Boasting nearly year-round sunshine and balmy temperatures, beautiful scenery and growing ranks of isle-based film industry technicians and various other supporting businesses, there’s no doubt that Hawaii has drawing power for filmmakers.
What’s in doubt is whether the state can maintain it amid competition with other states and international sites that are pitching bottom-line appeal to production companies.
Hawaii is among more than 30 states, along with Puerto Rico, the U.S. Virgin Islands and Washington, D.C., that offer some form of production incentive, including income tax credits. The Aloha State has been shelling out for film and TV productions tax credits — rebates on general excise tax payments and transient accommodation tax expenses — for two decades.
Over the years, supporters have pushed to increase subsidies, asserting that they yield local benefits such as spending on jobs, location fees, equipment rentals and hotel rooms. Critics have scoffed that the giveaways are too generous, unfairly burdening cash-strapped taxpayers.
In an attempt to strike a sensible cost-benefit balance, in 2017, state lawmakers established a
$35 million annual ceiling for the program. It took effect this year. But given an apparent risk of reversing recent gains, that ceiling now appears less sensible, verging on shortsighted.
The ceiling is expected to tap the brakes on motion picture, digital media and film production in the islands, which last year tallied $90 million in estimated rebate claims — up from from $55 million the year before.
Under the tax credit ceiling’s “rolling cap,” rebates are pro-rated based on spending totals, and any credits over $35 million can be paid in the following year, except in the program’s final year, 2026. Still, the annual limit can create not only an accounting tangle for the state film office, but perhaps more significantly, budgeting uncertainty that would discourage productions in development and pre-production phases from committing to a Hawaii shoot.
“Hawaii Five-0” and “Magnum P.I.” together could spend enough this year to warrant a rebate that hits the ceiling. The prospect of being wait-listed for rebates could send scores of productions looking elsewhere for location-related incentives that are more predictable.
State lawmakers are now sizing up Senate Bill 33, which would eliminate the cap and push back the mandate’s sunset to 2033.
The reasoning that prompted the cap is understandable. Why should Hawaii be handing out tax breaks to film producers while local government struggles to cover price tags for infrastructure upkeep and public services? And it’s unclear whether, overall, the rebate program is paying off in terms of hard-dollar gains, or tax revenues.
What is clear, though, is that the industry holds potential to serve as a savvy means to further diversify Hawaii’s tourism-dependent economy. It’s spurring the creation of quality jobs while promoting Hawaii as a visitor destination. Also, it’s tied to in-demand University of Hawaii’s STEM degrees (science, technology, engineering, math).
Earlier this year, the UH-West Oahu campus had a ground-breaking ceremony for its Academy for Creative Media, which is envisioned as a link to efforts statewide in the tech-centered creative economy, including video game design and development, evolving film and television production, and new media pursuits.
There’s no doubt the Legislature needs to keep an eye on this tax incentive to make sure it doesn’t get out of control. But in the meantime, it should pass
SB 33 to maintain Hawaii’s film-friendly reputation and set the stage for future industry-focused growth.
