EVALUATION Minnesota Film And TV Board

xMINNESOTA FILM AND TV BOARDReport SummaryThe Minnesota Film and TV Board isa private, nonprofit corporation.Acting as the state’s film commission,its purpose is to support and facilitatethe film and television industry andproduction in the state. For example,the board helps producers findMinnesota acting talent and crewmembers who work in the industry. Italso helps producers identify filminglocations and obtain permits to film inspecific locations.The state began funding boardoperations in the fall of 1983. For thepast several years, the Legislature hasgranted 325,000 per year for boardoperations. The board must match 1from nonstate sources—either in cashor in kind—for every 3 of statefunding.The board also administers the state’sfilm production jobs program. Theprogram is intended to supportproductions that create new jobs forMinnesotans who work in the film andtelevision industry.The film production jobs programprovides a rebate to film productionsthat meet eligibility criteria. Therebate equals 20 or 25 percent ofproduction-related expenses. Certainexpenses, such as alcohol and tobacco,are not eligible for rebate.Minnesotans’ wages and somenonresident wages are eligible.The Legislature has providedinconsistent funding for the filmproduction jobs program. TheLegislature appropriated 10 millionfor the program for the 2014-2015biennium. This funding levelexceeded all previous funding for theprogram combined. The fiscal year2015 appropriation of 5 million wassimilar to funding for a sample ofother states’ programs, but was belowfunding in most other states with filmincentive programs.Currently, the Department ofEmployment and EconomicDevelopment (DEED) providesoversight for state grants to the board.Since fiscal year 2010, ExploreMinnesota Tourism and theDepartment of Administration haveprovided oversight at different times.The Legislature and state grantagreements have not been clearabout expectations for boardoperations grants or the filmproduction jobs program.State grants to the board arelegislatively mandated. That is, theLegislature has named the board toreceive or administer the grant funds.Ideally, grantee duties in agreementsfor legislatively mandated grants arebased in part on legislation.Appropriation language for theoperations grant has stated only thatthe grant is for the board.When the Legislature is not clearabout its expectations, the stateoversight agency may be unable tojudge whether the board’s proposedactivities are consistent withlegislative expectations. The fiscalyear 2010 through 2013 operationsgrant agreements between the stateand the board specified grantee dutiesby incorporating the board’s annualwork plans. The work plans did notidentify which items were boardduties under the state grant agreement.The board’s current operations grantagreement with DEED includes fewerbut more concrete duties. Theagreement lists six finite duties. Theyinclude, for example, (1) launchSnowbate, (2) increase the listings in

SUMMARYxithe Minnesota Production Guide, and(3) produce and distribute three to fiveMinnesota film location and incentivemarketing trailers.1The Legislature’s funding of theprogram may also be affecting theability of the state to attract largerbudget films or television series.Regarding the film production jobsprogram, the Legislature has left manyprogram details to the Minnesota Filmand TV Board. For example, theboard approves program eligibilitycriteria developed by its SnowbateOperations Committee.We question whether two eligibilitycriteria the board developed areconsistent with the state law thatgoverns the film production jobsprogram.The board’s eligibility criteria forthe film production jobs programmay be limiting the program’sability to realize some filmproduction benefits, but statefunding of the program is likely acontributing factor too.States offer film incentives to obtain arange of benefits attributed toincentives, including (1) job creation,(2) spending “on Main Street,”(3) other production-related spending,(4) tourism, and (5) tax revenue.Different types of projects will yieldmore or less of each benefit.The board has set low minimumspending requirements forproductions. Television commercials,postproduction-only projects, andlow-budget films accounted for mostprojects that the board approved forincentive funds in fiscal year 2014.Several people we spoke to said thatlow-budget films do not create jobsthat pay well. Postproduction-onlyprojects include little spending “onMain Street” beyond thepostproduction businesses themselves.And we question the ability of any ofthese types of projects to inducesignificant tourism in the state.1“Snowbate” is the name the Minnesota Filmand TV Board has given the state’s filmproduction jobs program.The film production jobs program hasa standard reimbursement rate, butstate law specifies that productionscan receive a higher rate if they meetcriteria related to higher spending orfilming outside the Twin Citiesmetropolitan area.When the Legacy Arts and CulturalHeritage fund supported the filmproduction jobs program in fiscalyears 2012 and 2013, the boardapproved criteria that allowedreimbursement at the higher rate forproductions in which three of the topfive highest paid positions were heldby Minnesotans. All productions thatreceived a rebate during this timequalified for the higher rate based onthis criterion.2Currently, board criteria allow thehigher reimbursement rate when apostproduction-only project spends atleast 200,000 in Minnesota.According to state law, the minimumspending needed to receive the higherreimbursement is 1 million unless theproduction occurs outside the TwinCities metropolitan area.Minnesota Film and TV Board staffappear to submit accurate requestsfor operating funds to the state andthoroughly review expense reports2At that time, the standard rate was 15 percentand the higher reimbursement rate was20 percent.

xiiMINNESOTA FILM AND TV BOARDsubmitted by productions approvedfor film production jobs rebates.State oversight of the Minnesota Filmand TV Board has focused onfinancial issues. State agencies have,for example, verified that the boardmeets the private-match requirement,that the board’s expenditures areconsistent with grantee duties and thelaw, and that the board has sufficientlyreviewed reimbursement requestssubmitted by production companies toreceive incentive funds.Agency staff found few problemsduring their reviews. DEED staffindicated that the board’s documentswere consistent and accurate and thatthey have found only minor errors.The staff person from ExploreMinnesota Tourism commented thatthe board’s incentives specialist andfinancial administrators showedattention to detail. The staff person atthe Department of Administrationwho oversaw the grant said he foundonly minor issues during his oversightof the board’s grant.In our review of productions’ files, wesaw evidence that the incentivesspecialist completed detailed reviewsof expenditure reports. Filescontained correspondence between theboard’s incentives specialist andproduction companies questioning andresolving some expenses.However, we noted a problem withthe board’s administrative expensesduring one grant period.Board administrative expenses for thefilm production jobs program underone of the grant agreements exceededthe limit in state law. State law limitsthe program’s administrative expensesto 5 percent of appropriations for theprogram in any year.The board’s administrative costs forthe film production jobs program werebetween 6 and 13 percent of theLegacy Arts and Cultural Heritagefund appropriation. The Departmentof Administration retained anadditional percentage.3The board stayed within the budgetapproved by the Department ofAdministration, but the approvedbudget exceeded the amount allowedby the law that authorizes the filmproduction jobs program.The Minnesota Film and TVBoard’s grant reports have beenincomplete, inaccurate, andpotentially misleading.As part of its grantee duties, the boardhas created annual and sometimesmid-term grant reports. These reportshave not fully reflected the scope ofthe board’s work.In some cases, the board’s grantreports have included inaccurateinformation. These inaccuraciesappear to be errors rather thandeliberate misreporting. As a case inpoint, the board’s calculations relatedto full-time-equivalent jobs (FTEs)associated with projects have beenimprecise and, at times, inaccurate.For example, the board’s reports ofFTEs associated with projects assistedby the incentive program includeprincipal performers who do not livein Minnesota. At this time, the impactof including non-Minnesotans in FTEcalculations is limited because fewprojects have employed nonMinnesota principal performers.3The appropriation law permitted thedepartment to retain 1 percent of granted fundsfor administration. Laws of Minnesota 2011,First Special Session, chapter 6, art. 4, subd. 6.

IntroductionMost states have film offices. These offices help producers find filminglocations and crew and navigate state and local permitting. State filmoffices also market their state as an attractive filming location. And dozens ofstates offer financial incentives to encourage producers to choose their state asthe setting for film and television projects.Since 1983, Minnesota has relied upon the Minnesota Film and TV Board toserve as the state’s film office. In addition, the Legislature has chosen the boardto administer the state’s film production incentive, called the film production jobsprogram.1 The program provides a rebate based on production spending toproducers who complete eligible projects in whole or in part in the state. TheLegislature has funded the board and the incentive program through state grants.In April 2014, the Legislative Audit Commission directed the Office of theLegislative Auditor to evaluate the work of the Minnesota Film and TV Board.We addressed the following questions: How well has the Minnesota Film and TV Board managed the stategrants that fund its operations and the film production jobsprogram? Do board activities reflect state expectations? How does Minnesota’s film production incentive compare with thosein other states? To what extent does the program’s design supportthe benefits states seek by offering incentives? What is the history of state support for the film industry inMinnesota? To what extent has the support helped or hindered theeffectiveness of the board and the film production jobs program?To answer these questions, we reviewed grant agreements between the board andt

EVALUATION REPORT Minnesota Film and TV Board O L A . Program Evaluation Division The Program Evaluation Division was created within the Office of the Legislative Auditor (OLA) in 1975. The division’s mission, as set forth i