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Movie tax study questioned

Movie tax study questioned

Associated Press

HELENA - The Martz administration considered and rejected a plan to give tax breaks to the film industry partly because officials questioned the validity of a study on the plan's benefits. Now, the Schweitzer administration is using the same study to justify a similar proposal.

Mark Simonich, who was Commerce Department director for Gov. Judy Martz, said his agency did not believe the state would benefit from tax rebates as the study's authors claimed.

"The study didn't justify that we could get the level of economic growth in the state from the type of tax credit they were advocating," he said. "We concluded that the state would lose money."

The Martz administration didn't buy the figures used to predict the potential benefit from increased production spurred by tax incentives, Simonich said.

"The numbers were wrong because they were inflated," he said. "It looked like the numbers were cooked."

Sean Becker, principal investigator for the $20,000 study commissioned by the Montana Film Office, said the report and its conclusions are valid. Although he answered questions about the study once last year for Simonich, the former director never contacted him later with any lingering concerns, he said.

Sten Iversen, manager of the state film office, said he was unaware of Simonich's doubts about the study before now. "He was satisfied enough with the study to take it to Chuck Swysgood (budget director for Martz) and the Martz administration for potential legislation," Iversen said.

But Simonich said he made his doubts known to Iversen last year. He also said that, contrary to Iversen's assertion, he never urged approval of the tax credit idea and his reservations about the economic analysis were the reason.

"The study was why I backed off on it," he said.

The study and proposal were embraced by Gov. Brian Schweitzer, whose legislation would give movie and TV productions a 15 percent tax credit on up to $50,000 in wages paid to every Montanans hired. They also would get a tax credit of 10 percent on their total spending in the state. The credits would be limited to $1 million for each state-certified production.

The report, done by the Bozeman research company ArtsMarket for the state film office, estimates Montana could see film production quadruple to $25 million next year because of the tax breaks, based on 2003 figures. That would generate $2.2 million in taxes and the credits would amount $2 million, giving the state a gain of $200,000, the study concluded.

The projected level of industry spending would translate into about $39 million in total economic effect in the state, based on the study's analysis of direct and indirect impacts from TV and film projects during a six-year period.

The figures in the study are derived from a survey of 444 productions that operated in Montana from 1998 through 2003. However, only 15 percent, or 67 producers, responded to the survey, something a leading economist said made him question the findings.

Paul Polzin, director for the Montana Bureau of Business and Economic Research, said his agency wants 60 to 70 percent response rates to ensure the information is not skewed.

"There are no magic numbers in the journals on what an appropriate response rate is, but it needs to be higher to ensure yourself you're not a getting a biased sample," he said.

Simonich said the small number of productions providing spending information for the study was a major reason he questioned the analysis.

Becker said the survey response rate was "fantastic" and sufficient to make the economic estimates in the study. He said he had complete spending information from just 67 productions, but had partial financial details from another 44, and that was factored into the study's findings.

He also said the estimates of economic effects of the film industry in Montana are very conservative and do not include such things as more tourists and businesses coming to the state as a result of Montana's increased exposure.

Not everyone is convinced, including some members of the House Taxation Committee, where the tax credit bill is expected to face a vote later this week. Rep. Chris Harris, a Bozeman Democrat and sponsor of the measure, arranged for a recent meeting between Republican skeptics and Schweitzer administration officials to allay worries of skeptics.

Rep. Karl Waitschies, R-Peerless, said a 15 percent credit is too high compared to what other states offer. He believes the state will lose money.

Rep. Scott Sales, R-Bozeman, questioned whether the jobs created by the film industry last long enough to benefit the economy, or if those temporary employees end up collecting unemployment assistance after a project is complete.

Supporters of the bill remain optimistic about the proposal.

"I don't think the bill is in trouble at all," Harris said. "We don't need to convince Democrats; Republicans are naturally skeptical. Their major concern is they want to be convinced there is tax revenue benefit to Montana."

Copyright © 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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