FIRST LETTER TO GOVERNOR CRIST

March 12, 2007

Governor Charlie Crist

The Capitol

Tallahassee, FL 32399

Dear Governor Crist:

There's nothing like throwing public money at a market-driven capitalist enterprise to turn it into a subsidized welfare operation.

Take Florida's film industry, which in recent years has become more and more demanding in seeking increased tax incentives to support film production in this state.  

The industry supporters who seek these incentives claim that this is the only way that Florida can remain competitive with other states in a process that has spiraled into a never-ending battle between a handful of states trying to outdo each other in the kinds of tax credits and incentives they are willing to give the film industry.

It seems that these arguments have convinced you to support a new round of tax credit incentives totaling $255 million over the next 3 years.

How could that happen?

With a projected budget shortfall of as much as $600 million, and considering the myriad of expensive problems that are currently facing this state, from hurricane insurance, to property taxes, to an educational infrastructure in desperate need of improvement, are you really willing to forgo committing more money for any of these issues in order to give a portion of Florida film folk, led by a couple high-priced lobbyists, including one paid for by movie moguls from California, $255 million more of Florida taxpayer money to subsidize the making of movies and TV series in Florida?

Hasn't Florida already given substantial public money to support this industry?

In the attached report that I have prepared about what has happened to date with the Florida Entertainment Industry Incentive Program, I detail what the real costs have been since 2002 to Florida's tax base as a result of sales tax exemptions and tax incentives given to the film industry, as well detailing a number of abuses and misuses of these tax incentives.  There are other more serious abuses that I believe occurred during this time, but only through access to exempt public records can these suspicions be proved.

The process of how the need for tax incentives for the film industry has been staged managed by a relatively small handful of individuals – including your holdover State Film Commissioner – ignores the claims repeatedly made by these individuals and others, that Florida's film and entertainment industry is so healthy that it accounts for over $3 billion in economic impact to the state's economy.

An industry that generates $3 billion in economic impact does not need $255 million in tax incentives.

This is not to say that there is no merit in the State of Florida and Florida's film industry working together to tackle the challenges that need to be met if we are to keep abreast of the rapidly changing technological and content changes that are taking place.

What there is NO MERIT in doing, is in continuing to throw wads of money to subsidize the production of feature films and TV series – especially when the majority of these projects are the creation of out of state and out of country companies who are only to happy to spend some money in Florida with the knowledge that at the end of the day not only will they waltz out of our state with our tax money in their pocket, but with the promise of whatever profits they make will be spent or invested in their home state or country.

Neither feature films or the kinds of hour-long episodic television series that the promoters of these incentives keep citing as the reason why the state needs to commit these hundreds of millions of dollars, are capable of providing more than a couple thousand, part-time, middling wage jobs, and little or no possibility of creating the kind of long-term economic windfall needed for new business development which should be a cornerstone of any serious economic development program.

As just one highlight of the attached report, I provide evidence that last year's tax incentive, which according to your State Film Commissioner created 4027 jobs and generated a total of $18,964,525.00 in wages, actually cost the State of Florida $1390.60 per job, and generated an average wage of $4632.36.  

Unfortunately, neither your Film Commissioner, nor anyone else who has been telling you magical tales about how wonderful the movie business is for Florida, has been willing to tell you that instead of Mary Poppins meets Snow White and the Seven Dwarfs, that real story about Florida's tax incentive program is more like Gordon Gekko Meets The Three Stooges.

The reason that much of this information has remained secret for so long has been because it's only now coming to light as a result of a Public records lawsuit I was forced to initiate against  your Film Commissioner in order to get access to some of the information.  

I believe that you owe it to yourself, and to the citizens of this state to withdraw any support for the $255 million that you have committed to supporting, and instead, appoint YOUR own State Film Commissioner, seek a complete review and investigation of what has occurred with these tax incentives and tax exemptions, and then make a decision as to what direction YOUR administration should take regarding any future incentives for the film industry.

I know that this is a bold and controversial request that I make, and I am sure that you will get an earful about what kind of a troublemaker I am, but the truth is, as you all too well know, that when you can't kill the message, you have no choice but to try and kill the messenger.

In 1993, I came to the conclusion that Governor Chiles efforts to privatize the State Film office was a very bad idea, and that the individuals who he appointed to the public-private partnership were largely, sleazy, self-serving individuals who had little interest in anything but furthering their own financial wellbeing.

For almost 6 years I waged a very lonely battle to prove my allegations correct, and for much of that time, a lot of folks, including Governor Chiles himself did everything they could to discredit me and in effect, kill the messenger.

They failed!

Early on, General Milligan and the State Comptroller's Office came to agree with me and finally, after this group was caught trying to commit an act of fraud against the Governor's office itself, refused to give them any more money; Governor Chiles own Inspector General's Office came to agree with me and issued several scathing reports revealing the degree of duplicity and mismanagement that this group had engaged in; OPPAGA agreed with me, and various Florida Circuit Court judges repeatedly ruled in my favor allowing me to obtain the public records that supported my claims, and eventually led to the Florida Legislature abolishing this public-private partnership.

In fact, Governor Bush even agreed with me, because he asked me to write a position paper about how I thought his administration should deal with the film industry, and my first recommendation, which he followed, was to recreate a State Film Commissioner's Office under the control of the Governor's Office.

I now ask you to focus on the message, and not the messenger, and for the good of the Florida, your administration and Florida's film industry not to continue blindly down this path.

The problems we face today are not as easily solved by any kind of tax incentive program as some would claim. Our industry has, and will continue to undergo dramatic changes in technology, content creation and content delivery that represent a paradigm shift of such magnitude that the notion that Florida, at a time when it is beset with so many other critical financial concerns would consider committing $255 million in new tax incentives, on top of the additional tens of millions it gives annually to this industry in tax exemptions is, for lack of a better word, misguided.

Since 2002, Florida has given $137.25 million in tax exemptions and tax incentives to the state's film industry.  What has that money really accomplished?  Until that question is answered, and answered with more than platitudes, hyperbole and unverified and unsupported claims of almost magical economic impact, that if they were true, would only serve as one more reason to deny the need for even more tax incentives, no one in state government should consider supporting this massive tax incentive increase.

Lastly, besides the claims that I include in my attached report providing detailed evidence that the current tax incentive program is riddled with examples of abuse and misuse, I would caution you to consider that should you go forward with this plan to give $255 million more in tax incentives, do not be lulled into any notion that that will be the last time that you see these folks come asking for money.

Like their counterparts in Canada several years ago, who, when faced with their tax incentives being shut off, stormed the offices of the Canadian government letting them know in no uncertain terms that they had become dependent on these tax incentives, and no one had a right to take them away, you can expect that these same Florida folks who have waged this campaign for more tax incentives to show up again demanding even more money.

In three years we've seen the tax incentive for the film industry go from $2.5 million in 2004, to $10 million in 2005, to $20 million in 2006, and now they want $255 million over the next three years. Clearly, these are signs of a growing and rampant addiction to public money.

The trajectory of this increase, should on its own, give you reason to pause.  This is real money Governor, a lot more money than is being requested for a lot of other worthy projects, not the least of which would be hurricane insurance and property tax relief.

I believe that the information included in my attached report provides adequate reasons for your rethinking your support for these tax incentives.

Sincerely,

Al Crespo

Attachment:  FLORIDA'S FILM INDUSTRY: A Tale Of Public Money Gone Awry

Cc:      Lt. Governor Jeff Kottkamp

     Speaker of the House

     Senate President

     Members of Governor's Staff

     Selected House Committee Staff Directors

     Selected Senate Committee Staff Directors

     Director, Florida Department of Revenue

     Director, OPPAGA

     Selected News Media

     The Crespo-Gram Network

EXHIBIT  I    - FLORIDA TAX BOOK RECORDS

From 2002 through 2006, the State of Florida granted sales tax exemptions under Florida Statute 212.08(5)(f) totaling $109.2 million dollars.  Here's the applicable portion of the statute, followed by the year by year accounting of the Florida Department of Revenue:

APPLICABLE PORTION OF STATUTE 212.08(5)(f)

(f)  Motion picture or video equipment used in motion picture or television production activities and sound recording equipment used in the production of master tapes and master records.--

1.  Motion picture or video equipment and sound recording equipment purchased or leased for use in this state in production activities is exempt from the tax imposed by this chapter. The exemption provided by this paragraph shall inure to the taxpayer upon presentation of the certificate of exemption issued to the taxpayer under the provisions of s. 288.1258.

2.  For the purpose of the exemption provided in subparagraph 1.:

a.  "Motion picture or video equipment" and "sound recording equipment" includes only tangible personal property or other property that has a depreciable life of 3 years or more and that is used by the lessee or purchaser exclusively as an integral part of production activities; however, motion picture or video equipment and sound recording equipment does not include supplies, tape, records, film, or video tape used in productions or other similar items; vehicles or vessels; or general office equipment not specifically suited to production activities. In addition, the term does not include equipment purchased or leased by television or radio broadcasting or cable companies licensed by the Federal Communications Commission. Furthermore, a building and its structural components are not motion picture or video equipment and sound recording equipment unless the building or structural component is so closely related to the motion picture or video equipment and sound recording equipment that it houses or supports that the building or structural component can be expected to be replaced when the motion picture or video equipment and sound recording equipment are replaced. Heating and air-conditioning systems are not motion picture or video equipment and sound recording equipment unless the sole justification for their installation is to meet the requirements of the production activities, even though the system may provide incidental comfort to employees or serve, to an insubstantial degree, non-production activities.

b.  "Production activities" means activities directed toward the preparation of a:

(I)  Master tape or master record embodying sound; or

(II)  Motion picture or television production which is produced for theatrical, commercial, advertising, or educational purposes and utilizes live or animated actions or a combination of live and animated actions. The motion picture or television production shall be commercially produced for sale or for showing on screens or broadcasting on television and may be on film or video tape.

EXHIBIT II FLORIDA ENTERTAINMENT INDUSTRY FINANCIAL INCENTIVE BY YEAR

2002

Certain motion picture or recording equipment; refund.           $ 2 .3  million

Add'l Movie Exemptions                $12.9  million

Motion Picture Video Equipment      

$  4.1  million

2003

Certain motion picture or recording equipment; refund.           $ 2 .5  million

Add'l Movie Exemptions                $13.5  million

Motion Picture Video Equipment           $  4.3  million

2004

Certain motion picture or recording equipment; refund.           $ 2 .6  million

Add'l Movie Exemptions                $13.8  million

Motion Picture Video Equipment           $  4.7  million

2005

Certain motion picture or recording equipment; refund.           $ 2 .7  million  

Add'l Movie Exemptions                $16.0  million

Motion Picture Video Equipment           $  4.9  million

2006

Certain motion picture or recording equipment; refund.           $ 2 .9  million

Add'l Movie Exemptions                $16.8  million

Motion Picture Video Equipment           $  5.2  million

TOTAL                 

$109.2 million

EXHIBIT III – TAX INCENTIVE PROGRAM

Florida Tax Incentive Reimbursement Program was established in 2003 by s. 288.1254.  In 2004, the Legislature funded the program.  Here is the funding and expenditures by year:

2004-05

Funded with $2.5 million.  Gave away $2.45 million.

2005-06

Funded with $10 million.  Gave away $5.6 million.

2006-07

Funded with $20 million.  To date has committed to giving away $16,724.088.  This amount could flux dramatically.

THE PERFORMANCE MEASURES OF YOUR FILM COMMISSIONER POINT TO A DECLINE

Here are partial Performance Measures for several years that I managed to obtain from both the House Tourism Committee Report and the document you provided the Senate Commerce Committee:

Number Of Leads Generated

2001-02(4)     2002-03(4)

355     452

2003-04(4)     2005-06(5)

462     500          

Number Of Location Scout Visits

2001-02     2002-03

104     190

2003-04     2005-06     

180     100          

Number Of Projects Worked

2001-02     2002-03

898     926

2003-04     2005-06          1301     890

(Note:  I was not able to obtain any information for 2004-05)

The decline in 2006 of Projects Worked takes that number to a point lower than the number of projects worked since before 2001, which represents one more argument against any recent growth in our industry in the last year, especially one that would result in a doubling of our work force.