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Can Minnesota reel in Hollywood money?

More film and TV productions would come to Minnesota if incentives were greater — but the state remains ambivalent.

Photo provided by Wilson Webb/Fox Searchlight
Before the cameras roll, Wilson director Craig Johnson (far right, back to camera) discusses the scene with actor Woody Harrelson (in the maroon car).

Those who caught a glimpse of Woody Harrelson this summer know that the actor wasn’t in town to simply absorb the Twin Cities sights, see friends or relatives, or perhaps film a commercial—the reasons Hollywood stars have typically visited the Twin Cities in recent years. He was here for the filming of Wilson, the first full-length feature film to be mostly produced in Minnesota since 2009.

The Fox Searchlight production chronicles a curmudgeonly man’s quest to find his former spouse and the daughter he never knew he had. Set for release this year, it will star Harrelson as the title character, Laura Dern as his ex-wife Pippi and — in a significant break with typecasting — the Twin Cities as Oakland, California.

Admittedly, Minnesota wasn’t the first choice for Wilson, according to its director, Craig Johnson. After wrapping his 2014 film The Skeleton Twins (starring Bill Hader and Kristen Wiig), he reached out to the state of California for a rebate. At the time, California’s reimbursement procedure for independent films operated as a lottery system, which The Skeleton Twins lost, along with 455 other applicants. And that experience set the stage for how he would approach Wilson. “The first step [toward choosing Minnesota] came when we realized Oakland wasn’t going to work out [for] tax incentives.”

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While screening The Skeleton Twins around the U.S. in April 2014, Johnson eventually landed at the Minneapolis-St. Paul International Film Festival. Despite breezing through the Twin Cities in a day’s time, he recalled being fascinated by the diversity of the people, the photogenic neighborhoods and “cool, funky parts of town,” specifically around the St. Anthony Main theater, where his film was shown. “So that was it,” he says today. “I put it in my back pocket as a place to come back and visit.”

A year later, Johnson began scouting shooting locations for Wilson. The script (penned by Daniel Clowes who also authored the graphic novel the film is based upon) called for a mid-sized, progressive, gentrifying American city, which originally seemed destined for somewhere far west of the Mississippi River. According to the Wilson director, Seattle, Portland and Denver were all in contention with the Twin Cities. The screenplay’s 54 shooting locations ran the gamut—from a lakeside tourist restaurant to a prison — and “once we did our initial trip out [to Minneapolis] and saw it had everything we needed,” Johnson says, “it became a no-brainer.”

Between opening a production office in May and wrapping at the end of July, the film racked up more than $6 million in taxable expenditures in Minnesota. Roughly three-quarters of the behind-the-camera crew (totaling more than 100 people) were local residents represented by a film and television union. In front of the camera, Wilson called for 54 speaking roles, of which roughly three-quarters were cast from the Twin Cities, as were hundreds of background actors.

By concentrating Wilson’s production costs on mostly talent and services found within Minnesota, Fox Searchlight was able to maximize the state’s film reimbursement program. As operations go in the filmmaking industry, fruitful incentive packages make or break a state’s chances to draw in projects. To date, 35 states offer a film incentive, with Minnesota the lone Upper Midwest state with such a program. Referred to as Snowbate, the state’s rebate program will cover up to 25 percent of costs incurred while producing a movie, television show or commercial, as long as at least 60 percent of the production occurs here.

Showcasing Minnesota

“When they were going to make Wilson, Fox Searchlight called and asked me what I thought of shooting movies in Minnesota,” says film producer Robert Graf, admitting he warned of the state’s comparatively lesser reimbursement program, but boasted about its active talent. Originally from Prior Lake, Graf worked as a location manager on the Coen brothers’ 1996 film Fargo, which was filmed here. By the next year, he began working producer roles and has since shepherded 15 films to the screen, most of which are Coen brothers projects, including Hail, Caesar!, scheduled for release in February.

How snowbate works

Example: Wilson
Filmmaking budget:$10,667,394
Minnesota expenditures (including payroll):$6,078,666
Total Minnesota payroll:$3,295,408
Reimbursement from Snowbate: $1,519,666
Net savings to filmmaker:14.2%
Net direct proceeds to Minnesota economy:$4,559,000

Expenditures include costs related to 30 shooting days at 54 locations, including $250,000 spent on location fees.

Source: Estimates based on Snowbate application submitted by Pippi Productions

When a bountiful paycheck isn’t in the picture, the film’s financiers and producers like Graf say they “call around and ask filmmakers ‘How was your experience?’ ” when it comes to shooting in areas with an uncertain amount of shot variety, service accessibility or experienced crew. “If you’re not going to make the movie based solely on incentive dollars, then that’s the way people make decisions,” he says of industry protocol. Hearing a colleague give a positive review of a state’s unique offerings can, at times, be a tremendous convincer, Graf says. “Word-of-mouth plays an enormous factor.”

Similarly, film festivals can play a role in helping attract new projects for Minnesota. As was the case with Wilson, the Minneapolis-St. Paul International Film Festival (MSPIFF) and the Twin Cities Film Festival (TCFF) help highlight Minnesota’s filmmaking assets beyond Snowbate money, with an underlying goal to lure future film, TV or commercial projects here.

In April, MSPIFF will celebrate its 35th anniversary, seeking to top its 2015 event, which featured more than 200 films from 70 countries. The well-attended festival attracted more than 40,000 people, with hundreds in the film industry coming in from around the world. Among them were Minneapolis native and Mad Men star Vincent Kartheiser, along with fellow Minneapolitan Bill Pohlad, who closed the festival with Love & Mercy, the critically acclaimed film he directed that follows the life of Beach Boys songwriter Brian Wilson.

Although only in its sixth year, TCFF has also proven it can draw some of the industry’s top talent. Alexandria-born John Hawkes, who received a 2011 Best Supporting Actor nomination for Winter’s Bone, joined the festival ranks promoting Too Late, where he plays a troubled private eye searching for a “stripper with a heart of gold.” More than one-third of the 120 films shown at TCFF had a Minnesota connection—filmed in-state or using a crew with local ties. Roughly 8,400 filmmakers and attendees came to support the October festival, which was sponsored by HBO.

“I’ve had filmmakers tell me that because of the festival they are considering shooting in Minnesota,” says Jatin Setia, executive director of TCFF. “One of the ways you do that is you showcase your state. If they come for an event where they get to talk to a potential production crew in a networking setting, it goes a long way; that’s how you build relationships.”

MSPIFF has been the subject of similar testimonials, says Susan Smoluchowski, executive director of the festival and its parent nonprofit, the Film Society of Minneapolis-St. Paul. Director Alfonso Gomez-Rejon told Smoluchowski in an email last year that he plans to return after the positive experience he had screening his 2015 indie flick Me and Earl and the Dying Girl.

‘If you build it …’

An essential ingredient that would make Minnesota a more popular filmmaking state is infrastructure — basically, a huge studio area where filmmakers have ready access to soundstages, a closed set, state-of-the-art equipment and post-production facilities. Building such a studio can amplify production activity, as it has done in Chicago with Law & Order producer Dick Wolf’s Cinespace Chicago Film Studios. Matched with Illinois’ 30 percent, non-capped reimbursement, Wolf’s 1.5 million-square-foot space has most recently attracted Fox’s hip-hop melodrama Empire and several NBC productions. In contrast, Minnesota’s lack of a facility comparable in size has hurt its appeal.

Field of Dreams originally planned to shoot in Chisholm, where one of the film’s central figures, ballplayer Moonlight Graham (played by Oscar-winning actor Burt Lancaster), lived much of his life. Filmmakers scouted the city, but ultimately decided on Iowa because of a lack of infrastructure in Minnesota. Since then, more than 65 other productions have scouted the Iron Range region and come to a similar conclusion.

Little changed until 2004, with the arrival of scouting crew for North Country, which recounts the first major successful sexual harassment case in U.S. history, Jenson v. Eveleth Mines. The film had a reported $35 million budget and opened a conversation with the Iron Range Resources & Rehabilitation Board (IRRRB) about offering an additional incentive so that North Country could maintain local authenticity rather than ship production to Michigan for a better rebate. The IRRRB voted 8-4 in favor of establishing a 10 percent rebate of up to $200,000. As of 2013, the board had upped both the program’s reimbursement percentage and cap so that a film produced on the Iron Range can receive a rebate of up to 20 percent of its costs or $500,000, whichever is smaller. This rebate also is stackable with Snowbate, so a movie filmed on the Iron Range can receive rebates of up to 45 percent.

“What I discovered, though, was that the rebates on paper were 45 percent, but were netting out to be less than 45 percent,” says Jerry Seppala, who once did contract work with the Minnesota Film and TV Board. To earn the full 20 percent return, the IRRRB rebate restricted projects to the talent and services solely within the Iron Range region. Consequently, without a studio in the area or an experienced crew base to boot, plenty of projects passed.

But Seppala plans to change that trend this year with the opening of a state-of-the-art moviemaking facility called Ironbound Studios. Located 12 miles from the Range Regional Airport and underneath Chisholm City Hall, Ironbound has transformed a 45,000-square-foot former hockey and curling rink into a full-fledged studio. According to Seppala, the space will be outfitted with the same technology, soundstage and post-production capabilities as any studio in Los Angeles or New York. Even special effects company Big Sky Laboratories—with a filmography that includes Live Free or Die Hard, Night at the Museum, and The Last Witch Hunter—is setting up an operation at Ironbound.

“The rebate is good enough that in the course of the couple years, I can see it turning into the next hotspot where everyone wants to go shoot their movies,” says Matt Dean Russell, founding executive partner of Big Sky Laboratories. “It would make all the sense in the world for me to have a creative partnership with Ironbound.”

Neither Seppala nor Russell sees any reason that a $50 million production couldn’t film at Ironbound, but luring blockbusters won’t happen overnight. “If we are able to work within the incentive programs to increase the caps — in the case of the IRRRB — and increase the pool — in the case of Snowbate — we’ll be able to compete with anyone in the world,” says Seppala. “That’s the only impediment [at the moment].”

A lack of production-ready crewmembers is also an impediment, however. In order for production companies to maximize the stacked incentives, payroll (which typically makes up two-thirds of a production’s costs) must apply to crewmembers living within the Iron Range region. So to make Ironbound a more attractive venue, Seppala is aiming to educate the applicable populace.

Do film incentives really work?

The U.S. Department of Commerce’s Bureau of Economic Analysis says that every $1 million spent by the film industry will turn into $1.66 million in economic output for a state, while creating an additional 18.9 jobs.

Meanwhile, critics of the incentives system argue the process would be better off scrapped for a federally controlled tax credit program. Carrie Meyerhoff, who managed the Office of the Legislative Auditor’s evaluation of Minnesota’s film production jobs program, believes Snowbate does not pay for itself.

In an April 2015 report, her office wrote: “Of the several studies we reviewed that included tax impacts, all showed that the state taxes collected from wages and spending do not cover the cost of film incentives.” The analysis cited a 2013 analysis of Louisiana’s tax credit incentive, which estimated the net cost to the state at nearly $170 million in 2012.

In return, the analysis found the state received 23 cents for each dollar in tax credits awarded. (Louisiana offers one of the nation’s most popular film incentives, with a potential 35 percent return up to any dollar amount.) Meyerhoff clarified in an email that her office’s study was “focused on state taxes generated (that would offset the state’s spending), not all taxes.”

“We had an open casting call for some background actors, and 175 people showed up here on a Wednesday,” he says. “Two hours prior to that, we also had an open call for crew, and 75 people showed up. And these are people who work in other capacities somewhere—either recently laid off from the mines, in home construction or craft services like seamstresses.”

In his experience, Russell has come across robust incentive programs that didn’t immediately offer a capable crew base to shoulder the workload of a feature film. In his special effects office at Ironbound, he plans to move in a few lead artists and either attract or train in the local talent. “After that rebate sticks for a while, the crew gets better,” Russell says. “The more shows that come in and out of there, the more employment it will have for the local economy.”

Despite what Ironbound must do to raise its profile in the film industry, Seppala claims to already have letters of intent for over $70 million in film projects (pending scheduling) from a number of agencies. Admittedly, the stacked incentive is what generates most of that interest and without it, Seppala believes, the studio would go under. “It’d be over before we got started,” he says. “But if we demonstrate that the amount of spend occurring during these productions translates into economic development and job creation, I think [that lawmakers] would be hard-pressed to discontinue a program that is successful.” The studio’s first production, a feature-length film titled Legend of Grimrock: After the Fall, is based on a best-selling video game and set to begin filming in January with a $4 million budget.

The indispensable rebate

In 1997, Minnesota was the first state to enact a reimbursement program, a time when it was a moviemaking destination attracting major feature film productions including Little Big League, Mallrats and The Mighty Ducks series. The rebate began with a 5 percent return of up to $100,000, but was quickly copied and improved upon around the nation. The land that truly stole Minnesota’s cinematic thunder was Canada, which offers both national and provincial incentives that can reimburse up to 50 cents of every dollar spent.

Coming to a theater (or TV, laptop or phone) near you
Recent TV and film projects at least partially shot in Minnesota

Who’s in it: Woody Harrelson stars, Craig Johnson (The Skeleton Twins) directs
What the project is: Feature-length film by Fox Searchlight
Where it was filmed: More than 50 locations, largely around St. Paul
When it was shot: May through July 2015
How much was spent in-state: $6,078,666

Lady Dynamite
Who: Duluth native Maria Bamford stars
What: Television series by Netflix
Where: Duluth and the Twin Cities area
When: October through November 2015
How much: $2,042,328

I Am Not a Serial Killer
Who: Christopher Lloyd (Back to the Future) stars
What: Independent feature-length film
Where: Iron Range region and Minneapolis
When: February through March 2015
How much: $806,156

Blood Stripe
Who: Minnesotan Kate Nowlin (Young Adult) stars
What: Independent feature-length film
Where: Lake Vermilion area
When: Summer 2014
How much: $368,602

Legend of Grimrock: After the Fall
Who: Vincent Talenti (Fallout: Nuka Break web series) directs
What: Independent feature-length film
Where: Ironbound Studios
When: January through February 2016
How much: $4 million (est.)

“It quickly became one of those things where a movie you could make in Minnesota, you could make cheaper in Vancouver or Toronto,” says Graf. “The first and—almost sad to say—only thing you do is go to the current list of filming-incentive states and decide which ones might possibly fit the story you are trying to tell. Were it not for incentives, there are all sorts of movies that would undoubtedly consider Minnesota. Instead, you have to have a pretty compelling reason to want to shoot in Minnesota.”

When the Coen brothers chose to film 2009’s A Serious Man in the Minneapolis area, Graf admits there were more enticing incentives in places in Michigan and Wisconsin. However, the directing duo’s affinity for their hometown trumped the cheaper alternatives. “Frequently you end up where you can either go here and spend a million less dollars,” says Graf, “or somewhere else and spend the same amount of money and get $1 million more in production value. The filmmakers themselves have to make these choices of what’s truly important.”

Duluth-born comic Maria Bamford took this approach for her semi-autobiographical Netflix show Lady Dynamite, which is slated to begin airing in April. That production spent a little more than $2 million filming in Duluth and Twin Cities in order to maintain a sense of authenticity, although much of the production took place in Los Angeles, where there is more incentive money.

There also has been a trend of Minnesota-set films moving to cheaper production locations in the last 10 years, including Miracle (2004), Juno (2007), Leatherheads (2008), Gran Torino (2008), Public Enemies (2009) and Contagion (2011). More recently, in 2013, Minnesota lost perhaps the largest budgeted project the state could have had: Fargo, the television adaptation on FX, loosely based on the popular 1996 film.

When the Minnesota Film and TV Board reached out to lasso in the project, “FX just laughed when we told them we only had $10 million to give,” says the board’s executive director, Lucinda Winter. Instead, Fargo settled in Calgary to claim a better reimbursement offering and, since then, Snowbate has dwindled even further. “For 2013 and 2014, I had $5 million each year. Then in 2015, just $3.5 million,” says Winter. “Now for 2016, I have $1.5 million for all film projects. It’s not so much our 25 percent reimbursement that isn’t competitive, because that’ll cover most of the production costs. Where we are not competitive is simply our pool of funds available.”

Although Fargo’s budget remains unknown, the lost opportunity could be compared in scale to that of House of Cards, according to Winter. Maryland reimburses roughly $10 million to $12 million per season/year of House of Cards, she says. But the production is estimated to be spending about $60 million a year in Baltimore, “working with 2,121 Maryland crew, cast and extras on a 160-day shooting schedule that uses 2,050 Maryland vendors annually.”

With funds drying up, Minnesota could even see its film and recording workforce — amounting to 938 firms and 5,193 workers with a total payroll of $126 million — shrink in synchronicity. But a simple lack of funds is only half the problem; the other is inconsistency.

“What I hear loud and clear from production companies is ‘You have to have consistent funding, because we are doing business planning,’ ” says Winter. “Netflix tells me that to do a series they need to be able to count on $8 million year after year, and HBO tells me the exact same thing. It would be so great to get a series because it’s such long-term employment and visibility for your market and tourism.” Winter believes Snowbate would operate best at a steady $10 million annually, which could raise the industry’s GDP in the state to half a billion dollars.

Twin Cities BusinessCompletely cutting the money, though, would almost assuredly mean Wilson would be the final major motion picture to film in the state. In March, when Minnesota legislators outline dispersal of the state’s supplemental budget, Snowbate could receive the extra funds that its supporters hope for. As Graf, Winter and Seppala see it, with improved support of state funding, Hollywood could end up shouting “action” instead of “cut” on filmmaking in Minnesota.

Sam Schaust is TCB’s online and e-newsletter writer.

This article is reprinted in partnership with Twin Cities Business.