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The film industry brings roughly $180 million and 2,500 jobs to Hawaii each year, but that choose to film here are met by a dilapidated studio that has suffered from scarce funding and years of wear and tear.

“It’s an embarrassment,” said Donne Dawson, the state film commissioner who has managed the and since 2001.

“We need to have a production facility that the state can be proud of. Hawaii needs to protect its hard-earned reputation as a film-friendly location.”

Many of the buildings on the 7.5-acre lot date back to the 1970s, when CBS began leasing the Kapiolani Community College site for the original Hawaii 5-0 series. But some of the newer structures have problems, too.

Several of the buildings lack electricity and are rife with safety hazards, according to Dawson. Others are growing mold. A set of bungalows used to store wardrobes has fallen victim to decades of termite, ant and rat damage and needs to be torn down, she said. The air conditioning system frequently breaks down, causing the soundstage to become so hot that actors’ makeup runs.

The studio is in such disrepair that some productions have helped to subsidize improvements.

Most recently the studio hosted Last Resort, The River and Off the Map, all of which were cancelled after their first seasons. (The studio recently sold all the props, costumes and set decorations used in those series — as well as Lost, which wrapped up in 2010 after six successful years of production — at an onsite rummage sale open to the public.)

Advocates say it’s critical that the state fund basic repair and maintenance work for the facility if it wants to be competitive in the film industry.

“Even though that studio is really small and only of limited value to series, having something is better than nothing,” said state Sen. David Ige, who chairs the .

But it’s unclear whether the studio will secure the money it needs to bring its facilities up to par. According to Ige, recent attempts to increase legislative support for the film industry were largely unsuccessful.

The studio is fully funded by the state and operates under the . Funding comes from bonds issued by the state.

“Obviously with the financial conflict, it’s always been a challenge of balancing the potential value of the film industry” with other needs, Ige said.

Money is so scarce that the state has put on hold plans to partner with a private developer that wants to build . The project, which would include four soundstages and 60,000 square feet of additional studio space, is part of an ongoing effort to attract more film business to the islands.

The Diamond Head studio needs about $10.8 million worth of basic repair and maintenance work. One-tenth of that amount — $1.73 million — has been set aside in the 2013 capital improvement budget. Dawson hopes lawmakers will approve the rest of the money for fiscal years 2014 and 2016.

The most critical upgrade involves the aging air conditioning system in the studio’s soundstage, which was built in 1994. The 16,500-square-foot stage area is the only facility in the state with a controlled environment fit for shooting sound.

The AC regularly breaks down, causing delays and creating less-than-ideal conditions for filming, Dawson says.

But the AC system is just one item on the checklist. Also high-priority are facilities that pose safety hazards, including the studio’s water tank.

The tank building — used for controlled underwater filming — lacks electricity. Dawson also wants to replace its doors, which she said are too heavy and dangerous to move and, when unlatched, can get caught in the wind and whip open. The building is also home to rats and nesting carpenter ants, she said.

Still, Dawson acknowledged that it would likely be years before the studio is at the level it should be.

An interior roadway needs to be widened so that it’s easier and safer for big production trucks to turn. The production building, constructed in 2006, needs AC. Eventually, Dawson hopes the state will fund a second soundstage at the Diamond Head site.

But “first things first,” said state Rep. Marcus Oshiro, former chair of the House Finance committee.

“Let’s leverage what we currently own, which is the land and buildings, by improving it,” Oshiro said.

According to Dawson, basic improvements are essential. The studio’s flaws cause production delays, and delays are a production’s biggest enemy, she said.

“If they have to wait around or flip their schedule, it’s like a domino effect, and the whole process slows to a grinding halt,” Dawson said. “At the end of the day, what this is is a giant pressure cooker.”

“The industry’s fickle,” she said. “They’ll go where they can get the film done, get it done quickly and under budget. If we can’t keep up with that pace, we’re screwed.”

Advocates: Films Bring Big Bucks Into State Economy

Local proponents of the film industry point to the economic boon for the state — both direct and indirect.

The film industry adds $180 million to Hawaii’s economy annually, state data shows. In 2010 — a record production year for the state — the industry brought in $407 million.

DBEDT’s Research and Economic Analysis Division each year uses a multiplier to calculate the economic impact of the industry as adjusted by tax credits, temporary employment figures and other factors.

Year	Economic Impact (in millions of dollars)
2001	$143.6
2002	$254.3
2003	$145.3
2004	$283.7
2005	$181.4
2006	$166.1
2007	$363.2
2008	$272.6
2009	$280.6
2010	$622.2
2011	$298.6
2012 (est)	$397.9

The film industry also creates local jobs, employing more than 4,000 workers in 2010. Productions last year hired about 2,500 temporary employees.

The state itself has focused on growing the local industry workforce by developing and expanding digital programs at public schools and the University of Hawaii.

Lost producer Jean Higgins pointed out that the film industry also provides invaluable advertising for the state.

“No tourism department would ever be able to buy that kind of advertisement,” Higgins said.

The state offers tax credits to give production companies incentive to bring their films to Hawaii. The Legislature in 2006 , which established a credit amounting to either 15 percent or 20 percent of any production expenditures made in the state. Productions get a 20 percent tax credit on neighbor islands because costs are higher.

The state saw a record number of productions in the tax credit’s first year, according to Dawson. In addition to Lost, every county hosted a major feature film.

“Incentives are the name of the game,” Dawson said. Forty-eight states have tax incentive programs and studios are constantly on the lookout for locations that will give them the best bang for their buck, Dawson said.

Ige said Hawaii is constantly struggling to maintain its competitive edge in the industry. The cost of filming in the state is so high that relatively few producers choose to bring their projects to the islands, he said.

“With the new digital media today, any location can virtually look like any other,” he said. “We’ll get projects that have very few alternatives or ones with a story that insists on filming in Hawaii, but not much more than that.”

Still, some critics say that targeted business tax credits, such as the film credit, can actually end up hurting the state economy.

“A tax credit approach where there is no obvious need for tax relief is not an appropriate way to spend state dollars,” said Lowell Kalapa, president of the . “Tax credits and other incentives sell Hawaii short.”

Kalapa said the tax credits opened the door for too much back-door spending exempt from public scrutiny. He questioned whether funding for the film studio and its incentives should take precedence over other programs, such as the state’s early learning initiative.

“It comes out of the state treasury whether we like it or not,” he said.

The tax credit program is set to end in 2015, but Dawson is proposing that the Legislature this session push back the sunset date. Dawson also wants to bump the state’s spending cap up from $8 million to $12 million and open the credit to Internet-only productions, which are currently excluded.

Studio Improvements Come One by One

Because capital improvement funding often comes in at just a fraction of the amount requested, Dawson said the studio has often relied on resident productions — such as Baywatch and Lost — to subsidize basic upgrades. The studio has, on occasion, offset a production’s rent in exchange for in-kind contributions such as studio maintenance, she said.

State funds slowed to a trickle during the economic recession, which even forced the state to lay off Dawson between 2009 and 2012. The studio’s operating budget was reduced to an all-time low of $17,000 in the 2010 fiscal year.

Still, Dawson is confident the studio has the Legislature’s support. The state has already put roughly $17 million into the studio over the years — a testament to its investment in the facilities, Dawson said.

That funding includes the $7.3 million the state put into the studio in 2002, buying new production offices, a mill for set construction and other studio improvements.

The upgrades, completed in 2006, were part of a project that began in the early 1990s, when the studio itself broke ground. (The original set of CIP funding that was earmarked for the upgrades — about $5.5 million — lapsed after the state decided the studio was underused.)

This year, in addition to the CIP requests, Dawson has asked the Legislature to reestablish a special fund to direct revenue generated by the film industry to studio repair and maintenance. The original special fund was repealed in 2003.

Oshiro said Dawson has a good chance of making that happen.

“What she wants is some predictability and reliability with a funding stream … I can appreciate what she’s seeking,” Oshiro said. “It should be considered as long as we understand where the money comes from and how the money is being spent.”

New Studio Far Way’s Away

A significant added incentive for filmmakers would, of course, be a new studio.

The Diamond Head studio often lacks enough space for big productions, forcing producers to resort to retrofitted warehouses and ancillary sites. Dawson noted that the current soundstage is too small for some productions.

But the Kapolei studio is just a blueprint at this point, Dawson said, emphasizing that the studio would be a private enterprise.

Gov. Neil Abercrombie last year met with studio executives in Los Angeles to discuss plans for the Kapolei studio but infrastructure is his biggest priority, according to his spokeswoman Louise Kim McCoy.

“Whatever they may be doing is separate and apart from what needs to happen at Diamond Head,” Dawson said.