From 8 Mile to Rodeo Drive: Can Hollywood Magic Save Detroit?

Lights! Camera! Tax incentives!

Michigan Governor Jennifer Granholm last year signed a bill into law that gives movie companies spending more than $50,000 up to a 42% tax credit for shooting in her state.

The bet: Increased film-making will create high-paying jobs in a state slammed by the collapse of the US auto industry. The unemployment rate there is expected to hit 10.5% in 2009.

In 2008, production companies spent $65.4 million to film in Michigan - a minuscule slice of the multi-billion-dollar movie industry. But the expenditures generated another $93.8 million in related economic activity. And, according to a report by Michigan State University’s Center for Economic Analysis, Hollywood spending is expected to grow 187% off a small base through 2012.

But some who view the economy as static question the tax incentives and argue that other industries are then required to make up what they see as lost revenue, making the state as a whole less competitive.

Well, let's see: New Mexico adopted a similar tax incentive program in 2002. A report for the state prepared by Ernst & Young found that the program has attracted about 115 major movie productions. In 2007, the film industry spent $253 million there, creating 2220
direct jobs and generating $22.6 million in tax revenue.

Incentives can work, at least in the short-term. Wisconsin increased its rebate, and snared Johnny Depp’s Public Enemies from Minnesota. But California, long the center of movie making, has declined to offer any breaks.

Michigan’s immediate barrier to becoming the La La Land of the Midwest is its limited film infrastructure and small number of skilled production technicians. Among the steps it's taking to overcome this obstacle converting a shuttered General Motors (GM) plant into a sound stage. Ironic, isn't it?

The state’s tax incentive program has had some success, enticing Clint Eastwood’s Gran Torino -- a production of Time Warner’s (TWX) Warner Bros. -- to shift to metropolitan Detroit from Minnesota. And roller derby saga Whip It! -- starring Drew Barrymore, Ellen Page, Juliette Lewis and Marcia Gay Harden -- was filmed in Michigan and is scheduled to be released in October.