News Column

Wizard of Subsidies [Reason Magazine]

July 1, 2013


Taxpayer-financed trip to Oz

When Oz the Great and Power-fid hit theaters in March, it was not the most expensive movie ever made. But with a reported production and marketing cost of $325 million, it was an unusually pricey film, even compared with similarly effects-driven spectacles.

To help finance the picture, the movie's backers resorted to a now-common practice: moving the production to a state with lavish film subsidies. In this case, that state was Michigan, which has one of the most generous film subsidy programs in the nation.Hie filmmakers received almost $40 million to shoot in the state. As the free market Mackinac Center for Public Policy reported, that works out to a little more than the price of one movie ticket for each resident of Michigan. Hie film was initially granted its subsidy in 2010, when the program rebated Hollywood moviemakers up to 42 percent of any production expenses they incurred within the state.

The state government also agreed to back $18 million in municipal bonds to help finance the production, using state pension funds as a guarantee.The deal was structured so that if investors didn't pay, state retirees would. The investors didn't come through.

By the time the movie opened to the public, Michigan Motion Picture Studios (MMPS), a production company that filmed Oz in Pontiac, had missed three payments on its bond obligations. The state retirement system has filled the gaps, paying at least $1.68 million on behalf of MMPS in the year before the film's release.

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