Despite a 2,000 percent return on its investment and an average of $10 million per year in tax revenues while generating $498 million in economic activity in 2007 and 2008, the state's Department of Business, Economic Development and Tourism is set to dismantle the branch where film specialists work alongside the counties and industry to facilitate and grow film, television and new media in Hawai'i.

The film industry expressed strong concerns to lawmakers at a hearing last week about the proposed layoffs and restructuring, citing the loss of significant revenue for the state and long-term damage to the industry.

DBEDT is calling for the elimination of all state film office positions and is proposing to disperse the workload across the department to "generalists," thereby disassembling the centralized office and permitting system established by legislative mandate. This makes no sense to the industry, which said so in a unified voice at the joint House and Senate economic development committee briefing.

Substituting generalists for specialists doesn't work in the film industry. It's akin to saying every doctor can be a general practitioner. And no one wants a general practitioner doing brain surgery.

Legislators questioned DBEDT Director Ted Liu on whether a cost-benefit analysis was performed, or a transition plan was in place. His answer was "no" to both. Jeopardizing the functionality of a system that generates millions of dollars in tax revenues used to fund other programs just doesn't add up, even with only a cursory analysis.

Film is a revenue-generating industry. A number of states have either established new film tax credits or enhanced existing ones in the midst of the fiscal crisis because they are proven revenue-generators and are considered recession-resistant.

Time magazine recently reported that the beleaguered state of Michigan, hard hit by the economic crisis and a failing auto industry, created the most generous film tax incentive in the country in 2007. In-state production spending increased from $4 million to $100 million in 2008 — a 2,500 percent increase. In 2009, spending is on pace to increase by another 400 percent, to $400 million.

This illustrates two key things: The industry must spend money on location to make its product, and it can "retool" and move to another area very quickly.

About a dozen projects are under consideration for filming in Hawai'i over the next 12 months because of the momentum generated during the previous two years. Those projects stand to spend enough to generate more than $8 million in tax revenues. But if the studios and producers do not have absolute confidence that they will be able to access the tax credits and obtain necessary permits, Hawai'i will be knocked off the consideration list. Business certainty will be lost and will take years to re-establish. And the much-needed tax revenue will evaporate.

Roughly 60 percent of a film project's budget is spent on personnel costs. For one recent production that filmed in Hawai'i for 30 shoot-days, more than 75,000 local man-hours of labor or 36 full-time annual equivalent jobs were used. Multiply that by 12 per year and that equates to 400 full-time equivalent jobs. Similarly, one television series will generate 527,000 man-hours or more than 250 full-time equivalent jobs, and in 2004 Hawai'i had three series.

The remaining 40 percent of a project's budget must be spent on purchases from a broad range of businesses to make the product. "Lost," for example, interacted with more than 700 different businesses while filming its Season 5.

The film industry complements tourism. In 2007-2008, a partial list of projects contributed more than 61,000 room nights. And weekly ratings for "Lost," translated into box office dollars, is a $100 million dollar box office each week advertising Hawai'i.

With significant job creation and economic impact, you begin to see why strong objections are being made to DBEDT's proposal to move away from a very successful centralized system that is considered the industry standard.

All 50 states have state film offices. By doing away with Hawai'i's, the state will be sending the message "don't come," and saying "aloha" to jobs, revenues and millions of dollars in free advertising.

Jason Suapaia is president and executive producer of 1013 Integrated Branding; Jean Higgins is co-executive producer of "Lost"; Jeanne Ishikawa is the business agent for Local 996; Leroy Jenkins is president of Production Partners. They wrote this commentary for The Advertiser.