Oz the Great and Subsidized


Courtesty of Walt Disney Enterprises, Inc.

Oz the Great and Powerful is not the most expensive movie ever made, but with a reported production and marketing cost of $325 million, it is an unusually expensive film, even compared with other similarly effects-driven spectacles.

In order to help finance the picture, the studio resorted to a now-common practice: moving the production to a state with lavish film subsidies. In this case, that state was Michigan, which has one of the most generous film subsidies programs in the nation. The filmmakers got almost $40 million to shoot in the state. As Michigan Capitol Confidential, a site run by the Mackinac Center for Public Policy, a free-market think tank based in the state, notes, that works out to a little more the price of one movie ticket for each of the state's residents:

Michigan has 4.5 million individual taxpayers, and the state gave the film studio $39.7 million to shoot the movie in Pontiac. That works out to a subsidy of $8.82 per taxpayer while average ticket prices nationwide are $7.96.

The subsidy was granted in 2010 when the program refunded up to 42 percent of Michigan expenses to film makers — essentially a check from the treasury to Hollywood studios. The program expired, but the Legislature, dominated by Republicans, overwhelmingly decided to keep it around.

There's another wrinkle, too. As part of the financing process, the filmmakers wanted to borrow about about $18 million in municipal bonds. In order order to do that, they needed a backer. So the state stepped in, and agreed to use its state worker pension funds as a guarantee. "If the investors failed to pay," the New York Times reported in a piece on the deal last December, "the retirees would be on the hook." 

Lo and behold, the investors didn't come through. But now the state is. Another report from Capitol Confidential explains:

Michigan Motion Pictures Studios, which is being celebrated in the local media for having made the movie, "Oz: The Great and Powerful," in Pontiac, has missed its last three payments on $18 million in bond obligations. The movie opens across the nation today.

Under a deal made in 2010 by then-Gov. Jennifer Granholm, the State of Michigan Retirement Systems is on the hook for those missing payments. Michigan Motion Pictures Studios was formerly known as Raleigh Studios.

According to state officials, the state retirement system has made three payments since February of last year totaling $1.68 million. Michigan Motion Pictures Studio didn't respond to requests for comment.

I wrote about film subsidies in Reason's December 2012 issue. Kurt Loder reviewed Oz the Great and Powerful for Reason here. I reviewed the movie for The Washington Times