeling services. After we finished shooting, I spent many hours patching/painting, rearranging furniture, repairing fixtures, etc. My bosses (Production Designer/Art Director) were extremely conscientious, and would accommodate the property owners. I remember one time, my partner and I went back to a house the day after we wrapped, and spent the day moving furniture, cleaning and yard work. She was a nice enough lady, so it was okay. And the production company paid for it.

          Other impressions: J. Lo is an insane weirdo. Toni Braxton is delectable. Snoop Dogg is fun to smoke weed with. Q-Tip and Dr. Dre are cool as shit. Pink is an alcoholic weirdo. Deftones are super nice guys. Memories…

          1. J. Lo is an insane weirdo

            Keep going…

        2. Don’t use the word Hollyweird. Ever. Even ironically.

          1. What about “Nucular”? As in “Nucular Titties”?

            1. That’s so Hollyweird.

    2. Don’t forget they filmed the remake of Red Dawn in downtown Detroit, which actually included real ‘explosions’.
      Also the last Harold and Kumar movie, with the D standing in for New York. A couple of summers ago my wife and I were driving home through downtown and noticed NYC-style street signs and Christmas decorations. Certainly a weird senesation.
      A friend of mine actually had a minor role in Harold and Kumar (not that she’s boasting, or even admitting it–she was the little old lady with potty mouth–still, a gig’s a gig.)
      So not only does it bring movie stars to Michigan, it also produces great art. QED.

  9. However, my fellow Michiganders thought the whole “filmed in Michigan” thing was so cool!

    1. That sanctimonious cunt Mitch Albom is STILL on about what a great idea this is. What a fuckstick. God I hate my state sometimes – Granmole, Stabenow, Levin, Levin, Conyers, Kwame, Dingell…fuck….horrible.

      1. At least Dingell is good on guns.

  10. I can see it now at the end of film credits: “This film was imported from Detroit.”

  11. Michigan is a state?!?

    1. It’s a state of denial, Epi.

    2. We still don’t recognize Michigan Statehood in Ohio.

    3. It’s a region of Greece.

    4. Michigan is actually the newest state east of the Mississippi River.

      (I refuse to acknowledge the so-called “West Virginia.” Bunch no-good secessionists if you ask me.)

      1. Technically, I think its Virginia that was the secessionists.

  12. Just when you think it couldn’t get any worse…

    …these selfsame subsidies financed the remake… of Red Dawn

    http://www.michigancapitolconfidential.com/17955

    The remake of the classic Patrick Swayze 1984 movie debuts Nov. 21. It was filmed in Michigan in 2009 and the film company received $16.7 million in film credits from Michigan taxpayers.

    Now Michigan residents will get a chance to see what they paid for

    I believe they chose to stay home instead

  13. Wake up the Reason editors, the SCOTUS just ruled 8-0 in favor of the property owners in the Black River Dam takings case.

      1. Hold on there, they ruled against the government for the government. Granted the feds now need to pay off the state, it’s still government on government action.

        1. True, but it sets a good precedent about temporary flooding being a considered a taking.

        2. “government on government action”

          Worst. Pron. Ever.

          1. My thoughts exactly. Ugh.

          2. Do they use red tape for the bondage scenes?

  14. An America that reads more of this type of analysis is an America less likely to repeat such an obvious mistake.

    Oh come on, Matt. You know that’s bullshit.

    1. “Less likely.” 99% is less than 100%.

  15. I did stills for a couple of movies. A ton of fun for me. For the town not so much.

    After the second movie was finished the town of Natchitoches ran the studio out. It was a net loss for the town financially, and the movie people were insufferable.

  16. A day or two ago, I saw a piece at the Christian Science Monitor (which was, once upon a time, an very good news source) about Granholm jabbering moronically about electric cars and how if we don’t do whatever it takes to clog the streets of America with the damn things, the Yellow Peril will bury us. Also, ELECTRIC CARS ARE POLLUTION-FREE.

    So we’ve got that going for us.

    1. This?

      http://www.huffingtonpost.com/…..01783.html

      Title: Electric Vehicle Naysayers: Get Over It, Support American Jobs

      An incredible combination of sanctimony and stupidity.

      1. Or, you know, what P brooks said in his own stubborn, thread-protesting way.

  17. if we don’t do whatever it takes to clog the streets of America with the damn things, the Yellow Peril will bury us

    Shouldn’t that be the Yerrow Perir?

    1. Lacist plick!

    2. Racist.

      And also = that was the theme of the Red Dawn remake.

      Only they changed the chinese to North Koreans midway through out of…sensitivity issues.

  18. The heaping helping of stupid from the former Governess.

    Granholm was governor of the state when $1.35 billion in grants were offered, in order to develop and build electric vehicles and their batteries.

    Writing in the Huffington Post, Granholm says that these grants didn’t just mean parts, but jobs–63,000 of them, in fact.

    “I know the only reason those jobs were even possible is because the federal government, led by our president, made a commitment to battery technology,” she writes

    Apparently, you don’t have to be very bright to get into Haaaahvid; certainly not bright enough to see that any enterprise which cannot survive without government subsidies should be allowed to sink to the bottom of Lake Michigan, there to futilely gasp it’s last few tortured breaths.

    1. She’s plenty smart.

      She’s just dishonest and mendacious, which is certainly no barrier to getting into, or graduating from, Harvard.

  19. Or, you know, what P brooks said in his own stubborn, thread-protesting way.

    When responding to P Brooks, do as P Brooks does.

  20. She’s plenty smart.

    I don’t know- I have seen her on the teevee, in unscripted discussion format, and she did not impress me as being much brighter than your average rock.

    1. Entirely possible she’s gotten dumber since I knew her. Its been awhile.

  21. Over the objections of some local officials, the state agreed to use the state workers’ pension funds to guarantee the bonds. If the investors failed to pay, the retirees would be on the hook.

    Am I still the only one who absolutely loves this method of funding government programs?

Please to post comments

Comments are closed.