Incentives can be useful as a tool to grow a fledgling industry. The trick is to keep it from becoming an abject giveaway. Where the developing film and digital media industry is concerned, state leaders must ensure that Hawaii be competitive but move with care to balance inducements against the duty to keep the states’ tax-credit program fiscally responsible and honest with the taxpayers.

At this point in the legislative session, a few steps are being taken in the right direction, but the work is not done.

Lawmakers and the state and county film officials find themselves under the gun to extend the life, at the very least, of the tax credit authorized in Act 88. That credit expires in 2016, and advocates say that planning will soon be under way for future projects beyond that date.

The measure that appears to take the most targeted approach, with an eye on how the credit affects state tax revenues, is House Bill 2869, which Wednesday cleared a key threshold, approval by the House Finance Committee.

The debate is far from over — a competing version is moving through the Senate — but the broad outlines of the House version seem the soundest.

Senate Bill 2111, for example, spells out quotas for local hires. In the first two years of the credit, at least half the production cast and crew must be legal residents of the state. Given that one of the purposes of the credit is to grow Hawaii’s film workforce, which is still relatively small, producers might balk at such specific language.

And here’s what both bills lack: a provision to provide transparency on the tax-credit dollar amount that each project gets.

Here are a few of HB 2869’s key features:

» The tax credit for motion picture, digital media and film production would extend until January 2025.

» The maximum production credit to be paid would be $10 million, up from $8 million; supporters say this would be attractive to the larger-scale productions Hawaii hopes to bring here.

» The tax credit for non-salary production costs on Oahu would remain at 15 percent, while neighbor island productions would qualify for 25 percent, up from 20 percent, to overcome the added costs there.

» To encourage local hiring, the credit would be calculated separately for wages paid to cast, crew and musicians. In this category the differential would be maintained — 15 percent for Oahu (defined as a county "with a population of 700,000 or more"), 20 percent elsewhere.

But wages paid to Hawaii residents would be eligible for an additional 5 percent. This is a more effective way to build the workforce than simply mandating that a set percentage of the hires be local.

» To ensure that the incentive has proper oversight, the bill mandates that the state Department of Business, Economic Development and Tourism submit a report on its economic impact before the 2015, 2020 and 2025 legislative sessions.

The future of the credit must get serious scrutiny at each of these junctures, since not all of the data on these incentives are rosy.

A 2010 report by the Center on Budget and Policy Priorities shows that such programs cost the 43 states that enacted them about $1.5 billion in tax revenues the previous year. Massachusetts was cited as an example, reclaiming only 69 cents in income for its residents for every dollar lost to the tax credit.

An update published by the center last year showed that some states are starting to cap their subsidies or reducing the incentive in some way.

This is why the state also must rethink its current policy of releasing only aggregated data on the credit and implement transparency on how much each project gets. Industry concerns about this information being proprietary should be seen as outweighed by the public interest in knowing how its money is being spent.

Transparency helps to ensure that illegitimate expenses aren’t being claimed and reduces the risk of abuse by state officials and industry insiders.

Hawaii should view a measured sacrifice of tax revenue as being a worthy investment in a desirable industry that generates good jobs and supports tourism as a side benefit. But caution should be the watchword. The tax money given up here is not chump change — and taxpayers shouldn’t be treated as starstruck chumps.