State Expands Controversial Film Credit Program

State Expands Controversial Film Credit Program

The state is expanding its film tax credit program to include musical and theatrical productions in a new law that will likely benefit just one local theater business—at a time when the program is already subject to intense public skepticism and has become entangled in an FBI probe.

 

Under the new law, production companies whose shows have been or will be on Broadway can apply for tax credits to offset the costs of developing and rehearsing their shows in this state. But the law stipulates that those companies must use a venue with seating for 1,500 and where “live exclusive theatrical productions are, or are intended to be, exclusively presented.”

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“This is so narrowly crafted somebody who is going to benefit put this program in,” said Grafton “Cap” Willey, a managing director at CBIZ Tofias, an accounting firm. “Anything like this would have special interest on it.”

 

‘Another scandal ready to happen’

Just two theater venues, out of about a dozen in the state, meet the criteria in the law: the Providence Performing Arts Center, or PPAC and the Veterans Memorial Auditorium, which PPAC manages through a subsidiary company.

Venues like the Stadium Theatre in Woonsocket, which seats about 1,000, and the Theater-by-the Sea, in South Kingstown, which is about half that size, are excluded from the program.

“If it’s geared to help one entity like PPAC, we have another scandal ready to happen, because all you have to do is look at the PPAC board—all very well connected individuals,” said Ed Mazze, a business professor at the University of Rhode Island and an outspoken advocate for the film tax credits.

The PPAC board of trustees membership list reads like a who’s who of Rhode Island politics, including Governor Lincoln Chafee, Providence Mayor Angel Taveras, and House Speaker Gordon Fox.

Fox recused himself from the floor vote on the budget article that expanded the credit program and he stayed away from discussions about it out of an abundance of caution, said spokesman Larry Berman. “He doesn’t even know what their eligibility would be,” Berman said, referring to PPAC.

 

The expansion of the program is favored by the broader arts community, although it was PPAC that first came up with the idea, according to Lisa Carnevale, spokesperson for Rhode Island Citizens for the Arts. And it was PPAC that requested lawmakers file the necessary legislation, according to Berman.

“Again, we’re doing something like 38 Studios,” said state Rep Karen MacBeth, D-Cumberland. “We’re picking one business and we’re putting all our eggs in one basket.”

But Berman said the legislation was not written for PPAC. “There’s really nothing that prevents the Dunkin Donuts Center from hosting a theatrical production,” Berman said.

Dunkin Donuts Center: We were excluded

Officials at the Dunkin Donuts Center, which has a maximum seating capacity of 14,000, said that, in theory, a Broadway show could play at their venue. But that has never happened and the center has no interest in doing so in the future, said Larry Lepore, the general manager. “It is not an arm of our business,” Lepore said. “We have plenty of competition throughout the New England area. We don’t need to compete with PPAC.”

In fact, Lepore said the Dunkin Donuts Center had tried to get included in the bill. He said he had suggested the tax credit be modeled after a law in Louisiana which would allow a touring concert—say, Bruce Springsteen—to qualify for the credit if the development, rehearsals, and opening of the show were held at the Dunkin Donuts Center.

 

Lepore said he did not speak with lawmakers directly about the bill. Instead, he said he approached the president of PPAC, J.L. “Lynn” Singleton, who also happens to be one of the former board members for the state Economic Development Corporation that voted in favor of the 38 Studios deal.

Lepore recalls that Singleton—who did not respond to a request for comment yesterday—was receptive to his idea. But the final version of the bill didn’t have it. “It was apparently taken out of the bill and that excluded us,” Lepore said. “One day we were included and the next day we weren’t included.”

Senator: Economic development, not insider politics

The lead sponsor of the original Senate bill, Sen. Josh Miller said that’s because “adventurous” arena shows like the ones at the Dunkin Donuts Center don’t have the proven track record of economic development that Broadway shows at the PPAC do. (Miller's bill, along with its House counterpart, eventually got absorbed into the House budget, which passed last week.)

He denied that the deal was yet another example of insider politics at work. “I don’t think it’s ‘insider.’ It’s the venue that’s appropriate for that type of production,” Miller said. “That type of production has a proven track record of economic development.”

Miller said the goal was to create a vibrant theater and film industry in Rhode Island. Under the current program, once film productions are over, those who had worked on them either move to other states to find work or go unemployment, according to Miller.

 

Plus, the film program, which allows up to $15 million in total credits annually, has been gradually languishing. In 2010, $11.4 million in credits were issued, as compared with $5.4 million last year, and $2.7 million so far for 2012, according to Peter McVay, the state associate director of revenue.

Miller said expanding the credits to musical and theatrical productions would help spawn a year-round industry with jobs that are common to both types of productions—stage hands, set designers, carpenters, and costume designers.

Arts community on board

The change also has broad support in the arts community, according to Carnevale. “We would be immediately competitive, as there is no other state or city nearby that has this incentive,” she said. “Rhode Island is now one of the first to offer this. It should produce great economic benefit.”

One of the theaters that was excluded also voiced support for the new law—The Trinity Repertory Company, which actually consists of two theaters, one seating about 240, the other about 540. “The legislation so widely excludes us I think it’s a non-issue,” said spokesperson Marilyn Busch. “We’re supportive of all the arts in Rhode Island. Period.”

Mazze agreed that expanding the program to music and theater is a positive move—as long as it is open to everybody. He also praised the legislation for dropping the budget threshold at which a production would qualify—from $300,000 to $100,000. But he disagrees with Miller that the expansion should be limited to venues like the PPAC. “Once you start doing things subliminally … this becomes a cash register for people either paying off political favors or looking for political favors.”

 

Another insider deal?

PPAC is not the only politically connected entity ideally positioned to benefit from the new legislation.

Also at issue is who would be selling the lucrative tax credits to finance the productions. The current film tax credit market is largely dominated by two individuals, Anthony Gudas and attorney Michael Corso, according to sources who are familiar with the market in Rhode Island.

The new theater credits are incorporated into the tax credit program, fall under the same $15 million annual cap, and would be administered through the state film office. Sources familiar with the market say that Gudas and Corso are the only local players in the film tax credit market best positioned to serve as brokers in buying and selling the new music theater credits.

Corso is reportedly a friend of Fox and is caught up in the botched film tax credit deal for 38 Studios. Neither he nor Gudas responded to calls for comment yesterday. Berman also declined to comment on any connections between Corso and the expansion of the tax credit program.

One state rep, Charlene Lima, D-Cranston, says that the work should not be going to just a select few individuals in a system that she describes as a “favor factory.” Instead, she said the state should regulate who gets to be brokers in the buying and selling of the tax credits. She says production companies should have to rotate through a list that has been vetted by the state Attorney General.

 

Miller told GoLocalProv that the idea is not one he dismisses.

‘Scandal finds money’

Under the version of the legislation that did pass, individual credits of up to $5 million may be issued to film, music, or theater productions. However, that limit can also be waived by the state tax administrator, raising yet another red flag for some.

“Go back to Bob Watson’s quote, ‘scandal finds money” and this is making big money available,” said state Rep. Laurence Ehrhardt, R- North Kingstown. “One has to wonder where it comes from.”

Setting aside the debate over the merits and mechanics of expanding the tax credit, some say it just isn’t the right time to do it in the first place—not in the wake of the 38 Studios scandal and the pending investigations by state and federal authorities.

“We oppose the expansion given the inside baseball associated with those tax credits,” said Lisa Blais, spokesperson for the Ocean State Tea Party in Action. “We oppose expansion given the fact that higher taxes and fees continue to be imposed on working people to feed Rhode Island’s structural deficit while taxpayers’ money is used for legislative grants. We need balance, transparency and a long-term plan not just more of the same practices created in silos.”

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