Before shooting a frame of his movie "Velocity," producer Ingo Vollkammer changed the action thriller's location from Texas to Madrid. Then to Berlin. Then to Montreal.
The multiple script rewrites and location changes for the $25 million Halle Berry picture didn't stem from writer's block. They reflect a financial squeeze.
In a Hollywood starving for cash, movie producers like Mr. Vollkammer are increasingly basing major creative decisions on a mundane consideration: where they can land the fattest tax incentives and government subsidies.
As he was gearing up for the project in 2007, Mr. Vollkammer realized he could save money by moving the production to Europe, in part because the euro was weakening against the dollar. In addition, the Spanish government was offering lucrative subsidies that would offset the film's cost by millions. So he had a screenwriter rewrite the entire script, moving a climactic action sequence from a U.S. government building to a train station in Madrid.
Then Germany made an even better offer: If he set the film there, attaching a German director, the government would absorb about 40% of the film's budget. But by this fall, the euro had strengthened against the dollar, canceling out most of the savings for the Los Angeles-based producer.
So Mr. Vollkammer ordered one more rewrite, moving the film to Montreal and setting the action finale in the city's Olympic Stadium. By agreeing to shoot in Canada with a German director, he secured both subsidies and tax incentives but with production costs tallied in a weaker currency.
By changing elements like the location of the story and even the nationality of the director, Mr. Vollkammer found a way to access those subsidies, allowing him to slash his costs to just $15 million and make largely the same movie.
"I realized I can't be too fussy about the creative elements of my movies," says Mr. Vollkammer, who plans to begin shooting "Velocity" in March. "I would rather back a script into a budget than a budget into a script."
In recent years, many countries, plus several states around the U.S., have ramped up tax incentives and subsidies, competing with each other to attract film-production dollars in hope of boosting the local economy.
Michigan offers credits for as much as 42% of a film's in-state budget, and Utah and North Carolina have both recently increased their incentives to stay competitive. France recently enacted a new law that creates a 20% rebate for foreign productions shot in the country that have ties with French culture.
The incentives have become critical for many independent producers, who have found it increasingly difficult to raise film financing through the usual channels, including loans and pre-sales to distributors abroad.
While Mr. Vollkammer is an independent producer whose prior movies include thrillers such as "Grace," "One Way" and "Walled In," major studios haven't shied from taking advantage of such incentives. Warner Bros. shot Clint Eastwood's "Gran Torino" in Detroit after Michigan enacted its tax credits.
Jean-Luc De Fanti, a managing partner at Winchester Capital Management, which invests in independent films and provides financial services to the film industry, recently made some tough choices himself. Mr. De Fanti, who financed "The Men Who Stare at Goats," a comedy about military intelligence partially set in the Middle East and starring George Clooney, decided to shoot half the film in Puerto Rico and the other half in New Mexico, both of which offer sizable tax incentives. The tax incentives shaved about 15% off of the film's $30 million budget.
"We didn't have to change the script" to move to those locations, he says, "but we had to convince the talent to spend some time in Puerto Rico and New Mexico."
"Of course, if you're setting a film in Tuscany, you can't substitute Detroit for Tuscany," says Isaac Palmer, a managing director at Mesa, a boutique investment bank that specializes in entertainment and media. "But to the degree that you can, people are going through that exercise."
The rebates and tax credits vary among areas but typically are based on expenditures incurred in the state, including equipment purchases, set design, special effects, meals, airfare and insurance. Generally, labor costs apply only if the worker is a state resident, actors included.
To be sure, tax credits aren't a substitute for traditional equity or debt financing for a film.And some states impose caps on how much a production can get back, and often producers can get the reimbursements only at certain times of year.
Still, some filmmakers are desperate to take advantage of credits, says Peter Graham, a principal at a financing company called 120dB Films Tax Finance LLC, adding: "I have had to tell people, 'No you can't shoot that surfing movie in Iowa.'"
Credits: The Wall Street Journal
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