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Michigan-Subsidized Film Studio Fails; State Pension Fund Had Guaranteed Loan

2 min readBy: Joseph Bishop-Henchman

We’ve extensively covered states’ infatuation with using taxpayer dollars to subsidize film and television production, despite such production companies being some of the most profitable enterprises in modern America. While in 2000 a mere four states spent $2.7 million subsidizing film and TV, by 2011 that had reached 40 states and $1.4 billion.

Michigan was among the most generous, offering to cover 40 percent of qualified expenses, an outlay that cost Wolverine State taxpayers nearly $100 million a year. Acting on numerous reports from a variety of sources concluding that the incentives were wasteful and ineffective, new Governor Rick Snyder (R) managed to get the incentives pared back to only $25 million a year going forward.

Unfortunately, during the time of free-flowing state money, a little industry had popped up. While supporters talked about how they were building a permanent new Hollywood, in reality the whole thing depended entirely on ongoing state subsidies. Their reduction kicked the legs out from under the lie that it was ever going to be self-sustainable. Hence:

Michigan’s largest film production studio will likely default on a bond payment due in two weeks, sticking the state’s pension funds with the $630,000 obligation.

Sources close to Raleigh Studios in Pontiac told me Wednesday that the owners have not made their required monthly escrow set-aside payments since October, and won’t have the money to meet their biannual bond obligation when it comes due Feb. 1.[…]

[F]ormer Gov. Jennifer Granholm in 2009 made the state employee pension funds the guarantor of the $18 million in bonds sold to help build the $80 million studio, located inside the abandoned facilities of the old General Motors Centerpoint truck complex.

If the studio can’t pay, the pension funds have to.

The state also contributed an additional $15 million in taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. incentives.

Sounds like a big mess. Maybe we can all learn a lesson from Michigan’s mistakes: offer a good tax system to all comers, but don’t use the tax code to prop up one industry. It fosters dependency on the support and is costly for a long time.