Wednesday, January 20, 2010

A Tale of Two Studios

by Dan Mayfield, ABQ Journal

Mom always said life's not fair. The state is chipping in $10
million toward the construction of Santa Fe Studios, while Santa Fe
County stepped in with a $6 million loan for the studios and a $3
million loan for the eight-acre site.

In total, more than $19 million in public money is going toward the
$28 million project just south of Santa Fe.

In contrast, Albuquerque Studios spent $74 million (and $20 million
later) in private money to build stateof-the-art studios at Mesa del Sol
in Albuquerque four years ago.

"Everything is private. No state, federal or city investments," said
Nick Smerigan, chief operating officer of Albuquerque Studios.

Albuquerque Studios is part of the Pacifica Ventures family of
studios, which also has studios in Pennsylvania and Connecticut.

Santa Fe Studios is being built by the Hool family of movie
producers who have made films like "Flipper" and "Crocodile Dundee in
Los Angeles."

Questions about the fairness of the Santa Fe deal have popped up, in
part, because the Hools are longtime friends of the governor. The
Governor's Office and the Hools have said their relationship had nothing
to do with the deal.

Eric Witt, Gov. Bill Richardson's deputy chief of staff, insists
comparing the two studio projects isn't fair.

Witt said the state did a lot for the Albuquerque project located at
Mesa del Sol, including providing a road to Albuquerque Studios.

"That road was a big dang deal," he said, at a cost of $6.25million.
He also mentioned tax breaks and other improvements to Mesa del Sol that
benefited Albuquerque Studios. "I know it's not quite the same thing."

Smerigan has a different view.

"We paid for our own power, water lines. I didn't receive any
benefit with the possible exception of the road," he said. "I have not
gotten one break on anything. I thought that was going to be a benefit
that everyone would appreciate. Every piece of infrastructure on this
lot we paid for ourselves."

Jason Hool, president of Santa Fe Studios, points out that the
public money for his project comes with plenty of strings attached,
which guarantee the project benefits the state. So far, he said, the
Hool family has invested $1million and has raised more capital to finish
the construction.

So how did a California company end up with a project in which
taxpayer money covers more than two-thirds the cost?

Funds allocated

Long before Albuquerque Studios was planned and when the state was
flush with money in 2002, the state started looking at a need for

The film incentive program was picking up steam, Witt said, and the
Legislature appropriated $10 million for a studio in Santa Fe County,
which was the hub of the film business then.

"The allocation ... was the first one. At that time nobody was in a
position to actually build a soundstage facility," Witt said.

After the Legislature approved the $10 million grant for Santa Fe
County, the Governor's Office removed "Santa Fe" from the bill so the
money could be used statewide in case a project elsewhere was proposed,
Witt said. It never was.

The money was added to Richardson's Media Fund, which has money set
aside for film and media projects like training programs.

At the same time, Santa Fe was working on a media park in an unused
65-acre parcel of land just south of Santa Fe and about a half-mile from
the Bonanza Creek Movie Ranch, where "3:10 to Yuma" and "Young Guns"
were filmed, said Robert Griego, the Santa Fe County planning director.

"It began as an economic development project," he said. "We did an
economic development plan and in our plan we had targeted industries and
one of them was film and media."

Santa Fe County zoned the park a media district and set out to look
for an owner-operator for a studio, Griego said.

About three years ago, the Hools showed up.

"The county says, 'We're ready to move on this thing. Where's our
$10 million?'" Witt said.

By then, two proposals had already come and gone for soundstages.
The Hools had an ambitious project, a green studio designed by a
superstar architect, and came with a heavy-hitting board of directors
who represent Warner Bros., 20th Century Fox, Sony Pictures
Entertainment and Universal Pictures. It just happened, Witt said, that
Conrad Hool and Gov. Richardson were old friends.

The state at the time had the money in two piles, Witt said. The
state used $3.5million in Local Economic Development Act funds, which
are earmarked for projects that create jobs. The rest, $6.5million, came
from the media fund.

The money was given to the county, which is passing it on to Santa
Fe Studios.

Tied to jobs

In addition, the county has agreed to make a lowinterest, 10-year
loan for $6million to the Hools. And it is allowing the studios to buy the land, valued at about
$3million, with five payments. But rather than a monthly payment on the land, the Santa Fe Studios will pay back the loan after it reaches certain milestones in job

For every 100,000 hours of work, the studio pays the county
$520,000. The land sale is expected to close soon, said Santa Fe County
Attorney Steve Ross, and the Hools will have six years to pay off the

"We were struggling to structure something that would work for them
but not expose the county," said Ross.

The $10 million state grant - which was approved last week - will be
used for construction. Then, Ross said, the county will offer the Hools
the $6million loan.

If the Hools don't build the studio, they owe the state $10 million.
If the studio can't pay the $6 million loan, the county can foreclose on
the project, said Santa Fe County Attorney Steve Ross.

"We have to build a studio. It's not money in our pockets. We have
to deliver jobs. It we fail, we have to pay the money back," Hool said,
including the state grant. If business booms, Hool said, the studios
will own the land quickly. If business is slow, it could

take the full six years.

Santa Fe County Commissioner Virginia Vigil said construction job
hours will count toward the total.

"The intent was to link those dollars (the loan) to the ability to
create jobs," Vigil said.

Most film crew and actors work more than 40-hour weeks, usually
about 60, which will accelerate the pace of the studios reaching each
100,000-hour milestone.

Two large films, with about 120 film-crew workers, truck drivers,
caterers and more would provide 100,000 hours of work, said Jon Hendry,
the head of the state's film crew union, the International Association
of Theatrical Stage Employees.

The vast majority of state film work is union work, whether that's
with IATSE, the Screen Actors Guild, the Directors Guild of America or
others. Unlike a regular 40-hour workweek, Hendry said film jobs are
based on a 70-hour workweek.

The county estimates that the studios will pay back the entire loan
within the first five years of operation, Vigil said.

"We like this business model," Hendry said. "We told the county we
want to keep their feet to the fire." More About the Jobs

Pay Scale

The jobs created by Santa Fe Studios are expected to pay more than the
average wage for Santa Fe County, which was $42,000 in 2008, according
to the Bureau of Labor Statistics. The average film crew member makes
$48,000 a year, working on three films. DGA and SAG members and others
on set can make considerably more, said Jon Hendry, the head of the
state's film crew union, the International Association of Theatrical
Stage Employees.

An entry-level IATSE member can make $23 an hour, Hendry said.

Unemployment Benefits

Like any company, film productions must pay into the state unemployment
insurance benefits package, said Jason Lewis, chief of staff for the
Workforce Solutions Department.

Since the average film worker works 45 weeks a year, he or she is
eligible for state unemployment benefits when not working that can last
26 weeks and up to 86 weeks with new federal programs, Lewis said. Film
workers, who work on and off, are treated much the same way seasonal
workers are, Lewis said, and are not an additional strain on the
unemployment insurance program.

Health Care

A union member must be covered by a health plan to be eligible to work
and the health-care plans vary from a simple, highdeductible
$100-permonth plan to an $800-per-month plan that covers an entire
family. So film workers are not a drain on the state Medicaid system,
says Hendry.