Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committees on Economic Development and Science, Arts, and Technology, to which was referred S.B. No. 2558 entitled:

beg leave to report as follows:

The purpose of this measure is to increase the amount of tax credits for eligible performing arts projects produced in the State of Hawaii. This measure also recognizes that digital media products and sound recordings are eligible performing arts projects for purposes of this tax credit.

Testimony in support of the measure was received from two individuals. Testimony in opposition to the measure was received from the Screen Actors Guild Hawaii Branch, American Federation of Musicians, Local 667, and International Alliance of Theatrical and State Employees. Offering comments on the measure were the Department of Business, Economic Development, and Tourism as well as the Department of Taxation.

In addition, your Committees received testimony in support of many of the concepts included in other film legislation, which are now incorporated in this amended measure.

Your Committees find that Hawaii's film and television industries contribute significantly to both the state's economy and to the islands' image throughout the world. Despite these successes, Hawaii now finds itself facing increasing competition in the form of tax credits and other financial incentives offered by a number of states and countries. Your Committees are strongly supportive of the efforts of the administration and the industry to offer greater incentives to attract and expand entertainment production activities in Hawaii and have incorporated many of the concepts introduced by both in this amended measure.

Your Committees also wish to express their support for a greater emphasis on "growing the local talent" in order to provide for long range growth and stability of Hawaii's entertainment production industries.

Your Committees have amended this measure by deleting its contents and inserting many of the provisions of S.B. No. 2870, heard previously by the Committees. As amended, this measure:

Your Committees understand there may be concerns regarding the deletion of the per production and annual cap amounts. These caps, which members acknowledge are a means of predicting the annual financial impacts of the tax credits, may serve to deter, not encourage investment. In some cases, the caps may actually result in a lesser amount of projected revenue than is currently the case. For example, with a $10,000,000 cap the total amount of production that would receive the full credit in a year would be $66,000,000 on Oahu or $50,000,000 on the neighbor islands. If a cap is necessary it should be set at a level that reflects the State's goals for the industry.

Your Committees wish to thank all those who contributed to this "work in progress" and look forward to continuing dialogue with the administration and industry representatives in crafting legislation that will help develop digital media into a significant part of Hawaii's economic base.

As affirmed by the records of votes of the members of your Committees on Economic Development and Science, Arts, and Technology that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 2558, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 2558, S.D. 1, and be referred to the Committee on Ways and Means.