harvey @ deneroff.com

In January, I commented on Blue Sky Studios’ announced move from one New York suburb to another, i.e., from White Plains, New York, to Greenwich, Connecticut. The main reason for the move was because of Connecticut’s lucrative tax credit program.  It seemed to give Connecticut a successful animation house, proved again by the subsequent release of Horton Hears a Who! However, in the Please sir, can I have some more department, Blue Sky doesn’t  seem satisfied with the original deal and, according to Connecticut newspapers, is trying to squeeze even more out of the state.

Such negotiations are probably not unusual, except that they do involve an animation studio, which is yet another indication on how far the industry has come over the past few decades. And to prove the point, the Muscatine (Iowa) Journal reports (here and here)  that,

A family-owned animation company servicing the entertainment industry has moved to Winfield from Los Angeles after Iowa legislators created new tax incentives for  film companies locating in the state.

The Iowa Film, Television and Video Project Promotion Program was passed in 2007 to provide tax incentives to attract the film industry, job diversity, and talent to the state. The Iowa Film Office of the Iowa Department of Economic Development operates the program.

“It created fertile ground for companies to relocate to Iowa,” said Stephen M. Jennings, founder and co-president of Grasshorse Technologies Inc. “It was the deciding factor in our transition to Iowa.”

Grasshorse, a digital animation and special effects subcontractor, is obviously not in the same league as Blue Sky, but the story was nevertheless picked up by Fortune Small Business (here and here), which noted that,

In recent years the economic corridor that stretches from Iowa City to Cedar Rapids has emerged as a powerful locus of economic growth, not only in film but also in computer simulation, bioengineering, and renewable energy. … The falling dollar helps Iowa companies compete globally, as do generous local incentives such as a state tax exemption on profits from overseas sales.

“A key factor,” says Jennings, “was being able to compete with animation studios in Korea and India.”

I suspect studios in Korea and India are not exactly quacking in their boots about what Iowa (or Connecticut) are doing. Small regional studios, such as Grasshorse have been around for quite a while, including several which have done work for major Hollywood companies. (For example, much of the animation for the animated The King and I and special effects for Independence Day were widely subcontracted out to smaller studios and individuals.) Though trying just to compete solely on a cost basis is something of a fool’s errand.

As to the situation in Connecticut, Greenwich Time reported on Friday, March 28th, that,

The chief operating officer of Blue Sky Studios Inc. was at the capitol yesterday lobbying lawmakers to support millions of dollars worth of financial incentives to move the company to Greenwich.

… The proposal, circulated by the architect of the tax credits, House Speaker James Amann, D-Milford, has raised concerns because it would require lifting the annual cap on the credits from $15 million to $25 million.

Amann has said that although the digital animation production credits passed last year are open to all takers, the $15 million annual cap was tailored to attract Blue Sky for a 10-year commitment. The company underestimated how much it would need, which is why he wants to lift the cap to $25 million, Amann has said.

The New York Times, on Saturday, put the battle between New York and Connecticut in some perspective, reporting that,

With a proud film history dating back almost a century, to D. W. Griffith’s creation of a 28-acre production lot in Mamaroneck, Westchester County is increasingly watching production companies be lured across the border to Connecticut, which now offers them a 30 percent tax credit, compared with New York State’s 10 percent.

Since the Connecticut tax credit took effect in July 2006, that state has gone from playing host to the occasional film shoot (remember “Mystic Pizza”?) to attracting 66 feature films, television shows and commercials with a collective $400 million in production costs, the majority of it in the Fairfield County suburbs of New York.

At the same time, similar suburbs across the border in Westchester County have seen their film shoots shrivel. In 2006, Westchester was the setting for scenes from 14 big-budget features, as well as numerous independent films; last year, two movies were partially shot here.

The story goes on to say that even New York City, which has been somewhat insolated from these bidding wars, is starting to lose business to several other neighboring states. The state legislature will undoubtedly respond with its own set of incentives. I’m sure the film industry will be delighted. After all, it’s nice to be wanted.