Raiders of the tax incentives - Alaska baits Hollywood with a $100 million lure

When Disney’s romantic comedy The Proposal hits big screens this week, audiences will be treated to a digitized version of Sitka, Alaska that doesn’t exist in the real world. The film’s onscreen version of Sitka is mostly Rockport, Massachusetts, dressed up with totem poles, street-side banners and signs that give Rockport businesses an “Alaska” appearance in the movie. Visual effects wizards used computers to combine the dressed-up Rockport (and other Massachusetts locales) with mountainous backdrops shot in Southeast Alaska.

Alaska—as is often the case—hosted only a second-unit crew, one that captured mountains, beaches and cliffs.

Despite that last fact, the producers are among the first film companies in line to take advantage of the state of Alaska’s $100 million film subsidy program that’s now in its first year.

That’s not an indictment of Alaska’s subsidy program, nor is it anyone’s fault. It’s just that by the time Alaska’s film program could get fitted for her dress, the film’s producers were already at the alter with Rockport. A Boston Globe story published last week touts Massachusetts’ film subsidies, which began in 2006, as one reason the visual effects were made on computers in Boston and not Hollywood. Alaska’s program, meanwhile, wasn’t signed into law until June 2008.

“They were already doing all kinds of things in Massachusetts,” says Bob Crockett, an Anchorage-based location scout. Crockett is the current president of Alaska Film Group, a nonprofit professional association whose members urged the Alaska Legislature to re-establish a state film office and commit to the $100 million in subsidies.

Crockett says when he got word that Disney was gearing up for production he flew to Sitka on his own dime to scout locations. “They didn’t need a lot of information or documentation, but I still provided it to them thinking that there was work there,” he says.

Like many Alaska entrepreneurs, Crockett spends quite a bit of time answering questions from Outsiders in his industry when they come calling. That’s part of his niche in the local film community. Besides scouting locations—road-accessible whitewater or a glacier within a short flight from Anchorage, for example—Crockett also manages crew logistics. He knows who to call for helicopters, boats or snowmachines. He can arrange for a fabric Quonset-shaped building to be placed damn near anywhere to shelter people and expensive gear, in case the weather turns ugly. He says he knows which professionals can be called on for work, whether a crew needs extras, or grips, a soundman, or an experienced wilderness guide to act as a safety consultant.

Many of those people don’t work full time in film and video. Crockett does. “But there are very few of us that are in my situation—I’ve just been at it for so long,” he says.

Making movies is a second or third job for Alaskans in a place where a résumé often includes a long list—fisherman, processor, bull cook, logger, roadside flagger, snowplow driver. Crockett’s hopes more Alaskans will add exotic, credit reel-sounding words like “gaffer” and “key grip” to their list as the state’s incentive program takes flight.   

“In the beginning (film producers) are going to have to bring up a large crew,” he says, adding that people in state will need to train up and learn skills. “Right now, if you get two jobs in here at the same time, it’s hard to meet the demands of the crews,” Crockett says.

Film subsidies are common and occur across the globe. Productions that spend a few hundred grand filming in Norway or in the state of Texas can be subsidized. Industry boosters—some of whom prefer the word “incentive” to “subsidy” and try at length to describe a difference—say Alaska is slow to jump on the bandwagon. They also say Alaska has lost major productions because we didn’t have a subsidy until this year.

Of course there’s no real proof that Alaska has lost anything. Big films are complicated, expensive productions and remote locations have been missing out since at least 1925 when Charlie Chaplin presented The Gold Rush to moviegoers. Chaplin created his Alaska story shooting on studio lots in Hollywood and locations near Truckee, California.

In a recent meeting of the local film group, Crockett called the decision makers “economists” saying, “They’ve got to weigh all these factors.” He recited a list of hypothetical questions. Is location an artistic decision or a business decision? Is it an actress’s decision?

Alaska’s film subsidy is much like those in other places. If the state decides a given film qualifies—pornography and infomercials don’t and television commercials must be for “national” distribution to qualify—the producers can apply for a tax credit. The credits start at 30 percent of production costs spent in Alaska. Producers won’t owe taxes to the state, so they’ll need to sell their incentives to another company that does, likely a company in oil, mining, or fisheries. Under the current system, Alaska will pay out to filmmakers until 2013 or until the $100 million runs out.

Joe Austerman, who runs the Alaska Office of Economic Development says some state officials at first thought transferable tax incentives might pose problems. “That’s not going to be as much of a challenge as we thought it would be. The certified public accountants have that one figured out,” Austerman says. The CPAs were excited, he says. “They get to provide services to two clients with one bird.”

Local filmmakers say Canada is Alaska’s biggest rival. If you saw the set-in-Alaska TV show Men in Trees on ABC, you saw the small town of Squamish, British Columbia playing the part of a Southeast Alaska village. People who watched Men In Trees also saw the work of cameraman Steve Rychetnik, who along with his wife Carolyn Robinson owns Sprocketheads, a production company based in Spenard. “When you see the absolutely glorious locator shots of mountains and glaciers and beaches, mostly shot from airplanes, (Rychetnik) did that,” Robinson says.

British Columbia’s incentive program starts with a base payback of 25 percent of approved production costs. Alaska isn’t testing ankle-deep waters; its program has a base payback of 30 percent. Wages paid to Alaskans qualify for an additional 10 percent. Producers can apply for an additional 2 percent for spending in rural Alaska and 2 percent for money spent between October and the end of March. So hiring an Anchorage-based cameraman and sending him to a bush village for two days during winter just got 44 percent cheaper.

Industry boosters and the state bureaucrats in charge of regulations describe Alaska’s program as “aggressive” but also say Alaska has learned from other states.

“What we learned is that a lot of states rolled out their programs pretty loose,” Austerman says, adding regulators wanted to avoid loopholes that might allow a producer to order supplies or crews from Outside via cell phone from Fourth Avenue, then claiming the transaction was made in Alaska. “We wanted to make sure that an Alaskan vendor received that income, the only exception to that is crew staff,” he says.

A company must spend at least $100,000 in the state to qualify for any tax credit at all. Austerman says seven pre-qualified applications have been accepted so far and Disney’s application for The Proposal is among the first. The productions received letters with a disclaimer saying regulations weren’t yet finished, but the regs have since been adopted. Austerman also says he expects to hire a director for the state film office sometime this month.

Disney expected to spend between $300,000 shooting in Southeast when the company submitted its pre-qualifying application. That doesn’t mean they’ll get $100,000 in tax credits back. The Alaska rules require producers hire an in-state accounting firm to audit the actual expenses and submit that audit to the state. They might claim more. “I think (Disney) spent over a half million dollars down in Sitka,” Austerman says, but added the state will wait to see how much the company claims in its audit. 

A few people in the film community are skeptical. Russ Weston came to Anchorage in 1971 as a military photographer and has worked here ever since. He’s worked in film and video, and lately touts his expertise with new high-definition video cameras. He makes much of his living on current affairs programs, providing footage for TV news programs.

“Nothing I’ve done in the last 20 years—and I’ve put my wife through medical school working in this industry—nothing I have done has been dependent on a film incentive program,” he says. He counts himself as the longest-running nonmember of the Alaska Film Group. He says Outside producers will be “shocked” by the limited resources among Alaska filmmakers.

The film incentive law specifically excludes current events programs. Weston takes that as a signal the state just isn’t interested in what local professionals are already doing.

“Besides the camera work I do a lot of producing. If you see something on the network news I can tell you I do most of the work for all five of the major news networks,” he says. “If Governor Palin farts or burps the wrong direction, I’m hot on the trail, whether it be for Inside Editon or Al Jezeera.”

Weston is in the midst of making a documentary for the state about village public safety officers. He also keeps Discovery Canada updated on the climbing season at Mount McKinley every year. There isn’t a media worker in Alaska who hasn’t had their life rocked a little by the rather sudden national fame of Governor Sarah Palin. But as it happens, Weston’s network TV connections allowed him to capitalize on it. “By far the most shooting and the most work we’ve had since last August would have to be related to the governor. I mean, she literally bought my last camera,” he says.

Weston says the state has been here before, albeit without the tax incentives, when it ran a film office throughout the 1990s.

“They were targeting the higher end productions. Films like Star Trek, from studios like Warner Brothers and Paramount,” Weston says. “If I’m working for National Geographic on a project and there’s like six people on the crew, my feeling is that they should qualify for the incentive. My feeling about that is based on the fact that this is my bread and butter.”

Weston says Alaska comes up short when it comes to accessible locations.  It’s complaint as old and enduring as industry itself. Weston talks in much the way miners spoke about the Territorial Road Commission not building highways fast enough 60 or 70 years ago. The reason Canada has the upper hand, he says, is because a Vancouver-based film crews can drive to a remote locations. Alaska, Weston says, “is going to cost ten times as much as going to Vancouver, where they can drive up to the face of a glacier.”

Weston isn’t the only local in the film industry who’s skeptical. Mark Brinster, a Homer-based producer and cameraman spoke against the incentive program at legislative hearings and was surprised to see the minutes afterward because a clerk wrote that he spoke in favor of the program. “This idea that we have to offer incentives, when the bulk of the applicants are already shooting here taking advantage of the resource, that is just ass-backwards because they’re not hiring locals and not even renting equipment here,” he says.

Brinster also claims that fear of Alaskans being blacklisted is very real. Some filmmakers have invested heavily in equipment, and much of that cost need to be covered by renting the equipment out. “A lot of the vendors are afraid to speak out (against the subsidies), because they fear reprisals,” he says. “People are afraid to speak against it, because they believe they are going to lose contracts and work if they do.”

The program’s harshest critic might be Britt Arnesen, a 25-year-old musician who left a job with the state in 2008 to pursue music full time. She’s set up a web site, nosubsidy.org, part of which attempts to track the incentive program’s applications.  So far the Department of Commerce has been denying Arnesen’s records requests, delivering only producer’s pre-qualifying applications in heavily redacted form. The state’s position is that the paperwork contains trade secrets.

Arnesen figures she would prevail in court if she sued over the records request, but she doesn’t have money for an attorney or, she says, the time it might take to represent herself. “It’s a protect-the-industry-first position, and an Outside industry at that,” Arnesen says. “You’re probably seeing promotions for The Proposal right now, so how could that be a trade secret?”

The commerce department’s denial of Arnesen’s request has been backed up by an opinion from the Alaska Department of Law. But Austerman told the Press that doesn’t mean the process will remain secret forever.

“The Department of Law’s opinion is based on the pre-qualifying applications that we have today. When they apply for the tax credit, could that opinion change? Well, we will have to wait and see if we get a public records request,” Austerman says.

Austerman is a former entrepreneur who built up a chain of rental mailbox stores. He was appointed to his current job by the governor. He says it’s his first exposure to the movie business. He’s learned producers are guarded about their plans during pre-production. “It’s become apparent to me that this kind of stuff is concerning to them should it become public,” he says. “At some point in time, I think, because of (Arnesen’s) request there will probably be a pretty clear determination of what is public and what is not.”

Arnesen is connected to the Alaska film community, but says she does very little video or film work. She does have a close association with one professional, but refused to name him for fear her opinions could cost him work. “I’ve gotten notes of support and hatred from across the film community,” she says. “The people writing hate notes obviously haven’t read the (web) site, because I’m not disrespectful in my writing.” And she says her pursuit of information is on behalf of the public, not because anyone’s angling for work.

Arnesen’s records request was answered with copies of seven pre-qualifying applications in which even the applicant’s company name redacted. The state did reveal dollar amounts the production expected to spend, and in which communities the money might be spent. On the web site Arenesen tracks that info and concludes Original Productions is set to claim expenses for the spring 2009 shooting of Ice Road Truckers.

She says that though film incentive boosters talk of “new money,” in most cases they’re really talking about money that was already bound to be spent here. “Every single project on that list is one that already would have come here,” she says of the first report from the commerce department to the state legislature.

“Usually how it happens is that Friday night in the middle of the night you get a call to show up Monday morning on the side of a mountain somewhere,” says Reed Bovee, a veteran in the Anchorage film community. Bovee makes much of his living transferring film to video and moving images from one video format to another. It’s more complicated than it sounds and Bovee is just the sort of mechanically-inclined hardware geek you would expect to build machines that do it.

Did you know, for instance, that nearly half the film ever shot has age-damaged sprocket holes? Bovee did. In 1993 he and his wife, Kristy, started a company in the back bedroom of an apartment in Mountain View to rescue those old images. Their company, Cinevision, now employs three people full-time who spend most of their time doing nothing but transfer motion pictures from one format to another. (A disclosure: I have a writing credit on a documentary produced by the Bovees in the late-1990s.)

Cinevision also boasts a modest soundstage. “I built it for myself,” Bovee says. “I may have to do a training video on a piece of oil drilling equipment or something. I need a place where I can plunk that down and shoot pictures of it.” It was never part of the business plan to rent the space out, Bovee says, but it was only a matter of time before other local shooters found it. There’s a dressing room and kitchen. It has a comfy screening room. There’s even a 35 mm film camera once owned by Paramount Studios.

Alaska-based productions are the bread and butter of the local industry, Bovee says, but when someone in the film community says “national shoot” they mean something different. They mean someone will make those Friday night calls rounding up warm bodies to drop their plans for Monday. “A more fickle industry, there isn’t,” Bovee says. “It is so boom and bust, but thankfully the boom and bust happens so rapidly that you can mange to eke out a living.”

The most obvious thing about the so-called national shoot is the striking differences between crewmembers from Outside and the Alaskans. “If you look over at the people from Hollywood, they’ve never stepped off of pavement before,” Bovee says. “They’re completely out-of-sorts with the mosquitoes and the weather.”

So after the Outsiders fly home, the Alaskans often find themselves talking about the experience, good and bad. They have war stories: the soda-pop commercial that almost got them drowned; the director who couldn’t be heard over the roar of river rapids; the wilderness shoot with weather moving in and no food; a guide who became a cameraman when no one else would strap into a harness and lean out over a cliff. “We were always sort of lamenting the fact that there was nothing that they could do that we couldn’t do. We knew the lay of the land and, as it turns out, we had some talent,” he says.

But Bovee is also one of the filmmakers who never bothered to join Alaska Film Group, the organization that without spending a dime on lobbying got the $100 million incentive program passed in about a year’s time.

Bovee says he doesn’t know if anyone using his transfer service or soundstage are applying for tax credits (and he doesn’t disclose who his clients are), even though both services would qualify if the production qualified. He is skeptical about whether Alaskans will get more work from the incentive program. “Sadly, it won’t be the Alaskans who benefit financially; it will be the Hollywood types, at least in the beginning,” he says. “But I think what it will do is fill in some of these gaps in what has been kind of a hopscotch industry—I mean jumping from one gig to the next when there’s no gig in between.”

In addition to the $100 million worth of incentives, the legislation also creates a state film office and funds it at $300,000 a year. Alaska had a film office before. It closed in 1999 when the legislature zeroed its budget.

Bovee had one experience with the former film office. He inquired about permits for shooting on public land. He needed shots on the site of a former military base in northwest Alaska, among other remote locations. He needed information and thought, perhaps naively that the film office might point him toward bush airplane charters or land use permit, or regulation. “I was told in no uncertain terms that the film office wasn’t set up to help Alaska filmmakers working in Alaska—so, you know, ‘Note to self: Tell them you’re from Hollywood.’”

Dave Cuddy grew up in Anchorage and recently developed a film studio in Texas. He’s a former banker, having run Anchorage-based First National Bank, which is owned by his family. He’s also an erstwhile politician who campaigned for reduced federal spending during his 2008 run in Alaska’s Republican primary against then-U.S. Senator Ted Stevens. 

Cuddy is the kind of man you might expect to hate subsidies of any kind. But he admits he might take them since we have them. Film budgets are tough for accountants to pencil out. It’s a hard, unforgiving business and always a gamble, he says. The subsidies, Cuddy says, “are too much money not to take a look at.”

“Is it good for Alaska? I don’t know,” Cuddy says. “But I can say that without an incentive we’re not going to get a lot of film making in Alaska.”

Cuddy is almost finished with a project close to his heart. It’s a political thriller he produced called Conflict of Interest that features Lee Majors as the heavy. Majors plays a corrupt incumbent politician who is part of a system that monkeys with the international chromium trade. A small African country stands up to the U.S. but cutting off its supply of the metal.

Cuddy has a cameo role in the film. He plays a college professor with a free-market message, lecturing students that governments that spend too much can do more harm than good. It’s similar to positions he took running against Stevens in 1996 and again in 2008.

“That message did not resonate (with voters) on an intellectual level,” Cuddy says. “I set about re-inventing myself (after the ’96 loss)… you have to appeal to people on an emotional level.”

Cuddy says he is “not a player” in whether Alaska has a film incentive program and right now all the projects he is working on are most likely to be shot in Texas. “But as long as [Alaska is] going to have one, I will probably take advantage of it and bring some productions up here.”

Robinson, the co-owner at Sprocketheads whose husband shoots those “beauty shots” from airplanes, has her fingers crossed for a boom. “This industry will spread money across Alaska and in all different seasons, in all different trades,” says Robinson. “It’s good, clean money too—and more important, it’s new money.”

Maybe someday, Robinson says, a film set in Massachusetts could be shot mostly in Alaska.

scott.christiansen@anchoragepress.com