# Film Tax Credits

The impeccable timing of David Vaudt

Exactly one week before election day, State Auditor David Vaudt released his report on Iowa’s film tax credit program, which Governor Chet Culver halted in September 2009. The audit found problems with about $26 million of the $32 million in tax credits awarded under the program. The Des Moines Register summarized the key findings and covered the civil and criminal cases filed so far in connection with fraudulent film tax credits.

Getting this fiasco back in the spotlight is likely to hurt Culver and help GOP candidate Terry Branstad, whom Vaudt has endorsed and joined on the stump. Branstad’s campaign seized on the chance to slam inadequate oversight of the film tax credit program. Vaudt probably also benefits from making news just before voters will see his name on the ballot. The audit featured prominently in newscasts on October 26 and was a front-page story in many Iowa newspapers the following day. According to Radio Iowa,

Vaudt, a Republican, was asked about the timing of the release of the report the week before the election.

Vaudt says the governor actually requested the investigation, and his office worked in collaboration with the Department of Revenue and the Attorney General’s office. Vaudt says they handled this report like any other and released it once the report was completed.

More like two months after completing the report. Radio Iowa posted the full report here (pdf file). On page 6, a cover letter from Vaudt and his chief deputy, Warren Jenkins, states, “Copies of this report have been filed with the Department of Management, the Division of Criminal Investigation, the Attorney General’s Office and the Polk County Attorney’s Office.” That letter was dated August 19, 2010. What’s Vaudt’s excuse for waiting nearly ten weeks to release the report to journalists?

Culver told the Des Moines Register on Tuesday, “The timing is interesting. It was purely political but [Vaudt]’s been the most partisan auditor that we’ve ever had so it’s not a surprise.” Scott Harrington, campaign manager for Democratic candidate for state auditor Jon Murphy, on 26 October asked Vaudt “to provide a detailed timeline as to how today was determined to be the appropriate date to release this report.” I’m not holding my breath until that happens.

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Fred Hubbell to serve as interim director of IDED

Governor Chet Culver announced on Tuesday that he has appointed Fred Hubbell to serve as interim director of the Iowa Department of Economic Development (IDED). Hubbell will start working there on October 5. He will continue to serve on the Power Fund board, only he will now be IDED’s representative on that body. Last month the rumor mill floated Hubbell’s name as a possible challenger to Senator Chuck Grassley, but he said he was not interested in running for Senate.

Culver picked Joe O’Hern, deputy director at the Iowa Finance Authority, to be the new interim deputy director at IDED, focusing on IDED’s flood recovery efforts. This press release from the governor’s office contains more background on Hubbell and O’Hern.

Culver spoke about the abuse of Iowa’s film tax credit program during a press conference in Cedar Rapids on Tuesday:

When information was first brought to my attention last week about Iowa’s film tax credit program, I was troubled. But as we began our investigation into this program, and more information has come to light, frankly, I am outraged – not only that a program involving millions of Iowa tax dollars was so mismanaged but that some companies were taking advantage of this situation.

This problem first came to my attention last week when I was traveling on Tuesday with former director Tramontina. At that time, I asked him to prepare for me a memo outlining problems with the program. And, after receiving that memo, I took immediate steps to protect the taxpayers of Iowa. […]

These actions are intended to protect the best interest of Iowans, and not to harm the growing film and television industry in our state. This program should continue only after we have the controls, oversight, and due diligence in place to assure that it operates properly.

But, while there were clearly not the controls and oversight in place at the Iowa Film Office, we need to make sure that the film and TV productions in our state are following the rules.

For example, projects must have commitments for at least 50% of their funding before even applying for assistance under the program.

In addition, projects are not to receive tax credits until after their work is complete and they have submitted invoices of qualified expenses.

And, we expect film and television productions to obey Iowa’s labor laws – which mean people get paid for the work they do. That does not mean they wait until after their tax credit has been approved.

Iowans will not be taken for suckers. While we need to make changes to strengthen management of this program, we are not going to be taken advantage of – and if we are, we are going to claw back and make sure any money wrongfully provided is returned.

If something good can come out of this scandal, I hope that all of Iowa’s tax credit programs will now receive greater scrutiny. Even if there are no other tax credits being abused, we may not be getting our money’s worth for all of these programs. In a weak economy that puts pressure on state revenues, wasteful tax credits need to be on the chopping block along with government spending.

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