Minnesota's ground-breaking "Snowbate" tax-incentive program, which once made the state a top location for moviemakers, has gone from the cutting edge to the bottom of the barrel.

While a grassroots group pushes for stronger incentives, films that could have been shot here -- such as George Clooney's new movie, "Leatherheads," set in Duluth but made in the Carolinas -- are going elsewhere. And so are Minnesota film professionals.

Anne Healy, a St. Paul-based location scout, hasn't worked on a Minnesota shoot in three years. Her most recent assignment? Finding shooting venues in Wisconsin for "Public Enemies," a $100 million film starring Johnny Depp as 1930s gangster John Dillinger.

"I was driving them around in the van, and I felt awful," she said. "All I wanted to do was drive them to Red Wing. It would have been perfect, but I couldn't even mention it."

The film chose Wisconsin in January, after the state enacted a 25 percent tax rebate on film production expenses -- now the national standard, compared with 15 percent in Minnesota.

Healy is the point person for Project Johnny Depp, an ad hoc coalition of film professionals, hotel owners, restaurateurs and others who have been pressing state officials for more competitive incentives and a larger appropriation.

At $1.3 million available over two years, Minnesota's fund is the third-smallest in the nation.

On a major film such as Depp's, "the crew could be in a hotel for three to six months," said Scott Fischburg, vice president of sales for the Graves Hotel in Minneapolis. "That's a huge block of revenue. Restaurants, drugstores, clothing, everything you need living somewhere is impacted in a positive way as well."

Pressure also is coming from a larger nonprofit trade group, Shoot in Minnesota, which has hired lobbyists to "educate the Legislature that the stature we had as a robust production center is fading," said executive director Dave Halls. "And we believe there's a return on this investment."

Wisconsin has seen about $25 million in production expenditures in just two months, said Lt. Gov. Barbara Lawton. "I don't think I could point to another program that's had that kind of effect."

She estimates that half of the money spent on film production stays in the community.

"The biggest misunderstanding was that it was corporate welfare," Lawton said. "No one becomes eligible for these incentives until they've dumped money into our state. And jobs do begin to be built. A camera company has opened in Milwaukee, and a sound studio, and an expansion of another filming studio."

A community in retreat

In Minnesota, the infrastructure has shrunk since the 1990s boom that brought such productions as "Grumpy Old Men," "Fargo," "A Simple Plan" and "Jingle All the Way." Prop houses have closed, four cinema equipment companies have shrunk to one, and jobs have migrated to other states.

Minnesota's lack of an effective incentive package is "not a frequent topic among film people, it is the topic," said Minneapolis film makeup artist Mary Flaa. "People look at Minnesotans winning Oscars and they think we're still on the map. Well, we're not, because those projects weren't shot here."

Despite a pool of acting and technical talent deeper than any nearby state's, Minnesota has been "left in the dust" economically, said David Burton Morris of Deephaven, who has more feature films to his credit than any other Minnesota-based director.

Lucinda Winter, executive director of the Minnesota Film and TV Board, was gratified recently when Warner Bros. called with the news that Clint Eastwood will scout the state and others for a $20 million film about an auto worker. But she had to tell producers that current projects have exhausted her funds. Winter is asking the Legislature for an added $2.6 million to run the program until June 2009.

"I'm in the second year of this program, and it's just starting to work," she said. "With the Coen brothers coming here [to film this fall] it'll be the first studio feature since 'North Country.'"

Even though that Oscar-nominated 2005 film was set on the Iron Range, Minnesota only got 15 percent of its production spending, she noted. "They shot the rest of it in New Mexico" because of that state's greater incentives.

Senate chairman in favor

An amendment to a current bill would lift the rebate to 20 percent for films that spend more than $5 million in Minnesota within 12 months.

The state's nearly billion-dollar deficit makes it a tricky sell, but Sen. Richard Cohen, DFL-St. Paul, chairman of the Senate Finance Committee, said his goal is to "fill the deficiency of the film board rebate, and the governor's budget gives me some room to do it." No one has voiced opposition, he said.

Minnesota's old Snowbate program, pegged at 5 percent from 1997 to 2000 and 10 percent in 2001-02, brought in nearly $58 million in production spending while refunding about $2 million before it was axed in the state's last budget squeeze.

Between August 2006, when it was revived, and June 2007, the program generated $6.8 million in spending (including $3.7 million in payroll) while paying rebates of $818,000.

Some economists are concerned about the long-term effects of an incentive "arms race." They argue that a policy favoring new businesses disproportionately burdens existing businesses. If all states eliminated incentives, the reasoning goes, they could direct scarce tax dollars to traditional public services, and films would be made in the most fitting locations. But with other states (and nations) tilting the playing field, doing nothing means forfeiting the competition.

Rep. Ann Lenczewski, DFL-Bloomington, chairwoman of the House Taxes Committee, generally opposes corporate subsidies because they don't often bring in new revenue. But she's receptive to the film rebate because its costs and benefits are easy to track, and it "probably can attract business that isn't already in the state."

Winter views the current moves with guarded optimism.

"People want to stimulate the economy and grow jobs," and this type of program is "very quick in terms of economic results," she said.

Wisconsin's lieutenant governor, from her vantage point in a budding film mecca, couldn't resist a wry jibe at Minnesotans.

"As a friendly neighbor from Green Bay, I would say just sit tight," she said. "You're doing fine. We'll handle this."

Colin Covert • 612-673-7186