Fiscal Cliff Hollywood Handout Could Spark More Small Town Bankruptcies

Deep inside the fiscal cliff compromise passed Tuesday night is an item that could lead more cities into bankruptcy.

Allen Park, Mich. is an idyllic American town in the heart of the Rust Belt, the kind of place that far-left filmmaker Michael Moore claims he grew up in. A population of 28,210, and median household income around $56,000 a year puts it solidly in the middle class. It somehow escaped the ravages of Urban Blight that left other Michigan cities destitute as auto plants idled over the past thirty years; its poverty rate is only 6.6 percent.

That is, until the town caught show biz fever. The first Canadian Governor of Michigan, Jennifer Granholm, passed a tax credit that would pay back movie producers up to 42 percent of any money they spent in Michigan. (It’s kind of like going to Canada for the exchange rate, only better).

Hollywood rushed into the state to take advantage of the offer. Michigan paid out $110 million in 2010, before Governor Rick Snyder capped the subsidy at $25 million. Moore even got $830,000 for (ironically) filming portions of “Capitalism: A Love Story” there. For a while it looked like the new Hollywood was going to be in Michigan.

Enter Jimmy Lifton, a Music Man type who convinced the good people of Allen Park he was a famous Hollywood producer, and that their town could be that next Hollywood. Gary Burtka, the Mayor of Allen Park, was so star-struck, he didn’t even bother to check Lifton’s credits on IMDB. With the help of Granholm, they pitched an idea that would bring a new movie studio to the Midwest along with, a film school and a tourist attraction.

Granholm was a star herself: a former Miss SanCarlos and a Hollywood actress, whose sole credit was an appearance on “The Dating Game“in 1978 before she became Governor.

Like most government plans, the business model was fatally flawed from the beginning. The state of Michigan was expected to keep the studio afloat with film production credits and job retraining grants. More than $800 thousand was spent training unemployed auto workers to learn film skills like editing and stunt coordination.

Apparently no one bothered to check the unemployment rate in Hollywood, which was virtually the same as Michigan. (With the exception of unemployed actors, which encompasses the entire population of Southern California, minus the dozen residents currently working on pictures.) The income from film classes would have the allowed Lifton to cover his end of the bargain, around $90 million and allow them to complete the studio. Eventually he defaulted, and the project was cancelled.

Now the city is stuck with $31 million dollars of bonds, including the $25 million dollars they paid for a $5 million dollar building. The state of Michigan has appointed an Emergency Manager to run the City under a form of receivership that is usually reserved for blighted communities, like Pontiac, which also was convinced to build a movie studio they couldn’t afford.

The film industry is one of the most lucrative industries in America, and movies are among our biggest exports. There is no reason why we should be subsidizing the lifestyles of those who are clearly in the one percent. Yet it’s estimated that various states will be giving the Industry close to $1.5 billion this year. Meanwhile the recently passed Fiscal Cliff deal promised an additional $430 million tax subsidy to Hollywood producers.

I’m sure there are worse things in the budget that just passed through the House and Senate. I’m even more convinced that those who voted for it, will claim once again, they had to pass it, so they could find out what was in it.