Leo Adam Biga's My Inside Stories

George Clooney in Up in the Air (some airport scenes shot at Omaha’s Eppley Airfield terminal)

Here we go again.  Nebraska media reported in mid-January that homegrown film stalwarts Alexander Payne and John Beasley appeared before the state legislature cajoling elected officials to adopt tax incentives for the film industry.  Nebraska is one of only 10 states without any film tax credits, which helps explain why so few features of any size or consequence are shot here.  Outside of Payne’s first three features made here, you can count on one two hands the number of feature-length, medium budget films shot in Nebraska since the mid-1990s.  The state actually used to see more features, TV movies, and mini-series work before because Nebraska’s right-to-work status gave it an advantage, but that advantage has been lost in the high stakes incentives market.  It’s not the first time prominent Nebraskans in Film have tried impressing upon legislators the fact that Nebraska is losing a potential income stream to other states, including neighboring states.  Three years ago Payne made obstensibly the same appeal he made four weeks ago.  Then, as now, he used his planned film Nebraska as a leverage point in telling state senators, “Gee, wouldn’t it be a shame if I had to make a film called Nebraska in Oklahoma.”  Only now he’s saying he might have to take the production to Kansas.  It’s not just politics either.  He reportedly told senators, “I’m being pressured to shoot in Kansas instead of Nebraska and I’m hard-pressed to offer resistance. What do our counterparts in Kansas see that we don’t see?”  Even conservative Kansas, he noted, has adopted a 30 percent film tax credit program, whereas he added, “We have zilch.  That goes over like a lead balloon.  We Nebraskans now enjoy sensational cultural opportunities in opera, symphony, ballet, theater and art.  Film remains the missing element.  It’s crucial to have something in place here – even something modest – or filmmaking both from outside and home-grown has no chance in Nebraska.”

Beasley laid out a similar scenario, saying that the $12.5 million film he’s developing on Omaha native son Marlin Briscoe may also shoot in Kansas instead of Nebraska for the same reasons. “The investors in question,” he said, “want to see their money to go as far as it can go.”

I wrote the following story more than two years ago, when the tax incentives push last had this kind of star power buzz behind it.  Nothing happened then in the way of credits being adopted.  I assume something will happen this time.  My story by the way was published in truncated form, and here I present it for the first time in its entirety.  The piece tries to get at why this has been such a tough nut to crack in Nebraska and lays out a vision for how it might finally happen.  It appears now as if the groundwork laid down then may be finally paying off.

Nebraska Legislature once again wrestles with film tax incentives question:

Alexander Payne and John Beasley press the case home

©by Leo Adam Biga

A much shorter version of this story appeared in The Reader (www.thereader.com)

Over the years Nebraska lawmakers have steadfastly refused to entertain adopting incentives for the film industry, leaving the state among only a handful not offering them.

Nebraska film incentives proponents are mounting their argument in what may be the worst possible climate for garnering political traction on the issue. That’s because many look at incentives as giveaways, not exactly what a group of mostly conservative legislators want to enact amidst a lingering recession, a mammoth deficit and the likely chilling effect of Iowa’s mismanaged, now suspended film incentives program right next door.

Incentivising other industries in Nebraska, meanwhile, is fairly common. Since going into effect in 1988, LB 775, later retooled under the Nebraska Advantage Act, has been a business incentives engine for many industries in the state. Nebraska Department of Economic Development director Richard Baier said the state targets certain industries with incentives, including Information Technology, data centers, insurance, transportation-logistics and advanced manufacturing.

Historically, lawmakers’ resistance to film incentives has centered around why filmmakers should be given special tax credits for products that are risky investments. State funding for the arts is not new, but America has a tradition of private arts funding. The murky thing with film is that it is both a business and an art. The vast majority of projects of any size are purely commercial enterprises, including feature films, documentaries, made-for-TV movies, episodic TV series, reality shows, music videos, commercials and industrials.

Then there are the micro-budget films that are so small they add little to the economy, much less stand any real chance of getting seen.

Skeptics wonder if film incentives are a revenue neutral or net gain proposition or whether states stand to lose money. The mismanagement of Iowa’s overly broad film incentives program, whose lack of restraints and oversights saw up to 50 percent in tax credits awarded some projects and some producers purchasing luxury vehicles on the state’s dime, recently led Gov. Chet Culver to suspend the program pending investigations. The Iowa fiasco illustrates states can give out more than they get back. Earlier, Michigan and Louisiana confronted their own incentives program failures that forced reviews and reorganizations, but Iowa’s problems resonate more as they’re more recent and closer to home.

Some ask why states would even put themselves in the position of being taken advantage of by film sharks. Other simply ask why shouldn’t filmmakers and their investors pay their own way and bear all their own risks.

There’s also a suggestion that a film incubator be created that coalesces film artists, crafts people, technicians and investors in a collaborative space that also provides training classes or workshops, all in the spirit of nurturing film activity.

The real debate centers around whether or not film production would generate enough economic development to justify the state offering a stimulus package. Even a leader in the pro-incentives movement here, Mark Hoeger, puts it this way: “The question is, is this a business Nebraska wants to attract here, and that’s not a simple answer.” Hoeger, a veteran Omaha filmmaker and co-president of Oberon Entertainment, heads the Nebraska Film Association. A nonprofit advocacy group formed earlier this year, the NFA includes representatives from segments with the most to gain from incentives — area producers, directors, Teamsters, et cetera.

Under Hoeger, the NFA’s retained former Nebraska Department of Economic Development deputy officer Stu Miller to research the incentives issue. A well circulated report by Miller suggests a film tax credit formula of 20 percent will return a dollar eight cents on every dollar the state spends on incentives. He used the budgeted expenditures on Hoeger’s film, Full Ride, in devising his figures.

Proponents like Hoeger say that incentives would grow — from within and from without — the state’s nascent, somewhat scatter shot film community as it’s currently comprised into a sustainable industry.

Trouble is, no one really knows how many Nebraska residents work in film. There are some small production companies for whom filmmaking is their stock-in-trade. They range from one-person operations to minimal staffs. Rather than features, however, they produce TV commercials, industrials and documentaries. With the exception of those businesses and the documentary film units at Nebraska Educational Television and UNO Television, almost everyone that works in film in Nebraska does it as part-time, independent contractors. On film projects these freelancers fill such roles as grips, gaffers, makeup artists, costumers, set dressers, assistant directors and production assistants.

Then there are small firms that offer as an adjunct of their business film services, including casting agencies and sound recording studios.

As far as how many gainfully employed folks there are now and how many there might be, said Baier, “that’s not a number I can give you a feel for. That’s been part of our discussion with the film industry — and this is where it gets very complicated.” He said with a Pay Pal operation, for example, “you’re able to measure and quantify all of those things. In the film industry it’s much looser and much more difficult to get your arms around actual numbers.”

State Sen. Abbie Cornett, a film incentives advocate, chairs the Legislature’s Revenue Committee. She said “the film industry’s like any other industry that we incentivise in the state of Nebraska and that’s what we have to start looking at it as, as an industry, not as a one time event. We incentivised Yahoo to come here. It’s incentives, it’s giving a business reasons to locate here.” She concedes it will take “a long educational process” to cultivate the needed support for a film incentives measure to pass.

Baier said that what makes film incentives a tough sell here is that film is in fact unlike any other industry. When it comes to gauging hard economic impact, a brick and mortar call center is one thing, he said, and the traveling circus that blows into town with a film is another.

A call center has x number of employees earning salaries and wages. Those workers pay income tax and buy homes and everything else. The business pays property tax, purchases supplies, maybe invests in expansion and perhaps becomes a good corporate neighbor who gives charitably to community organizations.

The impact a film has when it comes to injecting new capital or creating jobs is debatable. That’s because there’s a wide spectrum of filmmaking in terms of budget, length of shooting schedule, cast-crew size, et cetera. Film budgets run the gamut from millions to thousands, production schedules vary from a few days to several weeks, cast-crew members number from a dozen to several dozen.

Only a portion of any budget is spent in any given locale. Payouts to on-screen talent, principal crew or department heads and to producers/directors/writers may or may not trickle to the local economy depending on where these individuals reside. Cast-crew size and the percentage of residents and nonresidents varies greatly and is a huge factor in determining how much lodging, eating, purchasing taxable dollars a film generates in-state. Even when shot principally or entirely in Nebraska, post-production aspects may be done elsewhere.

Said Baier, “The challenge with in-state crews is that many of them already have other kinds of film activities working with ad agencies and such, and so are you really creating new jobs or are you simply giving them more activity? Those are the kinds of things you would have to balance in that debate. If you’ve got somebody already doing it, should you give him an incentive to do one more project a year? That really lessens the economic benefit because from an economics perspective those folks already live here, they’re already working here, they’re already paying taxes here, all you’re doing is simply putting some icing on top of the cake.”

All these considerations go into the incentives deliberation.

“There would have to be a lot of thought into how do we measure the long-term economic impact of the film industry to our state,” said Baier. “Are we creating jobs? Are we keeping people here? Are we raising the salaries? Are we creating capital investment and wealth in our state? We have to evaluate to make sure that we are providing an appropriate level of incentives to stimulate behavior without having a race to the bottom in terms of incentive policy from a state perspective. I would argue some of this has happened in other states, where the thinking became, Well, state x is doing this so we have to do what they’re doing, plus more, and that cycle continues until there’s no economic benefit to the state.

“And so as you look at these incentives programs there’s a real delicate balance between how do you impact behavior without giving away the store? We do that ongoing with all of our incentives and we’re very careful about how we administer our programs in Nebraska to make sure they are performance-based, which basically means we’ve gotta have jobs creation, significant capital investment, and if and only then if you do those things do you get any kind of incentive.”

Indeed, the state does recapture incentives from companies that do not meet performance goals. Those companies either forfeit or refund any incentives not earned. Some states with film inventives only cut checks to filmmakers once the project is complete and it’s been verified that the stipulated goals have been met.

The latest Nebraska legislator among a tiny but vocal contingent to take up the incentives bandwagon is District 5 representative, Sen. Heath Mello, who introduced LB 282 earlier this year with a proposed tax credit of up to 25 percent tied to Nebraska film crew hires. The bill, which didn’t reach the legislature’s floor for debate, also proposed a fiscal note or financial guarantee that is a major sticking point for opponents.

Mello, along with colleagues Cornett and Tom White, argue that incentives will equate to jobs and careers in a burgeoning industry.

Doubters express what might be termed a parochial attitude that says, Hey, this is Nebraska, who do we think we are to try and get Hollywood to come? The truth is, as incentives supporters point out, for years now states just like Nebraska, notably Iowa, have attracted scores of film projects, large and small, studio and indie, while Nebraska’s settled for the crumbs.

Cornett said, “If we do anything here we’re looking at something that would just make Nebraska competitive to draw some films here, we’re not trying to open our flood gates and say Hollwood come to Nebraska. But if you’re making a film set in Nebraska we’d sure like it to be filmed here.”

There is the occasional mid-major film by native sons: Alexander Payne (Citizen Ruth, Election, About Schmidt); Andrew Robinson (April Showers); Nik Fackler (Lovely, Still). But their made-in-Nebraska works might be considered exceptions as these filmmakers have a special motivation to shoot here, incentives or not. There’s no question though that these artists’ indigenous projects do add to the area film culture, infrastructure and industry. Just as the Omaha Film Festival, the Nebraska Independent Film Project, the Mary Riepma Ross Media Arts Center, Film Streams and the University of Nebraska School of Theatre, Film and Television do.

Some proponents of incentives point to Omaha’s nationally prominent indie music scene as a model for the kind of industry-generating, image enhancement benefits a vibrant film scene might foster. They don’t mention that the major catalyst behind Omaha’s music indie phenomena, Saddle Creek Records, has energized things through entirely private means, without any props from tax credits.

Mark Hoeger

So why should film be treated differently than music? Proponents cite that film production costs generally far outstrip those for music and the number of artists and technicians attached to films generally exceed those on music projects. But what we’re really talking about is a feel-good, cool-quotient cultural amenity.

“Film is sexy,” said Hoeger. “Film is the kind of thing that is about glamour and excitement and all those intangible benefits that are greater than the direct economic benefits, and you know that’s not nothing. When you look at why Iowa’s justified doing what they have they saw one of their biggest challenges, as Nebraska’s is, is an aged population and trouble retaining young labor, especially talented, creative young labor.”

He said filmmaking would be another draw to keep people here and to attract new people here in the same way the Qwest Center, the new downtown ballpark, the Old Market, Lauritzen Gardens and the Henry Doorly Zoo do. It’s just that films are ephemeral things. They come, they go, the gypsies that work on them move on.

The idea of offering incentives to generate film production is nothing new. The allure of a film made in your own backyard has long been a powerful enticement. Filmmakers have long taken advantage of this vanity element to cut sweetheart deals with local-state government agencies, businesses and others eager to bask in the Hollywood limelight.

Several trends led filmmakers to ask for and get preferential treatment from state governments. Feature film production became increasingly untethered from its Hollywood base in the 1980s, in large part due to skyrocketing production costs. Filmmakers motivated to keep costs down headed to places like Canada, North Carolina and Texas, where film infrastructures took root. Once states realized the production pie was up for grabs, they began scrambling to offer more incentives. Bidding wars ensued. Together with these trends, independent cinema became the new model in the 1990s, leading to films being made wherever artists and investors could package financing and get the most bang for their buck.

The tech revolutions of cable and satellite television, VCRs, DVDs, personal computers cell phones, iPods, along with the phenomena of film festivals, social networking sites and services like Netflix, created new platforms for film/video viewing that expanded the demand for movies. A parallel revolution in home camcorders and digital editing put the tools of cinema production within the grasp of anyone, leading to an explosion in filmmaking. The age of garage films is upon us.

Even with all that, making the case for film incentives in Nebraska won’t be easy when elected officials must make hard social program cuts that affect people’s lives. On top of the budget woes, there’s the specter of Iowa’s film incentives scandal. The pro-incentives coalition acknowledges the Iowa situation hurts their chances to convince reluctant Nebraska lawmakers. Cornett called what happened in Iowa “a debacle” and “ridiculous.” “It’s going to negatively impact anything we do,” she said. “That’s something we’ll be battling.”

Hoeger and other incentives supporters believe Nebraska can learn from where Iowa and other states went wrong. One thing he and Cornett recommends is a deliberate program that ramps up slowly and carefully.

“If you’re just going to say, Here, come take whatever you want, we don’t care, then you’ll just be a sucker,” said Hoeger. “But if there’s a real strategy that says, Here’s what we’re trying to achieve and here’s what we’re willing to pay to get it, then I think it would be a smart move. Proper oversights are really important but I don’t think they’re the whole question either, although they’re an essential.

“The hope is and we shouldn’t proceed unless it’s more than a hope that you can show that we wrote a check for 20 percent  but we’re going to get back 25 percent, so you’re left with a net positive rather than a net negative out of this process. But if you can’t come up with a system that nets a return and achieves you’re objectives, then you walk away.”

He said any incentives would need to be tied to specific benchmarks, such as a minimum percentage of local crew used.

Iowa left the administration of an ever expanding and loophole-filled multi-million dollar incentives program in the hands of one overwhelmed film office employee. Nebraska Department of Economic Development director Richard Baier said Nebraska already has in place “a dedicated system” to administer incentives programs and this would be the logical mechanism to oversee film incentives.

“The Department of Revenue administers the actual auditing of our tax incentives programs for the State of Nebraska, which is great because that sort of puts a wall between what I would consider the sales team and the audit team,” he said. “Nebraska’s been very diligent and judicious about building a process in place to ensure compliance.”

Hoeger favors making any incentives program as transparent as possible, including a model like New Mexico’s that publishes on-line each film’s itemized budget.

Even though the Nebraska Film Office, which falls under Baier’s purview, would likely be only a liaison in the incentives process, it’s possible the office could be expanded. Presently, Lori Richards fills the film officer role on a contractural basis.

The Iowa program’s suspension has put several film projects in jeopardy or limbo, leading some producers to pull up stakes to shoot elsewhere. Nebraskans are prominently behind two of the affected projects. Writer-director-producer Steve Lustgarten’s feature My Own Blood was set to start shooting in Council Bluffs this fall when the plug was pulled on the Iowa program, forcing him to postpone the project, at least until the dust settles.

Alexander Payne is producing a film that was ready to roll when things blew up. Said Payne, “I’m involved in producing a film right now called Cedar Rapids, and where do you think that should be shooting? But its shooting in Michigan. We were all set to go in Des Moines and the incentives fell through, so we immediately high tailed it up to Michigan. There was something like a two or three million dollar difference” with Michigan incentives versus no incentives. The comedy starring Ed Helms (The Office) and John C. Reilly is directed by Miguel Arteta and is the first production of Payne’s company, Ad Hominem, which is also producing Payne’s adaptation of The Descendants, which begins shooting in February in Hawaii.

“As for my project,” said Lustgarten, “I’ll lose 100% of the funding without the Iowa deal. Will I sue? Wouldn’t want to tip my hand, though the Iowa attorney general says the state does have legal liability in regard to the contracts, so they’ll clearly be in breach.”

Incentives appear to be a Pandora’s Box that can’t be closed. They’re part of the film landscape now and all the wishful thinking or head-buried-in-the-sand grumbling will neither bring more films to Nebraska nor make incentives go away

Recently, Payne’s lent his clout to the NFA’s efforts. His public endorsement’s long been sought by advocates. This is the first time the writer-director of Sideways has participated. Where past film incentives efforts were reactionary, ad hoc blips, there’s now an ongoing apparatus to keep pressing home the message. All this made the filmmaker comfortable to put his name and his viewpoint out there.

“I think now they have a more concerted effort with a group and money behind it,” Payne said, referring to the NFA. Its president, Mark Hoeger, said the current pro-incentives camp is “by far” the most organized he’s seen it — “to the point that we’ve retained professional lobbyists to help us with getting organized and taking us through the (legislative) process.”

Rich Lombardi is one of two lobbyists with Lincoln-based American Communications Group Inc. working with the NFA on what he calls “an uphill battle” in trying to persuade a majority of Nebraska legislators that film incentives are a good thing for the state. A longtime Nebraska legislature lobbyist, Lombardi said the question of film incentives “has been up and down the flag pole” before in the Unicameral and gotten nowhere. But he agrees with Hoeger that its supporters “never had this level of organization” in the past, adding they never “had a guy of Payne’s stature become like the unofficial cheerleader” for the cause.

On Oct. 12 Payne offered his perspective in meetings with Gov. Dave Heineman and other state lawmakers and policymakers. He also did a meet-and-greet with the film community at the elegant home of Thompson Rogers, a local film investor.

Admittedly “a show pony” in this effort, Payne neither exaggerates nor underestimates the value of his input. His pitch to the gov was short and sweet.

“I’m not a numbers guy, I’m not a film financier, I’m not a state economic development officer. I’m an artist,” said Payne. “So, Mark Hoeger was there to make part of the nuts and bolts case and lobbyist Rich Lombardi was also there to buttress the case and make points of his own, and I was there just to basically say two things:  ‘I make films in Nebraska, my next film after my Hawaii film is called Nebraska and I’m already getting pressured not to shoot it in Nebraska because there are no incentives here, and I would hate to have to retitle that film Iowa or Missouri or Kansas.”

Predictably, Nebraska incentives backers got a cool reception from Heineman, a fiscal conservative facing a huge state budget deficit in a tough economic climate.

“The governor has a lot on his plate and did not seem very interested at this point in pursuing it because it involves a certain degree of out of pocket expenses with the promise of some returned revenue in the future,” said Payne. “He just now can’t seem to justify anything out of pocket. But I’m confident and hopeful that he’ll start to understand more and not just the economic but the cultural benefits of doing such a thing.”

Payne said his argument for incentives is the same whoever he’s talking to.

“Look, I’m just there to say, I don’t know all the numbers but we have on our hands in Omaha, Neb. a blossoming cultural capital. It’s a world class city in miniature and fomenting film culture through such an act would be a super cool thing to do. I mean, the governor tends to look at just the numbers, which is his prerogative, but there are a whole host of cultural benefits to be had by doing such a thing. Sideways continues to unfurl millions of dollars into Santa Barbara county tourism. Granted that’s a very, very special case, but the economic benefits were not quantifiable at the time and they’ve been kind of infinite since then.”

Others use as examples Northern Exposure, Dances with Wolves, Field of Dreams and The Bridges of Madison County as shooting sites whose iconic locations have become popular tourist sites in states not generally thought of as meccas.

Hoeger said film “is the forum in which the world finds out who you are.” The inestimatable value of a state’s name or landmarks being featured in a film is something Stu Miller is trying to attach an advertising dollar equivalent to. Cornett calls it “a ripple effect.”

It should be noted Payne also got pressure not to shoot in Nebraska on his first three features but each time he managed to get his way. The state’s lack of financial incentives didn’t prevent those projects from being made here but he said a more competitive environment to attract the film industry has changed all the rules, and that’s another reason for him now speaking out.

“Yeah, it was different then, there weren’t that many (incentives programs). One of the only reasons I got to shoot Citizen Ruth here back in ‘95 was that it was a right to work state. That was the goal back then, there weren’t as many states with tax incentives back then, so back then you would think about Texas and North Carolina, they were states with some crew base where also you could shoot nonunion. Then it changed in the last eight years or so with these incentive programs that caught on.”

Hoeger conceded even without incentives Nebraska still “has some advantages and they’re some significant ones. For example, permits is a huge thing and Nebraska, permit-wise, scores highly. It’s very easy to get permission to shoot almost anywhere except Memorial Stadium. Even working with the highway patrol to close stretches of road or shooting in public places, you get a lot of cooperation.”

But, Hoeger added, “you can get a lot of that in places like Oklahoma and Iowa and get incentives, too, so if Nebraska wants to be in this game then it needs to do something, and if it doesn’t, if we cant put together a package that makes sense, then who cares, we just won’t have films get made here.” He said his own company, Oberon, is close to securing financing on two features, neither of which will be made here, in part because of a lack of incentives.

The fact is, films do continue to get made here. It’s just a question of how much is enough to stimulate something like a sustainable industry. Hoeger said where Payne “was able to get his Nebraska projects through on the labor part of it,” via largely nonunion shoots that kept the price down,” the trouble is now that, for better or worse, the incentives world has gotten so much more competitive that those advantages alone can’t get you over the hump.”

That’s not to say Payne still won’t or can’t make Nebraska here sans incentives. If he held out to shoot here, chances are someone with his standing — he’s an Oscar-winner, a critical darling and, most compellingly, a proven moneymaker — would get his way. He’s one of only a few filmmakers to enjoy final cut privileges.

It’s also important to note that in addition to or in lieu of tax credits, filmmakers use other ways to hold down costs, including getting talent to work for scale, eliminating perks and devising ultra tight shooting schedules. Also, producers routinely negotiate deals, such as reduced group rates at motels for cast-crew and volume discounts on transportation-equipment rental, supply purchases, catering services and other budget items.

But these are relatively nickel and dime considerations in comparison with the large savings, rebates, exemptions, even equity stakes, that filmmakers seek and get from taxpayer-fed, government-run incentives programs.

“There’s a lot of ways to bring the film industry here besides giving money and those I’m particularly researching,” said Cornett.

If and when Nebraska decides to enter the film incentives world, observers say you can expect a moderate, play-it-safe program that focuses on homegrown projects.

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