Legis.Doc - -

Document Sample
Legis.Doc - - Powered By Docstoc
					                                                                    SPONSOR: Rep. Keeley & Rep. D.E. Williams & Sen. McDowell &
                                                                             Sen. Hall-Long
                                                                             Reps. Bennett, Blakey, Carey, Hocker, Hudson, Kovach,
                                                                             Lavelle, Lee, Manolakos, Miro, Ramone, B. Short, D.P.
                                                                             Williams, Wilson; Sens. Bonini, Connor, Sorenson

                                                  HOUSE OF REPRESENTATIVES
                                                   145th GENERAL ASSEMBLY

                                                        HOUSE BILL NO. 250


 1            WHEREAS, the Film Industry is a $60 billion dollar industry currently running a trade surplus in the United

 2   States; and

 3            WHEREAS, 47 states have incentive programs to attract film projects to their state; and

 4            WHEREAS, numerous studies have confirmed that such incentives succeed in bringing thousands of jobs, tax

 5   revenue and significant economic impact; and

 6            WHEREAS, Delaware currently lacks a recession-proof industry and has 33,000 citizens unemployed; and

 7            WHEREAS, tourism in Delaware is a $1 billion plus industry which would significantly benefit from the

 8   promotion which feature films produced in Delaware would provide; and

 9            WHEREAS, the banking industry has indicated a willingness to provide loans to film projects provided the State

10   fully guarantee those loans; and

11            WHEREAS, cultivating a home-grown film industry will enhance the quality of life of all Delawareans and

12   promote Delaware’s creative talent and retain their contributions in state.

13            NOW, THEREFORE:


15   members elected to each house thereof concurring therein):

16            Section 1. Amend Chapter 61, Title 29 of the Delaware Code by adding a new subsection “(v)” thereto as follows:

17            “(v)(1) A special fund of the State is hereby created in the Office of Management and Budget to be known as the

18   "Delaware Film Finance Guarantee Fund". The Secretary of Finance shall deposit into the Fund all moneys appropriated

19   thereto and all revenue generated from the sale of state guaranteed bonds issued in accordance with the Delaware Film

20   Finance Incentive Program.

                                                               Page 1 of 5
     HD : JDN : SES                                                                               Released: 06/19/2009 01:21 PM
21            (2) Moneys from the Delaware Film Finance Guarantee Fund shall only be used to guarantee loans made through

22   the Delaware Film Finance Incentive Program and satisfy the obligation created by such guarantee should it be called upon.

23            (3) The Delaware Film Finance Guarantee Fund shall be an interest earning account with any earned interest being

24   reinvested therein.

25            (4) All tax revenue collected from businesses registered with NAICS code 5121 (Motion Picture and Video

26   Production), shall be deposited in the Delaware Film Finance Guarantee Fund. All tax revenue generated by the

27   employment of individuals in such businesses shall be deposited in the Delaware Film Finance Guarantee Fund. This

28   provision shall be limited to $5 million per fiscal year, all remaining surplus being deposited in the General Fund.”.

29            Section 2. Amend §5054, Title 29 of the Delaware Code by re-designating the existing subsection (e) as “(f)”

30   thereof and by inserting a new subsection “(e)” thereto as follows:

31            “(e) In accordance with the Delaware Film Finance Incentive Program, the Delaware Economic Development

32   Authority is authorized to guarantee loans to feature film projects for up to 30 percent of a project. The full faith and credit

33   of the State shall be pledged to the payment of, and shall guarantee, any debentures issued by the Delaware Economic

34   Development Authority pursuant to this program. Such debentures shall be issued within limits promulgated by the

35   Delaware Film Finance Incentive Program for the purpose of attracting the film industry permanently to Delaware, subject

36   to the following:

37            (i) No loan guarantee may exceed $5 million;

38            (ii) The total size of the loan guarantee program shall be determined by an appropriation within the State’s Bond

39   and Capital Improvement Act or the annual Appropriations Act, or otherwise enacted by the General Assembly;”.

40            Section 3. Amend Chapter 50, Title 29 by adding a new “Subchapter V-A” thereto as follows:

41            “Subchapter V-A. Delaware Film Finance Initiative Program

42            § 5074. Legislative findings; authorization.

43            The General Assembly finds that expansion of the film industry in this State will result in increased job

44   opportunities for Delaware residents, produce more tourist revenue in this State and increase the tax base. In order to

45   encourage the increased availability of financing capital to such ventures, the Delaware Economic Development Authority

46   is authorized to issue guarantees on loans to film projects that qualify for the Delaware Film Finance Initiative Program.

47            § 5075. Definitions.

48              As used in this chapter:

49            (1) "Feature film project" is a project to produce a film made for initial distribution in theaters.

                                                                Page 2 of 5
     HD : JDN : SES                                                                                    Released: 06/19/2009 01:21 PM
50            (2) "Major distribution territory" is a territory with significant market share in the film industry, such as Japan, the

51   UK, and Australia.

52            (3) "Major film sales company" is a company which negotiates and secures contracts with distributors in major

53   territories for feature film projects.

54             (4) "Completion bond insurance" is a form of insurance offered by a completion bond company to guarantee that

55   the producer will complete and deliver the film (based on an agreed script, cast and budget) to the distributor(s) thereby

56   triggering the payment of minimum distribution guarantees to the producer (but received by the bank/investor who has cash

57   flowed the guarantee to the producer).

58            (6) "Above the line" individuals denote someone whose contract is negotiated rather than determined by market or

59   union-rates.

60            (7) "Producer" is someone who participates in one or more of the following: initiating, coordinating, supervising

61   and controlling matters such as fund-raising, hiring key personnel and arranging for distributors for the purpose of making a

62   film.

63            (8) "Production" is the process of recording a film.

64            (9) "Post-production" is the process of editing a film into a finished product, ready for showing at theaters.

65            § 5076. Eligibility for loan guarantee.

66            The Delaware Film Finance Initiative Program ("the Program") promulgates the following regulations prescribing

67   the minimum qualifications for businesses, whose sole purpose must be the making of a feature film project (“project”),

68   seeking the state’s guarantee of a loan to their project.

69            § 5077. Qualifications for projects seeking loans under the Program.

70            (a) Projects may apply to the Council for Development Finance (“the Council”) for a loan guarantee under the

71   Program provided:

72                      1. They have formed an LLC or incorporated in Delaware;

73                      2. The loan application does not exceed $5 million or 30% of the project’s total budget; and

74                      3. The application is made on such forms and at such time as the Council may by regulation prescribe.

75            (b) Projects which certify and provide documentation of the criteria listed in subsection (a) of this section may be

76   approved for a loan guarantee by the Council provided:

77                      1. At least two distribution contracts in major territories through a major film sales company;

78                      2. 70% of each project's budget is deposited in escrow, with the 25% of the total budget financed through

79            a major film sales company;

                                                                 Page 3 of 5
     HD : JDN : SES                                                                                   Released: 06/19/2009 01:21 PM
 80                    3. Completion bond insurance is procured;

 81                    4. Affidavit that the individuals “above the line” attached to the project agree to file taxes with the State

 82           of Delaware on the revenue they receive from the film's receipts and to file W2s for the income they receive from

 83           the film's production;

 84                    5. Production and post-production will be provided by a Delaware company;

 85                    6. A Delaware resident is listed as a producer; and

 86                    7. 80% of the project will be shot in Delaware.

 87           (c) Loan guaranteed through the Program shall have the following terms:

 88                    1. All principal and interest shall be repaid within 3 years;

 89                    2. An interest reserve for 36 months of interest payments; and

 90                    3. The project's North American distribution rights are pledged as collateral.

 91            (d) Applications seeking investment which qualify under this subchapter shall be subject to approval as follows:

 92                    a. Loan applications shall be reviewed by the Council on Development Finance ("the Council") which

 93           shall evaluate such applications based on criteria established above; and

 94                    b. Based on such review, the Council shall recommend applications for approval by the Chairperson of

 95           the Delaware Economic Development Authority. No application shall receive a loan guarantee under the Program

 96           unless and until it has been recommended for approval by a majority of the Council and has been approved by the

 97           Chairperson of the Delaware Economic Development Authority.

 98                    c. The Chairperson's approval shall be restricted to verifying whether or not the project has met the terms

 99           of the requirements of this program.

100           § 5078. Certification of Delaware Producer for loan application.

101           (a) The requirements necessary to qualify as a Delaware producer under the Program shall include the following:

102                    (1) The person has been a resident of the state for at least 1 year;

103                    (2) The person has not been an applicant for a loan guarantee under the Program which failed to shoot

104           80% in this State.

105                    (3) The producer has been recommended by an affidavit from the Tourism Advisory Board.

106           § 5079. Revocation of qualification or certification.

107           (a) The Council for Development Finance may, after notice and an opportunity for a hearing, revoke any loan

108   guarantee under this Program if the Council finds:

                                                               Page 4 of 5
      HD : JDN : SES                                                                                Released: 06/19/2009 01:21 PM
109                      (1) Any material representation made by the business or by any person on behalf of such business in

110            connection with an application under this subchapter was false when made; or

111                      (2)   The application otherwise violates any conditions detailed in this subchapter.         If any such

112            qualification is revoked, the loan guarantee shall be revoked.

113            (b) The Council is authorized to require that any application or such other document as it requires to be filed with

114   the Council be submitted under penalties of perjury.

115            (c) Notwithstanding § 581 of Title 30, the Director of Revenue may disclose tax return information of any

116   applicant to the Council whenever the Council notifies the Director of Revenue that such information is necessary or

117   desirable for any determination required under this subchapter. The Council may not further disclose any information

118   received under this subsection except to the Council on Development Finance and then only to the extent necessary for the

119   Council to carry out the duties specified in § 5097 of this title.

120            (d) The Corporation and the Council on Development Finance shall not disclose to any person, other than in

121   compliance with a proper judicial order, any information contained on any application for qualification for loan other than

122   to any applicant for the note of guarantee, provided the business applicant authorizes such disclosure, and to the Director of

123   Revenue.”.

              The Delaware Film Finance Incentive Program will provide a loan guarantee to film projects which demonstrate
      exceptional probability of repaying their loan. The qualifications for that standard are based upon New Mexico's extremely
      successful Film Investment Loan program. The qualifications, in brief, are:
              1. That the film project has 70% of its financing already secured and in escrow;
              2. That the film project has secured international distribution in major territories; and
              3. That the film project has secured insurance for its completion.
              Applications for the loan guarantee will be approved or denied by the Council for Development Finance and the
      Chairperson for the Delaware Economic Development Authority.
              In addition to the qualifications specified above, the film project must agree to shoot 80% of the project in
      Delaware and hire Delaware companies to produce it, so that the tax revenue generated by the film project's production
      will go to the State.
              The loan guarantee provided by this Program will be provided against a new fund, the Delaware Film Finance
      Guarantee Fund, which will be funded through tax revenue generated by this legislation.

                                                                  Page 5 of 5
      HD : JDN : SES                                                                                Released: 06/19/2009 01:21 PM