HOUSE OF REPRESENTATIVES	H.B. NO.	1039
TWENTY-NINTH LEGISLATURE, 2017		H.D. 1
STATE OF HAWAII

A BILL FOR AN ACT

 

 

RELATING TO FUNDING FOR CREATIVE MEDIA AND FILM DEVELOPMENT.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 

     SECTION 1.  Hawaii's film industry brings in an estimated $250,000,000 in production revenues per year, providing the State with an estimated economic impact of $437,000,000 annually.  Hawaii must keep pace to support the new platforms of creative media, which require purpose-built or renovated facilities in order to support these expanding sectors. According to the Motion Picture Association of America, the entertainment industry in the United States is comprised of 108,000 businesses and represents $104,000,000,000 in total job wages across all fifty states and includes film, television, and digital or creative media sectors.  Hawaii is well-positioned to compete in the global entertainment industry arena, but must explore ways in which to leverage current and future infrastructure assets to self-fund maintenance of existing and future facilities.

     The Hawaii film office in the creative industries division of the department of business, economic development, and tourism is involved in all aspects of the film industry, including fulfilling its statutory duties for film permitting, tax incentive management, and studio operations and management.

     With the passage of Act 88, Session Laws of Hawaii 2006 and Act 89, Session Laws of Hawaii 2013, which included enhancements to the motion picture, digital media, and film production income tax credit program, the demands on the Hawaii film office's responsibilities increased.  Without a provision in the measure to provide additional professional staff to manage the multi-million dollar program, the film office has been handling all aspects of the credit with limited staff and resources that are stretched to capacity.  While two positions and a percentage of the base funding have been restored, the costs to offer facilitation for productions, manage the motion picture, digital media, and film production income tax credit program, and maintain the Hawaii film studio far exceed the existing general fund allocations of funding and staffing.

     This Act broadens the sources of revenue for and renames the special fund created in section 201-113, Hawaii Revised Statutes.  By capturing revenues from the Hawaii film studio and other potential revenue sources such as grants, the special fund will provide a necessary funding mechanism for ongoing basic repair and maintenance of the Hawaii film studio, which average $150,000 per year, as well other new infrastructure to support the creative media and film industries.  With anticipated gross revenues generated by current film studio rental of $600,000 annually, the department of business, economic development, and tourism will have the means to maintain the studio facility and related infrastructure that it currently is unable to do.

     SECTION 2.  Chapter 201, Hawaii Revised Statutes, is amended by amending the title of part IX to read as follows:

"[[]PART IX.[] HAWAII TELEVISION] CREATIVE MEDIA AND FILM [DEVELOPMENT] INFRASTRUCTURE SPECIAL FUND"

     SECTION 3.  Section 201-113, Hawaii Revised Statutes, is amended to read as follows:

     "[[]§201-113[]  Hawaii television] Creative media and film [development] infrastructure special fund.  (a)  There is established in the state treasury the [Hawaii television] creative media and film [development] infrastructure special fund into which shall be deposited:

     (1)  Appropriations by the legislature;

     (2)  Donations and contributions made by private individuals or organizations for deposit into the fund;

     (3)  Grants provided by governmental agencies or any other source; [and

     (4)  Any profits or other amounts received from venture capital investments.]

     (4)  Revenues, fees, and charges from the rental and operation of the Hawaii film studio;

     (5)  Revenues, fees, and charges from the processing of film permits pursuant to section 201-14; and

     (6)  Revenues, fees, and charges from the processing of the motion picture, digital media, and film production income tax credit pursuant to section 235-17.

     (b)  The fund shall be used by the [board to assist in, and provide incentives for, the production of eligible Hawaii projects that are in compliance with criteria and standards established by the board in accordance with rules adopted by the board pursuant to chapter 91.  In particular, the board shall adopt rules to provide for the implementation of the following programs:

     (1)  A grant program.  The board shall adopt rules pursuant to chapter 91 to provide conditions and qualifications for grants.  Applications for grants shall be made to the board and shall contain such information as the board shall require by rules adopted pursuant to chapter 91.  At a minimum, the applicant shall agree to the following conditions:

         (A)  The grant shall be used exclusively for eligible Hawaii projects;

         (B)  The applicant shall have applied for or received all applicable licenses and permits;

         (C)  The applicant shall comply with applicable federal and state laws prohibiting discrimination against any person on the basis of race, color, national origin, religion, creed, sex, age, or physical handicap;

         (D)  The applicant shall comply with other requirements as the board may prescribe;

         (E)  All activities undertaken with funds received shall comply with all applicable federal, state, and county statutes and ordinances;

         (F)  The applicant shall indemnify and save harmless the State of Hawaii and its officers, agents, and employees from and against any and all claims arising out of or resulting from activities carried out or projects undertaken with funds provided hereunder, and procure sufficient insurance to provide this indemnification if requested to do so by the department;

         (G)  The applicant shall make available to the board all records the applicant may have relating to the project, to allow the board to monitor the applicant's compliance with the purpose of this chapter; and

         (H)  The applicant, to the satisfaction of the board, shall establish that sufficient funds are available for the completion of the project for the purpose for which the grant is awarded; and

     (2)  A venture capital program.  The board shall adopt rules pursuant to chapter 91 to provide conditions and qualifications for venture capital investments in eligible Hawaii projects.  The program may include a written agreement between the borrower and the board, as the representative of the State, that as consideration for the venture capital investment made under this part, the borrower shall share any royalties, licenses, titles, rights, or any other monetary benefits that may accrue to the borrower pursuant to terms and conditions established by the board by rule pursuant to chapter 91.  Venture capital investments may be made on such terms and conditions as the board shall determine to be reasonable, appropriate, and consistent with the purposes and objectives of this part.] department of business,

economic development, and tourism to provide for:

     (1)  Operations, repair, and maintenance of the Hawaii film studio;

     (2)  Support for new infrastructure development;

     (3)  Programs and initiatives for creative media industry development; and

     (4)  Programs that expand the skill sets of Hawaii's resident workforce in the creative media and film industries."

     SECTION 4.  Section 201-111, Hawaii Revised Statutes, is repealed.

     ["[§201-111]  Definitions.  As used in this part:

     "Applicant" means a person applying for a grant or venture capital investment from the board under this part.

     "Board" means the Hawaii television and film development board.

     "Eligible Hawaii project" or "project" means an entertainment project in which at least seventy-five per cent of the budget for the production costs, excluding salaries and costs for the producer, director, writer, screenplay, and actors in the project, is dedicated for the purchase or lease of goods or services from a vendor or supplier who is located and doing business in the State.

     "Fund" means the Hawaii television and film development special fund.

     "Venture capital investment" means any of the following investments in a project:

(1)  Common or preferred stock and equity securities without a repurchase requirement for at least five years;

(2)  A right to purchase stock or equity securities;

(3)  Any debenture, whether or not convertible or having stock purchase rights, which is subordinated, together with security interests against the assets of the borrower, by their terms to all borrowings of the borrower from other institutional lenders, and that is for a term of not less than three years, and that has no part amortized during the first three years; and

(4)  General or limited partnership interests."]

     SECTION 5.  Section 201-112, Hawaii Revised Statutes, is repealed.

     ["[§201-112]  Hawaii television and film development board.  (a)  There is established the Hawaii television and film development board.  The board shall be attached to the department of business, economic development, and tourism for administrative purposes only.  The board shall administer the grant and venture capital investment programs and the Hawaii television and film development special fund established under this part.  The board shall also assess and consider the overall viability and development of the television and film industries and make recommendations to appropriate state or county agencies.

     (b)  The board shall be composed of nine members, four of whom shall be appointed by the governor pursuant to section 26-34, and all of whom shall serve four-year staggered terms.  One of the governor's appointments shall be made from a list of nominees submitted by the president of the senate and another appointment shall be made from a list of nominees submitted by the speaker of the house of representatives.  The four appointed members shall possess a current working knowledge of the film, television, or entertainment industry.  The director of business, economic development, and tourism, and the chairs of the four county film commissions or its equivalent, shall serve as ex officio voting members, who may be represented on the board by designees.

     The chairperson and vice chairperson of the board shall be selected by the board by majority vote.  Five members shall constitute a quorum, whose affirmative vote shall be necessary for all actions by the board.  The members shall serve without compensation but shall be reimbursed for expenses, including travel expenses, necessary for the performance of their duties.

     (c)  The film industry branch development manager shall serve as the executive secretary of the board.

     (d)  The board may adopt rules pursuant to chapter 91 to effectuate the purposes of this part."]

     SECTION 6.  Section 201-114, Hawaii Revised Statutes, is repealed.

     ["[§201-114]  Inspection of premises and records.  The board shall have the right to inspect, at reasonable hours, the plant, physical facilities, equipment, premises, books, and records of any applicant in connection with the processing of a grant to the applicant."]

     SECTION 7.  There is appropriated out of the creative media and film infrastructure special fund the sum of $1,000,000 or so much thereof as may be necessary for fiscal year 2017-2018 for the purposes of the fund.

     The sum appropriated shall be expended by the department of business, economic development, and tourism for the purposes of this Act.

     SECTION 8.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 9.  This Act, upon its approval, shall take effect on July 1, 2038.

 

Report Title:

Creative Media and Film Infrastructure Special Fund; Appropriation

 

Description:

Expands funding sources to support creative industries development within the Department of Business, Economic Development, and Tourism; changes the Hawaii Television and Film Development Special Fund to the Creative Media and Film Infrastructure Special Fund; repeals various programs supported by Special Fund and the Hawaii Television and Film Development Board.  Appropriates funds.  (HB1039 HD1)

 

 

 

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