WHEREAS, the state of Delaware desires to create job and attract economic investment associated with the film and related entertainment industry; and

WHEREAS, the State of Delaware seeks to encourage the promoting of local Delaware business and the purchasing of local Delaware goods and services arising from film productions within the State; and

WHEREAS, tourism in Delaware is a $1 billion plus industry which would significantly benefit from the promotion which feature films produced in Delaware would provide; and

WHEREAS, cultivating a local Delaware film industry will enhance the quality of life of Delawareans, serve to promote Delaware’s creative talent, and assist in retaining Delawareans’ artistic contributions in-state.

NOW THEREFORE:

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE (Three-fourths of all members elected to each house thereof concurring therein):

Section 1.  Amend § 5002, Title 29 of the Delaware Code by redesignating subsections (d) and (e) as subsections (e) and (f) respectively, and by adding to § 5002 a new subsection (d) to read:

“(d)  ‘Film Board’ means the Film Board created by this chapter.”.

Section 2.  Amend Chapter 50, Title 29 of the Delaware Code by adding thereto a new section to read:

Ҥ 5008A. Film Board.

(a)    A film advisory board (the ‘Film Board’) is hereby established and shall serve to advise the Director of the Economic Development Office (the ‘Director’) and the Governor on matters relating to economic development and strategic opportunities in the film-making and related entertainment industry.  The Board may research, study, and analyze film-making and related entertainment projects, with the primary function to review applications to the Delaware Film Incentive Program and other matters that may be referred to it by the Governor or by the Director.  

(b)(1) The Film Board shall be composed of seven (7) members appointed by the Governor, who shall serve renewable terms of four (4) years.  The Governor shall appoint four (4) Delaware resident members, including at least one (1) member from New Castle County, one (1) member fromKent County, and one (1) member from Sussex County.  Any four (4) members of the Film Board must possess one or more of the following designations:  an expert in film finance, film sales, and film distribution; an expert in entertainment law; or an expert in film production.  The other three (3) members must possess one or more of the above designations or one of the following designations:  a member of the Bar of the Supreme Court of the State; an officer of a bank or trust company located in the State; a private equity expert; or a venture capital expert.

(2)  Members of the Film Board shall serve without compensation, except that they may be reimbursed by revenue generated by the Delaware Film Incentive Program, for reasonable and necessary expenses incident of their duties as Film Board members, as defined by the Film Board in accordance with State law.  A member of the Film Board who has, or has reason to believe that he or she will have, any financial stake in an application before the Film Board must abstain from voting on the application.  A Film Board member who fails to abstain when required will be immediately removed as Film Board member and be permanently disqualified for reappointment to the Film Board.

(3)    The Film Board shall appoint a facilitator (the ‘Facilitator’) who will administer the receipt of applications and schedule their review by the Film Board.  The Facilitator is expected to serve as the liaison and primary contact for entities interested in participating in the Delaware Film Incentive Program or for utilizing Delaware in the production of movie or television endeavors.  The compensation of the Facilitator shall be funded solely by revenue generated by the Delaware Film Incentive program, either by fees, such as for application or loan origination, or by the Delaware Film Finance Guarantee Fund.

(4)    The review of all applications shall be conducted at public hearings following reasonable public notice prior to the approval of any applications under this program. No application may be voted approved except during such public hearings.

(5)    The Governor shall appoint the chairperson of the Film Board, who shall serve at the pleasure of the Governor.

(6)    A gubernatorial appointment to replace a Film Board member whose position becomes vacant prior to the expiration of the member's term must be filled only for the remainder of that term.  However, a person who is appointed to fill such a vacancy may be reappointed.

(7)    The Film Board is permitted to meet through telephonic or video conference calls to allow for members living in other states to attend.  The Film Board shall conduct its business only when a quorum is present.  A quorum consists of five (5) of the seven (7) members being present including by remote conference, as permitted.  Upon written request from the Film Board, the Governor may declare a vacancy for any member who is absent from four consecutive Film Board meetings. 

(c)  An Application approved by the Film Board shall be sent to the Director of the Delaware Economic Development Authority, who shall as soon as possible, but not later than 30 days from its receipt, either veto the application or issue a ‘note of guarantee’, providing the full faith and credit of the State to back a loan guarantee to an applicant who meets the requirements of the Delaware Film Incentive Program under §§ 5074-5079A of this title.

(d)(1) The Director of the Office of Management and Budget and the Controller General shall appoint a designee from each of their respective offices to serve as a contact to support the Film Board.  Upon request of the Film Board, the designees from each office shall assist the Film Board by providing relevant analysis and research.  The above designees shall be available to attend Film Board meetings from time to time, when the need exists and requested by the Film Board.

(2) The chairperson of the Film Board, after approval by at lest four (4) members of the Film Board and with prior notice to the Controller General, may engage professional contractual services in accordance with state professional service procurement statues when necessary to provide analysis and research for specific applications.  The Office of the Controller General shall administer contracts for those services. 

(e)(1)  The Film Board may approve an application only upon first establishing that the State has available value in assets or property matching or exceeding the value of the note of guarantee to be issued.  At the request of the Film Board, the Office of Management and Budget shall reappraise the value of property or other assets available and intended for use as collateral for the note of guarantee.

(2)            The Film Board shall have broad discretion to select the most favorable applications, provided that the applicant has satisfied all of the requirements of the Delaware Film Incentive Program, based on consideration of factors including the likelihood of each applicant to repay their anticipated loan and impacts to the Delaware economy of each film.  Applications made to the Film Board may pass only upon an affirmative vote of five (5) members.  An application must receive a vote within sixty (60) days of its submission to the Film Board or within thirty (30) days of the receipt of additional information requested by the Film Board.  A vote may be vetoed by the Director of the Delaware Office of Economic Development for good cause.

(3)            Fees shall be set for application to the Film Board and/or for application processing fees at a rate to cover the cost of contractual services, including appraisals of state property, required by the Film Board and compensation for the Facilitator.

(4)            The Delaware Economic Development Authority shall issue a note of guarantee to an approved applicant, designating the amount of the loan and the limitations upon the loan, as follows:

(A) The loan must be for at least a 3-year term, and no more than a 5-year term.

(B)  In conjunction with the loan, there must be an interest reserve established, which sets aside all required interest payments under the terms of the loan.

(C)  The loan must be in the highest position possible against all available assets of the film, as determined by the Film Board.

(D) The loan must not exceed $5 million.

(E)  The loan, upon issuance, shall close, or occur simultaneously with the closing of, the financing of the film’s total budget.

(F)  The ‘note of guarantee’ is void if any of the above terms are not met.

(f)    By January 15 of each year, the Director of the Delaware Economic Development Authority shall report the Fund's previous year's uses to the General Assembly, including all applications reviewed, all applications approved, and the status of all loans that had previously been guaranteed loan guarantees. 

a.        As part of the report, the Delaware Economic Development Authority shall report on the estimated tax revenue of the program.  It is the intent of the Delaware Film Incentive Program that the tax revenue generated as a result of the program be considered for deposit into a special fund designated to provide resources for guaranteeing future loans to qualified applicants.

b.       The report shall contain the total amount due for all loans whose term will end in the coming fiscal year. The legislature shall appropriate sufficient cash reserves into a special fund to cover the coming year’s fiscal obligations arising from the possibility of default.”.

Section 3.  Amend § 6303A, Title 29 of the Delaware Code by redesignating paragraphs (10)-(23) of § 6303A as paragraphs (11)-(24) respectively, and by adding a new paragraph (10) to read:

“(10)  To designate State property as available for use as collateral for loan guarantees.”.

Section 4.  Amend § 6307A(a), Title 29 of the Delaware Code by adding a new paragraph (4) immediately after paragraph (3) of subsection (a) to read:

“(4) Advise the Director of the Office of Management and Budget of State property suited to use as collateral for loan guarantees and the value of such State property.”.

Section 5.  Amend § 6102, Title 29 of the Delaware Code by adding a new subsection (w) to read:

“(w)(1) A special fund of the State is hereby created by the Office of Management and Budget to be known as the Delaware Film Finance Guarantee Fund (the ‘Fund’).  The Director of the Office of Management and Budget shall deposit into the Fund all moneys directed to be placed into the Fund.

(2) The funds deposited into the Delaware Film Finance Guarantee Fund may be used only to collateralize notes of guarantee in accordance with the Delaware Film Incentive Program under §§ 5074-5079 of this title; to satisfy the obligation created by the notes of guarantee, should the Delaware Film Finance Guarantee Fund be called upon to do so; or to pay for professional contract services and the Facilitator as required by the Film Board.”.

Section 6.  Amend Chapter 50, Title 29 by adding a new Subchapter V-A to read:

“Subchapter V-A.  Delaware Film Initiative Program

§ 5074. Legislative findings; authorization.

The General Assembly finds that expansion of the film industry in the State will result in increased job opportunities for Delaware residents, increase tourism-generated revenue in the State, stimulate spending within the State, and to generally increase State revenue.  In order to encourage the increased availability of financing capital to film ventures, the Film Board is authorized to issue loan guarantees to film projects that qualify for the Delaware Film Incentive Program.

§ 5075. Definitions.

   As used in this subchapter, unless the context otherwise requires:

(1) ‘Feature film project’ or ‘project’ means a project to produce a film made for initial distribution in theaters.

(2)  ‘Major distribution territory’ means a territory with significant market share in the film industry, such as Japan, the United Kingdom, and Germany.

(3)  ‘Major film sales company’ means a company which negotiates and secures contracts with distributors in major distribution territories for feature film projects.

 (4) ‘Completion bond insurance’ means a form of insurance offered by a completion bond company to guarantee that a film producer will complete and deliver the film, based on an agreed script, cast, and budget, to the distributor or distributors, thereby triggering the payment of minimum distribution guarantees to the producer, but received by the bank and/or investor who has financed the guarantee to the producer.

(5)  ‘Above the line’ individual means someone whose contract is negotiated rather than determined by market-based rates.

(6)  ‘Producer’ means a person who participates in one or more of the following: initiating, coordinating, supervising, and controlling matters such as fund-raising, hiring key personnel, and arranging for distributors for the purpose of making a film.

(7)  ‘Production’ means the process of recording a film.

(8) ‘Post-production’ means the process of editing a film into a finished product, ready for showing at theaters.

§ 5076. Eligibility for loan guarantee.

The Board, in consultation with DEDO and various stakeholders, shall establish criteria prescribing the minimum qualifications for businesses whose sole purpose is the making of a feature film project with the support of the State’s guarantee of a loan to their project. 

§ 5077. Qualifications for projects seeking loans under the Program.

(a) Projects may apply to the Film Board for a loan guarantee under the Program, provided that:

1.  the loan will be issued to either a Delaware limited liability company (LLC) or Delaware incorporation, the same entity who must manage and administer all facets of production and post-production;

2.  the loan application does not exceed 30% of the project’s total budget, up to a maximum of $5 million; and

3.  the application is made on such forms and at such time as the Film Board may prescribe.

 (b)  Projects which certify and provide documentation of the criteria listed in subsection (a) of this section and criteria established by the Film Board, may be approved for a loan guarantee by the Film Board, provided that film projects also certify and provide documentation of the following:

(1)  They have at least 2 distribution contracts in major distribution territories through a major film sales company;

(2) The financing provided by a loan guarantee will complete the financing required to meet the budget of the film;

(3)  Completion bond insurance will be issued upon the close of financing for the film; 

(4)  All employees of the project execute Delaware W-2 tax forms;

(5) All individuals ‘above the line’ attached to the project must either be employees of a Delaware corporation, filing W-2s for the income received from the film; independent contractors filing 1099 forms, with withholdings of appropriate Delaware taxes for the income received for work on the Project; or a Delaware corporation or LLC, filing with the State of Delaware for any income received from the film;

(6)  All foreign entities must agree to tax withholdings by the State of Delaware for income received for work performed in Delaware;

(7)  Production and post-production will be provided by a company incorporated in Delaware or organized as an LLC under Delaware law;

(8)  A Delaware resident is listed as a producer; and

(9)  Eighty percent of the project shall be made in Delaware, as defined and determined by the Film Board.

(10) The applicant agrees to have its application entered as public record, including supporting documentation, as defined and determined by the Film Board.

(c) A loan guaranteed through the Program must have the following provisions:

(1)  a minimum 3-year term and maximum 5-year term;

(2)  an interest reserve for each required monthly interest payment for the term of the loan; and

(3)  all available assets pledged as collateral for the loan, and the highest available position the loan relative to other stakeholders, as determined by the Film Board.

 (d) An application seeking a loan guarantee under the provisions of this subchapter may be approved or denied as follows:

(1)  An application will be approved, a request for more information will be made, or the application will be denied by the Film Board after evaluating the application based on established criteria.  An applicant may not receive a loan guarantee under the Program unless and until the application has been approved by five (5) members of the Film Board.

(2)  The Film Board shall have broad discretion, based upon the consideration of factors including the verification of the project’s satisfaction of the requirements of the Delaware Film Incentive Program, the likelihood of the project’s repayment of the loan, and the projects anticipated impacts on the Delaware economy.

§ 5078. Assignment of the full faith and credit of the state, and State property as collateral for loan guarantees.

(a) The full faith and credit of the State is hereby pledged for $15 million to provide for notes of guarantee under this program. Within 90 days of enactment, the Office of Management and Budget shall designate $15 million of State property as collateral for this pledge, until such time as it is replaced by state revenue generated from this program or an appropriation from the General Fund.  The property must be unencumbered by federal or State regulations prohibiting the property’s use as collateral for loan guarantees.  Municipal structures, schools, property of historical significance, and facilities used by first responders may not be so designated.

§ 5079. Action on Notes of Guarantee.

(a)  Should the loan to the film project be partially or fully unsatisfied at the maturation of the loan and the ‘note of guarantee’ be called due by the lending institution, the note of guarantee shall be satisfied by funds from either the state’s General Fund or the Delaware Film Finance Guarantee Fund.  State property designated as collateral shall be replaced by cash and it is anticipated that the indebtedness created by note of guarantee will be satisfied by state revenue generated by the Delaware Film Incentive Program.

§ 5079A. Revocation of prior approval and loan guarantee.

(a)  The Film Board may, after notice and an opportunity for a hearing, revoke a loan guarantee under this Program if the Film Board finds that:

(1) any material representation made by the business or by any person on behalf of the business in connection with an application under this subchapter was false when made; or

(2) the application violates any conditions detailed in this subchapter. 

(b)  If prior approval is revoked, the loan guarantee is immediately null and void.

(c)  Any application or other document required to be filed with the Board is subject to penalties of perjury.

(d) Notwithstanding § 581 of Title 30, the Director of Revenue may disclose tax return information of an applicant to the Film Board if such information is necessary or desirable for loan authorization under this subchapter.  The Film Board may not disclose information received from the Director of Revenue except to contractors or employees of the Film Board, and then, only to the extent necessary for the Film Board to carry out the duties specified in § 5097 of this title.”.

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