WASILLA -- Alaska revenue officials predicting a $3.5 billion budget shortfall are scrambling to placate the film industry even as they move to dismantle the state's film and television subsidy program.
Gov. Bill Walker wants to eliminate the Alaska Film Office to save $346,700 on three positions and another $20 million annually in tax credits, according to budget documents. A separate bill sponsored by Sen. Bill Stoltze, R-Chugiak, would end Alaska's film tax credit program as of July but includes a "transition" section that awards credits to companies that get approval before July 1.
Department of Revenue Commissioner Randall Hoffbeck on Monday issued a one-page statement -- "An Open Letter to the Film and Television Industry" -- in response to an "understandable frenzy in the film industry" following media reports about the program's woes, said Kelly Mazzei, executive director of the film office.
The letter was emailed to the 20 to 25 people who asked what was happening with the tax credit program, as well as a few media representatives including Alaska Dispatch News, according to Mazzei, whose job is one of three on the chopping block. She personally received numerous phone calls from Hollywood, she said.
Hoffbeck's letter serves to clarify the state's position on tax credits now.
Yes, the governor's budget proposal eliminates funding for the three film office positions, the letter says. The next sentence is all in boldface: "However, this action does not eliminate the film tax credit program."
That applies to any projects with a written notice of qualification from the state's four-member film commission, Hoffbeck writes, adding the state's tax division has other staff to process the credits if necessary.
Credits are available only as long as applicants "meet the statutory requirements detailed in the qualification notice," the letter says. But statute requires the production to be in Alaska's best interest and fiscal health, which now must be filtered through the difficult budget times ahead.
"The message has always been that we are still accepting applications, but the commission was giving more consideration to the state's budget situation," Mazzei said of Monday's letter.
An Alaska-based producer said the state is trying to hang on to potential producers looking at Alaska, at least for the next few months.
Matt Szundy, owner of Glacier Film Productions, spent a year working with the state to promote Alaska film locations. He said companies from Dubai to Beverly Hills have called with questions since the possibility of axing the credits surfaced in January.One company was planning to shoot a feature film in Alaska come fall.
"I have a meeting with them tomorrow where I have to explain whether or not there will be a tax credit for them," Szundy said Tuesday from Girdwood, where he's working on a film shoot. "Maybe, based on the letter I saw yesterday."
The biggest film confirmed for an Alaska shoot is "Hunter Killer," a submarine thriller with Cold War overtones slated to start production in Whittier in April.
Alaska's film program, launched in 2008, sought to build the film and television industry with tax credits that can cut costs in half and spur local spending on hotels, restaurants and crew. Supporters say the credit is the only reason feature movies like "Big Miracle" and "Frozen Ground" have been shot in Alaska. So have dozens of reality shows, which account for more than half the applications for tax credits.
But the state's grim budget season has set the stage for major cuts that appear to face little opposition.
An email from the state film office last month warned potential applicants to "(r)econsider applying for the Alaska film credit." Applicants pay a nonrefundable fee of $200 to $5,000.
The email, provided by a local filmmaker, reads in part: "Unfortunately, Alaska is experiencing a critical budget deficit with the extremely low cost of oil and Alaska being an 'oil' state. In light of the current fiscal environment, most likely, new credit applications will not be approved by the film commission."
The governor, during a Jan. 30 news conference, was asked if the state was already cutting the film subsidy.
Walker said he'd heard publicly that a production company he later confirmed as the one behind "Hunter Killer" was rejected for a tax credit because they "got caught in the middle of the dropping oil prices." The company appealed, Walker said. He also said film credits are something Alaska "may not be able to afford going forward" but he had not made a decision or issued any orders shutting down the program.
By all appearances, "Hunter Killer" is on track. SprocketHeads LLC, the Anchorage-based company providing Alaska production services for the film, posted a casting call on its Facebook page Tuesday and held a set-crew training in Whittier last weekend.
"The state has already entered into a good-faith deal with this production company," Walker spokesperson Grace Jang said in an interview Tuesday. "We don't want to send a message saying that the state goes back on its promises."
Alaska Dispatch Publishing