Christine Stuart photo

As the state grapples with an estimated $8.7 billion budget deficit over the next two years, Gov. M. Jodi Rell and a number of lawmakers have questioned the wisdom of its film tax credit program, which has cost it $102 million in tax revenue.

But if it wasn’t for the tax credit, Hal Katersky told the legislature’s Commerce Committee Tuesday that Pacifica Ventures wouldn’t be looking to build a $65 million studio complex in South Windsor.

And “We obviously couldn’t build our studio if there was a cap at $30 million,” Katersky said.

When Rell released her budget for fiscal years 2010 and 2011 it included a $30 million cap on the film tax credit program, but Rell said last week that she was “flexible” when it comes to the tax credit program.

Once there’s a significant investment in infrastructure, such as the more than 400,000 square-foot studio, visitors center, and hotel Pacifica Ventures through Connecticut Studios LLC plans to build in South Windsor, the state will benefit from the creation of jobs and increased economic activity, Katersky said.

Katersky pointed to a recent study of the film tax incentive program in New Mexico, in which it found that for every $1 extended in state tax credits, state and local governments received $1.50.

A recent

Commerce Committee Co-Chairman Sen. Gary LeBeau, D-East Hartford, warned the committee against paying to much attention to the report, since he didn’t feel it was independent enough to truly evaluate the tax credit program which was started in 2006. He anticipated that a more independent analysis, like the one done in New Mexico, will be completed in the future.

Christine Stuart photo

The South Windsor project will create 1,650 production related unions jobs that pay an average of $68,200 a year and create approximately $112.5 million in additional Connecticut payroll, Katersky said. In addition it will create 114 full-time studio jobs paying an average of $37,500 and generating $2.7 million in additional Connecticut payroll.

According to the study by Ernst & Young, the film tax incentive program created 3,829 jobs in New Mexico in 2007.

New Mexico’s tax incentive program is not a tax credit program, but a tax rebate program.

Katersky said the production receives the tax rebate about 30 days after its finished shooting. He said he wouldn’t be opposed to a tax rebate program, if that’s something Connecticut is looking at.

LeBeau said he thinks the credit may create an unnecessary layer of bureaucracy. He said he could see the state lowering its exposure through a tax rebate system because the money would be going directly to the people who are making the films.

Currently film tax credits can be bought, sold, and transferred.

Kevin Segalla, who founded the Connecticut Film Center, told the committee Tuesday that his company has transferred most if its film tax credits, but may use some of them this year. He said when the credits are transferred they’re usually discounted between 80 to 90 cents on the dollar.

LeBeau said the tax credit program was never meant to create entrepreneurs like Segalla. “It’s not the essence of what we intended to do,” LeBeau said. He said by making it a tax rebate program the state may be able to make the program much more effective, while saving the state a little bit of money.

Aside from the possibility of a production tax credit, the state has offered Pacifica Ventures a tax credit of 20 percent on infrastructure costs exceeding $1 million and the Department of Economic and Community Development announced Monday that it is willing to loan it $5 million for equipment, construction, and other project-related activities. The studio, which would include a 50,000 square-foot visitors center would be located at the intersection of I-291 and Route 5 in South Windsor.