Film tax credit fallout continues

Mismanagement of Iowa’s state film tax credit program has led to more personnel changes at the Iowa Department of Economic Development this week. On Monday three longtime employees of the department were dismissed: general counsel Melanie Johnson, Jeff Rossate, and Amy Johnson. The Des Moines Register reported,

Rossate, as division administrator for business development, was the direct boss for film office manager Tom Wheeler. Johnson was Rossate’s No. 2 as the coordinator of the business development division.

The Des Moines Register reported on Saturday that e-mails showed those officials were privy to some of the worst problems facing the film program in the two months before it was suspended.

Amy Johnson had been serving as interim director of the film office before she was dismissed. IDED announced Tuesday that attorney Jessica Montana will be the new interim director of the film office. Montana has worked on IDED’s regulatory assistance team since 2007.

I wonder whether the latest dismissals will complicate the criminal case against Wheeler and two film producers. Wheeler was fired from IDED shortly after the scandal broke, and earlier this month the Iowa Attorney General’s Office charged him with non-felonious misconduct. His defense attorney will now be able to claim that Wheeler’s boss and others knew about problems with the film tax credit program.

No matter what happens with that case, I don’t envy IDED director Bret Mills, who needs to sort out this mess. Mike Tramontina resigned as IDED director when the film tax credit scandal broke, and Fred Hubbell served as interim director of the department until Governor Chet Culver appointed Mills in late December. The Iowa Senate confirmed Mills unanimously this month.

Here’s hoping state legislators will put the film tax credit program out of its misery. A bill is pending to suspend the tax credit until July 2011, but the program was ill-conceived from the beginning and doesn’t deserve to be revived. There are a lot better ways for the state to spend up to $50 million a year.

Meanwhile, the Des Moines Register reports today,

Eleven film companies are suing Iowa’s Department of Economic Development, saying they believe certain documents that have not been released since the scandal broke – including expenses and budgets they reported to the state – should be kept confidential.

Scott Brennan, an attorney for the film companies, said Tuesday there is a difference between public curiosity and public interest in the ongoing probe. His clients believe they were guaranteed “by contract and by statute” that certain trade secrets would be kept secret.

The attorney general’s office and the Register argue that the records – first requested last fall – are public under state law and should remain so because they are of significant public interest. The two sides met in court for the first time Tuesday.

According to a brief filed Tuesday by Michael Giudicessi, the newspaper’s lawyer, “Whether evidenced by the very requests of the Register and other news organizations for access, the suspension of the film tax credit program by the governor’s office, the conducting of an independent audit by the department, the vast and increasing amount of taxpayer dollars involved or the ongoing terminations … it is clear that the public interest is not served by any degree of continuing secrecy.”

Continue Reading...

Year in review: Iowa politics in 2009 (part 2)

Following up on my review of news from the first half of last year, I’ve posted links to Bleeding Heartland’s coverage of Iowa politics from July through December 2009 after the jump.

Hot topics on this blog during the second half of the year included the governor’s race, the special election in Iowa House district 90, candidates announcing plans to run for the state legislature next year, the growing number of Republicans ready to challenge Representative Leonard Boswell, state budget constraints, and a scandal involving the tax credit for film-making.

Continue Reading...

More fallout from film tax-credit scandal

Governor Chet Culver took more steps on Monday to deal with the scandal surrounding Iowa’s tax credits for the movie industry:

Culver fired Iowa Film Office manager Tom Wheeler, who was in charge of coordinating tax-credit deals with moviemakers, who flocked to Iowa during the past year.

Vince Lintz, deputy director of the Iowa Department of Economic Development, which oversaw the film office, turned in his resignation. […]

On Monday, Culver asked state Auditor David Vaudt, Iowa Department of Revenue director Mark Schuling and Attorney General Tom Miller to assist in reviewing the program.

Culver said he was “very troubled” by reports of abuses in the tax credit program, which reportedly included purchase of two luxury vehicles by unidentified movie executives, and lax oversight.

“I’ve made it very clear from the very beginning that we would like to continue the program,” Culver told The Des Moines Register. “But not until we have all of the controls in place, the oversight, the due diligence that is necessary to run any program involving taxpayer money.”

Surely we’ll be hearing a lot more about this mess, which already prompted the Department of Economic Development director’s resignation last Friday.

Naturally, Republican legislative leaders are blaming the “governor’s lack of oversight and failure to properly manage the film tax credit” for the problems. Several people I’ve spoken with share Bleeding Heartland user American007’s view that this scandal is going to become a major headache for Culver, like wrongdoing at the Central Iowa Employment Training Consortium was used to attack Governor Tom Vilsack and other Democrats a few years ago.

It’s not clear to me how Culver could have or should have micromanaged the film tax credit program. Upon learning of problems, he has acted promptly and appropriately. If the governor were resisting change to this program, protecting the officials who screwed up, or blocking an investigation, that would be a different story.

In addition, as you can see from this CIETC scandal timeline, the CIETC abuses became public knowledge during the spring of 2006. The scandal didn’t stop Iowa Democrats from making big gains that November. Mike Mauro was elected secretary of state that year, even though he shared a surname with one of the CIETC board members (I remember some fretting over that at the time).

Culver should brace himself for more bad news about the film tax credits when investigators have completed their reviews, but I don’t see this issue being salient with voters more than a year from now.

Share any relevant thoughts in this thread.

Continue Reading...

Tramontina resigns over problems with film tax credits

Talk about a bolt from the blue:

A memo from auditors investigating irregularities in a state tax-credit program for filmmaking paint a picture of movie producers and film executives taking personal advantage of the program and state administrators paying little attention.

The director of the Iowa Department of Economic Development, Mike Tramontina, abruptly resigned Friday after allegations of mismanagement of the program surfaced. The department oversees the Iowa Film Office. The manager of that office, Tom Wheeler, was placed on paid administrative leave.

The departure of Tramontina, who was appointed to the post by Gov. Chet Culver in 2007, came after preliminary findings from auditors looking into allegations that filmmakers had purchased luxury vehicles for themselves.

According to the memo obtained by The Des Moines Register, auditors found a long list of bookkeeping lapses and poor oversight in the program, which has spent $32 million on tax credits for 20 film projects since its inception in 2007. The program was aimed at promoting filmmaking in Iowa as a way to contribute to the local and state economy.

The governor’s office announced Tramontina’s resignation at 4:56 pm on Friday. Culver also suspended the tax credit program until auditors complete a review of it.

State Senator Tom Courtney, a Democrat from Burlington, told the Des Moines Register “he talked to state officials about problems with the movie tax credits about a month ago, when labor officials complained that few Iowans were getting hired to work on the movies.” Courtney raised those concerns again in a meeting with the Iowa Economic Development Board the day before Tramontina resigned:

“I’m hearing nothing but complaints that workers are being brought in from other states” during film productions in Iowa, Courtney said. “I don’t imagine we have a lot of Clint Eastwoods running around, but with a little training, we could be doing many of those jobs.”

Michael Tramontina, the state’s economic development leader, said he couldn’t put a number on how many jobs are created, since many are temporary – from contractors used to build sets to caterers and “extra” actors.

“Anecdotally from the film industry, it ranges from 20 to 60 percent Iowans” employed on films produced in Iowa, Tramontina said. […]

Tramontina said the agency is working to develop “employment thresholds” for a film, but hitting a number is complicated.

Employment requirements should depend on the kind of film being made – whether it’s a feature film being made over three to six months or a TV series that might run for years. […]

Courtney said lawmakers might need to address closing what he called “an open door” in film tax credits if Tramontina’s agency is unable to do it. He said most Iowa economic development incentives carry job-creation requirements. “Iowa has a bright future in the film industry, but we have to help the people who live here.”

While Republicans harp on the need to cut spending further, it’s equally important to subject every tax credit to scrutiny. The Iowa Policy Project has found that expenditures on tax credits for business have “skyrocketed” in recent years, far outstripping the rate of increase in spending from Iowa’s general fund. These tax credits should be on the table as legislators look for ways to balance the budget.

Continue Reading...
View More...