URBANDALE, Iowa — Gov.-elect Terry Branstad said Tuesday he plans to scrap the incentive program that used state tax credits to lure film projects to Iowa, but he has not given up on having a film office or seeking to have future movies made in Iowa.
Branstad said he is considering options for the scandal-plagued film office, including moving it from inside the state Department of Economic Development to the state Department of Cultural Affairs. That would be part of his plans to revamp DED operations into the Iowa Partnership for Economic Progress — a new public-private partnership intended to spur the growth of jobs and development around the state.
“I think at this point we are evaluating what to do with (the Iowa Film Office) and whether that should be in a different agency or where it should be,” said Branstad, who is slated to begin his fifth term as governor on Jan. 14. He said no final decision had been made regarding the future of the film office.
“We certainly do not intend to get back into the tax credit situation there. I think that that’s a bad idea. It was badly run, and we are not going to go that direction,” he said.
“We did create the film office back when I was governor before and we had significant success without tax incentives,” Branstad added, pointing to successful movies like “Field of Dreams,” “Bridges of Madison County,” and “Miles from Home” that were filmed in Iowa. “I don’t think we should rule out the possibility of filmmaking in Iowa, but I think we need to make sure that whatever we do is cost effective and that the taxpayers’ interests are always protected.”
In October, State Auditor David Vaudt issued results of a special investigation that determined $25.6 million in state tax credits were improperly issued to film projects. He said about 80 percent of the nearly $32 million tax credits that were granted to 22 film companies that made claims with the state involved payments for expenditures where there was no proof or inadequate documentation.
Vaudt said the special investigation uncovered deferred payments, in-kind contributions received in exchange for notations in the film credits and other expenditures that could not be verified with support materials.
In some cases, production companies would enter into an agreement with an actor for a small salary with the promise of more money if the film was sold for millions of dollars — costs that were included as part of the expenditures claimed for state tax credit certificates but in many cases were never actually paid.
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The special audit covered the period from May 17, 2007, through Sept. 21, 2009, when Gov. Chet Culver suspended the tax credit program and requested the state audit of the DED’s film office and the state’s Film, Television and Video Production Promotion Program.
Culver suspended the program as a result of concerns identified when DED personnel determined the cost of certain vehicles purchased by production companies and transported to California for personal use had been included in the total expenditures reported by the production companies. Culver later allowed existing tax credit applications to be processed but halted any new applications from being filed.
After the scandal broke last year, six people within the DED lost their jobs, including former Iowa Film Office director Tom Wheeler. Wheeler is slated to stand trial on a misdemeanor charge of non-felonious misconduct in office, but his attorney has requested a continuance in Polk County District Court for the proceedings scheduled to begin next Monday.
Matthias Saunders of Minneapolis pleaded guilty in November to first-degree theft, which is punishable by up to 10 years in prison. Saunders has agreed to cooperate with prosecutors in their case against Wheeler and Wendy Runge of St. Louis Park, Minn., another filmmaker who is scheduled to stand trial on Jan. 10 for one count of ongoing criminal conduct and 11 counts of first-degree fraudulent practices.