A wave of panic is spreading among Michigan film subsidy beneficiaries and backers. Gov. Rick Snyder’s budget plan calls for replacing the state’s three-year-old incentive program (which the Detroit Free Press notes paid out $60 million to moviemakers last year alone) with a yearly allowance capped at $25 million.

The Free Press’s main film subsidy cheerleader, Mitch Albom, sounded the alarm loud and clear in a lengthy Feb. 20 column.

“We look like fools,” Albom declared of Snyder’s plans, noting what he thinks is the reaction from the rest of the nation. He then urged folks to contact their state legislators (“Call them!”) and tell them to preserve the open-ended subsidies.

Albom further stoked the fire in a Feb. 24 article, and at a “Town Hall meeting” in Livonia where he was the keynote speaker.

Taxpayers in Allen Park may not share Albom’s confidence in the program after the city voted to lay off all 27 firefighters. As reported in the Detroit Free Press, a failed film studio project is the reason.

“The decision to issue the layoff notices was attributed to financial problems caused by the decision announced last year by Unity Studios to leave the city for Detroit.”

The city and state offered a sweet subsidy deal of its own to lure the promoter of a supposedly $146 million project called “Unity Studios.” A Nov. 2010 Mackinac Center blog post summarizes what followed:

“It’s taken less than two years for the entire project to implode. The (ceremonial) groundbreaking in August 2009 was followed by a tumultuous period which saw Unity Studios founder Jimmy Lifton go from promising thousands of jobs at his privately owned utopian 104-acre film studio and “retraining program,” to a scaled down studio and film school on city-owned property, to near eviction and eventually hightailing it out of Allen Park to set up shop in Detroit.”

If not for the promise of more than $40 million in state and local tax credits, investment and loans, Lifton may not have been so eager to push for the project. Instead, because of the government-offered handouts, it appears that a core government service that protects citizens — firefighting — may be sacrificed due to the pipe dream of luring Hollywood to Allen Park.

A recent Earnst and Young study claims a return of $6 on every tax dollar spent in the state on film and TV production. Albom cites this as a reason for giving $125 million to the industry, rather than the $25 million proposed by Gov. Snyder. He confidently predicts that this will ensure “nearly $400 million a year in film/TV activity.” 

Michigan Budget Director John Nixon told Michigan Capitol Confidential that the governor’s proposed budget is not about opposing the film industry. Instead, it’s about what makes sense, because the money that the state gives to movie makers comes out of state coffers paid in by all taxpayers.

“I wouldn’t sit here and say we have to kill (the film industry) or it’s a waste of time,” said Nixon. “We have to come up with a mechanism that doesn’t hurt the state the more successful they (the filmmakers) are. Whatever the number is, it’s coming at the expense of something else.”

The Mackinac Center has long been critical of these types of programs, based on two exhaustive studies. (The most recent study was completed in 2009.) The Center’s conclusions were reinforced by a state audit conducted in 2010, a recent Senate Fiscal Agency analysis, and a study from the Upjohn Institute.

Even if the state hired actors Kurt Russell, William Baldwin and Robert De Niro to replace laid-off firefighters, the empirical evidence suggests it is unlikely that the money spent on such a niche industry will ever pay off.

Barbara Hansen made $114,815 in 2010 as general manager of Detroit Transportation Corporation. DTC exists to operate the Detroit People Mover, the municipal rail system that serves downtown Detroit.

Hansen also received a $14,696 pension contribution made by her employer last year. It is a benefit DTC employees get that far exceeds the private sector. The DTC contributes 12.8 percent of W-2 wages for employees’ pensions, more than double the payment made to a typical private sector employee with a retirement benefit.

“That’s not where you want to be,” said Rick Dreyfuss, a pension expert and adjunct scholar at the Mackinac Center for Public Policy. “That wouldn’t be sustainable in the long term.”

In 2010 the DTC contributed $517,852 to employee pension plans for 81 employees, according to documents received in a Freedom of Information Act request. Had the DTC contributions been more in line with the private sector, the transit system could have saved $250,000.

The DTC’s outsized pension contributions are part of a $5.7 billion-a-year gap between what private sector and public sector employees receive in benefits.

A 2010 study done by the Mackinac Center compared public employee retirement benefit costs to private sector employers. It used a survey of 24 large Michigan companies with a combined total of more than 600,000 salaried employees. The average employer retirement contribution for those private sector employees was just over six percent.  The Mackinac Center study also notes that typical Fortune 100 workers covered only by a defined-contribution “401k” type retirement plan receive company contributions of 5.77 percent of pay for their retirement funds.

According to 2009 data provided to the Federal Transit Administration, the People Mover required a $6.2 million operating subsidy from Detroit taxpayers and another $4.3 million from the state of Michigan for a total operating cost tax subsidy of 81 percent. Fares from riders contributed just 7 percent of the People Mover’s operating costs.

The operating expense to move the average rider one mile on the People Mover was $4.28. The People Mover operates a single line in downtown Detroit that is less than 3 miles long.

For comparison, fares from users of the Chicago Transit Authority’s rail system and buses paid 39 percent of the total operating costs in 2009. Moving the average rider one mile on the CTA’s rail lines required 38 cents.

The Detroit Department of Transportation operates buses within the city – many of which ride directly underneath the People Mover’s single track. Fare revenues amounted to 16 percent of DDOT operating costs in 2009. DDOT’s cost to move one passenger one mile was 82 cents.