The Minnesota film community’s effort to urge legislation that would rescind a 6.5 % sales tax on commercial production services has advanced in the State Capitol. Last week (4/29), the bill passed the House to be included in the omnibus tax bill. It now goes to the House/Senate conference committee.
The tax has been cited by ad agencies as a deterrent for shooting commercials in Minnesota, whose film community has experienced a slowdown in work from agencies leaving town (SHOOT, 2/12, p.1). The tax has already been alleviated in such other production markets as New York, California, Florida, Texas, Toronto and Vancouver, B.C.
"[The sales tax] is just a piece of the whole scenario of why an agency decides to stay in town or not," said Janet Zahn, executive director of the Minneapolis Office of Film, Video & Recording. "All things being equal, the sales tax at the bottom of that bid makes a difference. We want to eliminate this reason for agencies to leave. We can’t eliminate them all; we’re never going to. But we’re working really hard because this is something we can change."
Kathy DiToro, senior VP/ director of broadcast production at Minneapolis-based agency Campbell Mithun Esty (CME) is a supporter of the bill. She acknowledges that, in terms of spot production, CME’s main consideration is directorial and or special effects talent. The agency often shoots on the West Coast and has done a number of jobs in Canada-with L.A. or New York directors-to take advantage of the favorable exchange rate.
"A lot of it [shooting out of town] is driven by talent issues and weather/location issues," said DiToro. "But there have been times on certain types of jobs where it made sense to shoot here"; for example on some of CME’s retail-oriented accounts which include K-Mart, Domino’s Pizza and Air-Touch Cellular. "We’d bid a director here and [for instance] in Dallas and Atlanta, and the cost of the sales tax made it more competitive to go to another market."
The sales tax may have more of an impact on small to mid-sized agencies, such as Minneapolis-based Periscope. That agency’s broadcast production manager Patti Hofstad related that the tax doesn’t deter her from shooting in town since they really don’t have the budgets to travel. But the tax does diminish the amount they can apply towards production.
"When the budgets are really small, it is an issue," said Hofstad. "All of sudden, you’re looking at every $100 dollars you possibly can [save] and you’ve sometimes got $4,000-$5,000 in sales tax or, if it’s a larger budget, the tax can be up to $20,000. That’s a huge chunk of money. It has been difficult; if we want to get the job done and we can’t work on the production or postproduction numbers anymore, a lot of times we’ll end up eating something-because we want to do the job."
But it is the local suppliers who are hardest hit, financially, in the current ad climate. Three of Minnesota’s filmmaking soundstages were recently put up for sale, including the state’s largest shooting facility, St. Paul-based Energy Park, which is owned by Jim Lund, director/owner of commercial shop James Productions. Lund acquired Energy four years ago and spent $1.5 million to renovate the former athletic club into a facility encompassing four soundstages, office and support space.
"It’s the combination of softness in the commercial production area," said Lund, "plus the feature films we’ve lost, particularly to Canada, that has made it difficult for us to keep the doors open here." Among the movies filmed at Energy are Grumpier Old Men, Jingle All The Way and the recently-released A Simple Plan, starring Billy Bob Thornton. Energy is now hosting production of a Fox feature film titled Here on Earth.
Lund attributes the local film market’s lack of work to several factors. Chiefly, there is "less of the middle-budget work being done" than in the past and a migration of commercial production to the West Coast. "That’s always been a factor," said Lund, "but it seems as if it’s been more of a factor in the last couple of years." Other stages on the sales block are Harmony Scenic Studios and Ice House Studios, both in Minneapolis.
