Iowa Subsidizes the Movie Industry -- A Good Idea?

September 30, 2009, 8:20 a.m.

Movies Are Getting More Expensive
And It's Not Just the Ticket and Popcorn Prices
(brought to you by FromDC2Iowa.blogspot.com*)
Now I don't mean to minimize the outrageous prices we're charged for popcorn at the movies. And if you're curious as to how much profit a movie theater can make from 11 cents worth of popcorn see my earlier analysis in Nicholas Johnson, "From Politics to Popcorn," January 1, 2007.

But it turns out we're spending millions of dollars of our own money making those movies. And since it now turns out some of those millions are going to private cars for the movie makers and iPhones for their kids, questions are being asked about the wisdom and generosity of Iowans paying 50% of the cost of movies made in this state -- by far the most generous program of any U.S. state, even if it all went into movie costs.

See, Donnelle Eller, "State weighs film credits' cost vs. return," Des Moines Register, September 27, 2009; Jason Clayworth, "State routinely withholds tax credit data from public," Des Moines Register, September 28, 2009; Jason Clayworth, "Director denies abusing tax-credit system," Des Moines Register, September 29, 2009.

Frankly, I think that focus is too narrow.

Transferring taxpayers' money to the bottom line of for-profit corporations, and the pet projects of wealthy campaign contributors, has never made a lot of sense to me.

My writing on the subject was originally prompted by the ill-fated proposal, widely supported by Iowa's politicians and newspapers alike, that was originally the $300 million "Iowa Child" indoor rain forest and ultimately went through many name and purpose changes, a failure to raise a dime of construction money, a rejection by virtually every Iowa town along I-80, and ended as a proposed $150 million "Earthpark" for a tulip bed somewhere in Pella that has yet to be funded and built. See the lengthy, entire Web site, Nicholas Johnson, "Earthpark."

Along the way I came to question everything from "TIFs" to mislabeled "jobs programs" to the bailouts of banks and auto manufacturers, that seemed to me an ill-considered waste of taxpayers' money and a total distortion of the separation between "socialist" programs and "marketplace, free private enterprise."

Here's a sample excerpt from one of the early entries in this blog three years ago, representative of the dozens of op ed columns and blog entries since:

What they [governments] spend tends to fall into three categories (with subsets):

(1) clear government functions (e.g., the military and and public schools, libraries and parks) primarily performed by government employees;
(2) outsourcing related governmental functions to private contractors, performed by employees of for-profit firms (e.g., defense contractors and road building firms); and
(3) simple transfers of public tax revenues to for-profit firms (and individuals).

The latter is problematical for a number of reasons.

(a) Ideologically, how does it square with "capitalism," "free private enterprise," etc.?
(b) With one-third of the 800,000 new start-up firms each year out of business four years later, these aren't very good odds for our tax dollars -- especially given that the recipients we choose to enrich are those who couldn't convince investors, venture capitalists or bankers to pick up the tab.
(c) The data is somewhere between fuzzy and totally non-persuasive that the public receives anything like fair value for its money.
(d) How can we possibly know that a grant of public funds (or tax forgiveness) is actually tipping the scales and making a difference in any given business decision? How do we know the recipient wouldn't have gone ahead anyway with the investment, or that the decisive factors in the decision involved matters other than how much public money they could worm out of the state (e.g., quality of the work force, schools, outdoor recreation, crime control, water supply, transportation networks)?
(e) How do we justify providing cash to one business person while denying it to his or her competitors?
(f) And isn't a system like this just asking for something between good-old-boy-ism and outright bribery in terms of how the goodies are distributed?

Nicholas Johnson, "Neutral Principles, Anyone? Justifying Corporate Welfare," July 12, 2006.

For a Des Moines Register op ed column from three months earlier that expanded on this theme, complete with supporting sources in footnotes in this online version, see Nicholas Johnson, Values Fund May Not Be So Valuable for Taxpayers," Des Moines Register, April 13, 2006.

The practice of transferring the taxpayers' money to the bottom line of for-profit corporations becomes especially insidious when it involves "tax credits." "Transparency" or not, it becomes somewhere between very, very difficult and impossible for the public or media to track just who is getting how much from where and for what when the funds transfer takes the form of reduced taxes.

It would be no more consistent with the desirable separation of socialism from capitalism, but at least everyone would know what's going on, if the published tax rates applied to every individual and business, and the subsidies took the form of appropriations, cash transfers, above the table, to identified beneficiaries in itemized amounts.

The Iowa City Press-Citizen has long been a champion of open government, public meetings, public records, and transparency, and I admire them for that. Indeed, it is the absence of transparency in some of Iowa's tax credit programs that is the focus of the paper's editorial on the abuses in Iowa's efforts to encourage the making of movies here. Editorial, "Public Has a Right to Know About Tax Credits," Iowa City Press-Citizen, September 29, 2009.

I just think the problem of taxpayer grants to for-profit ventures is much bigger, and more destructive of the state's economy, than some tax credits to a movie company. They are just a tiny sub-set of what needs fixing.

State Support of the Arts

In a recent five-part series on the relocation of the University of Iowa's Hancher Auditorium I addressed "Hancher and the University's Academic Mission," a sub-heading in Nicholas Johnson, "Hancher - Part IV," September 17, 2009. Is it consistent with the mission of an academic institution to provide what amounts to public entertainment events -- such as collegiate football, and Broadway shows on tour?

Similar questions need be asked about the use of taxpayers' money to support the arts generally, especially for-profit artistic ventures. But similar answers are also available.

1. "Everybody's doing it." Normally I don't find this a very persuasive argument for transferring my money, against my will, to for profit corporations. But the fact is that most states do exactly what Iowa does for the movie industry. Our 50% may be a little on the generous side compared with their 25% to 30%, but that's kind of a detail. And then there's always the line, "If we don't attract them to Iowa some other state will just attract them elsewhere."

2. "Why not the movie business." Another argument might be that, as long as we're giving away taxpayers' money to for-profit enterprises, why have a bias against the movie business. Clearly my arguments have not been persuasive to those legislators who want to continue favoring some businesses over others in the distribution of my money. That being the case, they might as well include movie makers.

3. "State public relations." Movies made in Iowa, like any other product or service in Iowa, involves local purchases, and employment, benefiting Iowa's economy. But that's the least of their potential benefit to the state. Whether made in Iowa, or merely about Iowa, a film a positive presentation of our state in film or television, or merely a reminder to the public that we exist, can have a positive impact in attracting businesses, professionals, students, and tourists. We can't buy that kind of publicity with print or Internet ads, state magazines and maps, even if we had the money to try. Amazon has a Web page called, "Iowa Connections -- Movies Made in and/or Featuring Iowa" that lists some 20 feature films. And its list doesn't even include "State Fair," "The Music Man," "Cold Turkey" -- a Norman Lear film that paid Iowans in 1969, rather than asking for handouts, as John Carlson reminds us [Photo/poster credit: Des Moines Register] -- or make any mention of the role of Riverside, Iowa, in "Star Trek" or the mention "West Wing" made of Iowa City's Hamburg Inn # 2 (or, alas, Senator Grassley's offer of $50 million of our money for his friends' indoor rain forest).

4. "Legitimate state expenditure." Even if movies were not one of the best public relations bargains going, government support of the arts is more in the tradition of legitimate state expenditures, including those for public schools, parks, libraries and museums. Historically it was kings, and the very wealthiest, who thought it important to support the arts with what was then the equivalent of tax money. Many school boards think it is quite appropriate to provide budgets for student instruction, and extra curricular activities, in the graphic or visual arts, theater, choral groups, dance, bands and orchestras. The state of Iowa is about to invest something on the order of $300 million in the replacement of the Hancher-Voxman-Clapp buildings. Many cities use public money to build local auditoriums and venues. Congress, which seemingly can agree on little else, has over the years agreed to the wisdom of federal support of the arts through such agencies as the National Endowment for the Arts, National Endowment for the Humanities (now headed by our own Jim Leach), and Corporation for Public Broadcasting, among others.

5. "The Creative Community and Economic Growth." Richard Florida and others make a persuasive case that emphasizing creative communities, with the amenities creative professionals are looking for, can do more for economic growth than handing out taxpayers' money to conventional businesses -- businesses that might have come there anyway, or that came only because of the subsidy and will leave as soon as some other community offers them more.

Have you ever stayed to watch all the credits roll after the movie? It's a listing of an incredible number of professions and skills, most of which we've never before heard of and remain something of a mystery as to what they might involve, and often hundreds of people. When a movie is made in Iowa, a number of those jobs come here -- not just the jobs for a few lucky actors and dozens of paid or unpaid "extras." But again, the greatest significance for our state is not that movie making is some great employment program. It is that it enables us to nurture more of the creative class here in Iowa on a permanent basis, and attract those from the creative class in Los Angeles, New York, and elsewhere that come here for the duration of the project.

That's not to say the state's program for subsidizing the movie industry shouldn't be subjected to the same analysis as any other subsidy program. [Jennifer Jacobs, "Gronstal: I may regret creating film incentives program," Des Moines Register, October 2, 2009 (“'If it’s all just a great big give-away with no long-term job creation or economic growth in this state or people having full-time employment, then this isn’t a very good deal for the state of Iowa,'” said Senate Majority Leader Mike Gronstal, D-Council Bluffs").] But it is to say that it may well be able to make a case for taxpayer assistance that other businesses cannot.
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* Why do I put this blog ID at the top of the entry, when you know full well what blog you're reading? Because there are a number of Internet sites that, for whatever reason, simply take the blog entries of others and reproduce them as their own without crediting the source. I don't mind the flattering attention, but would appreciate acknowledgment as the source, even if I have to embed it myself. -- Nicholas Johnson
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Hancher Relocation Process and Site

July 10, 2009, 8:30 a.m.

University Offers Useful Model for Major Decisions
(brought to you by FromDC2Iowa.blogspot.com*)
The way the University of Iowa is going about the Hancher-Voxman-Clapp rebuilding project interests me almost as much in terms of the decision making process and procedure as the ultimate outcome.

The UI's "Facilities Management" held a major town hall-style meeting last night (July 9) with an invitation to all local folks interested in coming -- at which an estimated 350 showed up. It has created a Web site with relevant information, and provided an email address for those wishing to offer opinions, suggestions, and objections. It promises more public meetings in the future.

The Web site is http://facilities.uiowa.edu/hvc-site.htm. The email address is hvc-site@uiowa.edu.

Unlike some past University -- and City, business and homeowner ongoing -- decisions to flout warnings about building in flood plains, and failing to provide flood-mitigating greenways, this time the University is taking very seriously the risk of future flooding. Its studies are not yet completed, but the Web site provides access to the current pdf file-report: Siting of Hancher/Voxman/Clapp and Art Building Flood Mitigation Task Force Recommendations, e.g., "The second and most important recommendation of the Task Force is that the future Hancher/Voxman/Clapp and Art Building complexes be designed and built in such a way that they are protected at least to an elevation two feet above the 500-year floodplain, as that 500-year floodplain has been newly calculated by a 2009 hydrologic study conducted by the Corps of Engineers and funded by the University of Iowa. This level of protection would be approximately seven feet above the high water elevation of the 2008 flood."

And the Web site also provides a link to the Power Point slides used at last evening's meeting. If you're interested in either the ultimate location of the buildings, or the process issues surrounding the University's decision-making process, these slides are very much worth your time. They include maps of the eight sites' locations, photos of the sites, and perhaps most significant a listing of the "criteria" used for evaluating them, which of those were considered "critical," and a comparative evaluation of the two sites thought to be the best of the eight.

Here is Lee Hermiston's report of last night's meeting: Lee Hermiston, "2 Possible Hancher Sites Show Promise; Citizens discuss relocating complex at public forum," Iowa City Press-Citizen, July 10, 2009 ("While eight sites on and off campus have been identified, Joe Hibbard of Sasaki and Associates said not all of them will fit space, parking, topography and other critical needs. . . . The two sites with the most promise are the land directly north of the existing Hancher-Voxman-Clapp complex, dubbed Site 1, and a two-block parcel of land in downtown Iowa City"). And see, Erin Jordan, "Hancher Site List Narrowed to Two," Des Moines Register, July 10, 2009; Diane Heldt, "East vs. West for Relocated Hancher," The Gazette, July 10, 2009, p. A1.

The Press-Citizen's editorial yesterday urging attendance: Editorial, "Give Your Input Tonight on Where to Move Hancher," Iowa City Press-Citizen, July 9, 2009

And some letters to the editor yesterday that put forth arguments for and against the two top sites:

Katherine Belgum, "Move Facility West of Its Present Site," Iowa City Press-Citizen, July 9, 2009 ("The obvious choice is right along Riverside Drive just west of where the buildings are now located -- but built close to the street and uphill from there current location")

Regenia Bailey, "Iowa City Needs an Urban Auditorium," Iowa City Press-Citizen, July 9, 2009 ("Placing Hancher Auditorium and the School of Music in downtown -- ideally south of Burlington Street -- would meet both city and UI objectives")

Donald Baxter, "Link New Hancher and Courthouse," Iowa City Press-Citizen, July 9, 2009 ("Hancher should be located in such a place as to reinforce the growth of Iowa City's downtown, so the locations along Burlington Street are the most ideal")

Commentary

As you may have gathered, I'm relatively well impressed with the process. If I recall correctly the "eight sites" were disclosed to the community by the University some time in March, rather than sprung on us last evening. Unlike the school board's proposal to close Roosevelt Elementary School, last night's meeting didn't have the aura of a "done deal." That may just be because the consultant and officials involved were simply more slick with their public relations than the school board members were with theirs. It's possible that the "March eight" were simply straw men to provide the illusion of alternative possibilities when "site 1" was already pretty obvious to them. But if that's the case they're entitled to some credit for their PR skills (an application of valuable skills somewhat analogous to the old advice, "be sincere, even if you don't mean it").

The point is, whatever may have gone on in back rooms, their list of "criteria" seemed rational and genuine, their comparative evaluation of sites 1 and 6 seemed balanced (that is, it acknowledged the strengths and weaknesses of each) rather than an argumentative effort to favor one over the other. They did hold the town meeting. They did explain and demonstrate their rational process. They are seeking to get the best data available with regard to risk from future floods, and they seem to be willing to have their decision driven by that data. They did listen to the remarks of a significant number of attendees. And the listening could come across as genuine since they had not merely presented to the audience what they were going to do (even if that was the case), but rather their "criteria" in a process that was represented to be ongoing rather than a done deal, and one that would involve additional public meetings.

Is there a template we can draw out of the contrast between the school board and Facilities Management approaches? I think so.

To hold a public meeting, with the express or implied representation that an institution genuinely seeks public input -- ideas, suggestions, reactions, objections -- that will help shape and be incorporated in a final decision, when in fact the decision has been made, is disingenuous at best and seriously self-defeating. It's worse than holding no meeting at all. Not only was the public not included, it was lied to and its efforts were merely wasted time.

On the other hand, there is a reason why experts with professional training are used by institutions as employees or consultants. You can't turn every decision over to a majority vote of the inadequately-informed, special-interest-driven mob.

So what's the best balance? I think the judicial process has something to offer in a procedure that might include the following:

o provide as much advance notice and transparency as possible with regard to future decisions

o outline the issues and relevant data for the public, in writing, on Web sites, as early in the process as possible

o include the criteria the institution believes relevant, along with a full and candid, independent, analysis of the arguments and data pro and con with regard to each option

o hold public meetings, and provide other opportunities for public input, at that point -- with a focus not on the ultimate decision, but on the data that needs to be gathered and the criteria that are relevant, of those the ones that are "crucial," and what is, and is not, thought to be appropriate analysis

o make some modifications, however relatively insignificant, in those data and criteria based on suggestions received, to provide the reality as well as the appearance of genuine listening and response -- rather than just rejecting all out of hand and sticking with the institution's initial list

o hold a public meeting at which the options (not a "decision," but the options) are presented along with an analysis of each in accord with the agreed upon criteria and data; listen and respond as appropriate to presentations by members of the public (while politely urging them to stick to the agreed upon criteria and avoid repeating the arguments of others)

o finally -- and the analog drawn from appellate court process -- when the ultimate decision is made issue a written explanation of how it was arrived at and why, that identifies and acknowledges every suggestion that came from the public throughout the process and the impact it had on the decision and why. (For example, suggestions were made last evening regarding the possibility of building over the Iowa River, or re-purposing the Foundation building as Clapp. Such ideas should be considered (even if ultimately rejected) -- rather than merely rejecting them, like universal, single-payer health care, as "off the table.")

A couple substantive ideas, and then I'm through.

On the assumption the "New Hancher" will go somewhere in the area bounded by the Iowa River, Park Road, and Riverside Drive I do hope some detailed thought will go into the potential greenway -- (a) using a parking lot surface that permits the permeability of water into the subsoil, and (b) planting of the grasses most able to hold back runoff. Properly planted, flood plains without homes and buildings not only eliminate property damage, they can also reduce the seriousness of the floods that will, inevitably, occur -- with their potential to absorb as much as a five-inch rain without raising the level of the River.

Has thought been given to re-routing Riverside Drive, so that its intersection with Park Road would occur nearer the River, across Park Road from the lower entrance into City Park? This could free up even more land near the top, rather than the bottom, of the present acreage.

What are the University's plans for 50 years out? I can recall when most of the University's buildings were within an easy walk of the Pentacrest. It was not until the late 1920s that it began to build (e.g., field house, hosptial, stadium) on the West side. It always seemed a shame to me that we did not take advantage of the $100 million spent on refurbishing Kinnick to buy land, and build a modern stadium and parking area, well out of town. Is the hospital complex going to have to continue to "build up instead of out"? The rest of the University as well? Or are we, at some point going to have to establish a second campus -- perhaps linked by monorail? If not, no problem (except for the congestion, and impact on Iowa City's historic neighborhoods, and downtown). But if that will need to happen at some point we might be wise to be thinking about it now, and considering (even if considering and then rejecting) the possibility of doing that with the "New Hancher" (while leaving Voxman and Clapp nearer to where they are).

All thoughts prompted by one evening meeting.
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* Why do I put this blog ID at the top of the entry, when you know full well what blog you're reading? Because there are a number of Internet sites that, for whatever reason, simply take the blog entries of others and reproduce them as their own without crediting the source. I don't mind the flattering attention, but would appreciate acknowledgment as the source, even if I have to embed it myself. -- Nicholas Johnson

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