Nova Scotia Animation, the bullet dodged: Mark Cappello’s summary of the events that nearly killed an industry

Last updated on December 17, 2010

(Or, what may be the most important news story of the year)

To say it’s been a hell of a year for our colleagues in Nova Scotia would be an understatement.  While the rest of our community has been pulling itself out of an industry-wide downturn, the Nova Scotia animation industry was all but decimated by a re-interpretation of existing tax credit legislation that saw their credit essentially cut in half.  Contracts went elsewhere, and so did the talent.  Where once there were approximately 800 people working in animation in the province, recent counts put that number close to 75.  With the new year approaching, things looked grim, but a surprising announcement came e just a few weeks ago, and with it, hope for a renewed and healthy animation sector.  Friend of the site, occasional contributor, and Nova Scotia animation mainstay, Mark Cappello gives us the story of what was almost the end of an industry.

I promised Mike I would write a follow up letter to the whole year-long fracas that was The Nova Scotia animation industry vs. revised tax credit legislation. I know a dissertation on the ins and outs of our provincial drama probably doesn’t sound that exciting but I believe there is a lot of information worth sharing that applies to our industry in general and tax credit reality specifically.

In total opposition to my nature I will try to keep this short, I will keep an eye on the comments section to answer any further questions or clarify any details I may miss, for the most part I will just outline a blow by blow timeline of what happened and how things went down.

Our drama began last August, when the NS provincial finance department decided to reinterpret our provincial tax credit rules. Historically this poorly worded legislation was interpreted to allow for a maximum usage of the full credit towards labour expenditures, this interpretation was used for a full decade on all of the animated projects that wound their way through the province from 1999-2009. To be clear, the finance department’s new interpretation was within the bounds of reading the ‘poorly worded’ legislation and no NEW legislation was added, producers were just informed that there was a new interpretation that was to be followed.

This new interpretation essentially created a ‘cap issue’ where any animated production would inevitably hit a production cap before it could get close to the full labour incentive it used to enjoy. Traditional live action film producers did not really feel the impact of this decision in the same way as animated producers, most live action productions are not as labour intensive as animated productions.

The impact of this reinterpretation was first felt by Copernicus Studios as they were finishing their final paperwork on one of their productions. The Finance Department informed them that the tax credit they were expecting to receive was not in line with the new interpretation. Suffice it say the difference was not inconsequential and Copernicus had started their production long before the reinterpretation came into effect leading the ownership of Copernicus to dispute the reinterpretation and threaten significant action against the Finance Department. The province saw reason and allowed Copernicus’ project to be grandfathered in, but it was clear to Copernicus exactly what effect this reinterpretation would have on our local industry on any upcoming projects.

With the full impact of the reinterpretation now understood, and the region still suffering from the effects of the recession, Copernicus took the responsibility to contact any and all remaining animation producers in the region and attempt to organize a group meeting. This first meeting took place in February of 2010 and it gathered a relatively shell shocked group, Collideascope had closed as had Fatkat in New Brunswick and the recession was impacting production levels all across the country. Our local studios were losing talent to some Western regions that were ramping up, and it was clear to some of the people at the table that if there was to be an upswing in production in our region we would need to at least make the region competitive with the other regions in Canada, in short we needed to address the reinterpretation which essentially cut our tax credit to around HALF of what BC and Ontario offered at the same time. HALF.

Copernicus suggested the creation of DANS, the Digital Animators of Nova Scotia, and everyone assembled agreed to rally under that unified banner. Paul Rigg, of Copernicus, had chaired the meeting and it was agreed that he would be our first spokesperson. Our first order of business was to get an information campaign out to our various provincial MLAs (Members of the Legislative Assembly). This required the creation of some consistent documents that outlined the actual impact to our industry because of the reinterpretation, with an appeal for the loss of jobs and revenue to the province. Now, it’s important to note that Nova Scotia is regarded as a ‘have not’ province that regularly suffers seeing it’s youth and talent move away to larger centers in order to ply their trade. Animation is the type of industry that is technological, not resource based (like fishing or logging), appeals to young talented creatives, and can lead to decent paying jobs and long contracts. Animation is the type of industry that should hit all the right buttons in a province with youth retention issues and a craving for fresh new tech industries. We frankly thought we had a pretty clear case to present to the powers that be.

We began our information campaign by writing letters to our MLAs and most of us followed that up with face to face meetings to discuss the issues personally. Most MLAs were certainly interested in what appears to be a pretty clear issue, while others, notably Pam Birdsall and Lenore Zann, took it upon themselves to champion the issue as often and as hard as they could. We tried to leverage these MLA meetings into meetings with various ministers like Education and Finance, and we had some wonderful success with Marilyn More, Nova Scotia’s education minister. Marilyn More saw the connection between a strong industry and opportunity for graduates of Nova Scotia’s art colleges. In fact, the province of Nova Scotia was supporting and heavily subsidizing various animation college programs, an obviously fruitless task if there is no local industry to support graduates, you are essentially subsidizing other province’s industries.

Oddly enough, we had little to no support from the traditional live action film industry groups, they simply saw this as ‘not their problem’ and they wanted to keep their head down politically. I sincerely hope that if our roles were ever reversed we would act differently.

All of this political campaigning culminated in a meeting with representatives from the Finance Ministry, the Minister of Economic and Rural Development Percy Paris, and representatives from his office as well as a representative of Film Nova Scotia. This meeting took place in August, ironically one day removed from the anniversary of the reinterpretation. Yes, it really did take that long to get our message and our concerns heard throughout the government to warrant a meeting to finally allow us to present our case to people who may actually make a change.

This 6-7 month timespan was not spent idle, we actively campaigned and hassled our MLAs, we tried to get the ear of the Finance Minister, and although he was scheduled to attend our big meeting, he backed out the day before. The meeting went well, we had large charts and the Film Nova Scotia representative was there to confirm our numbers and our concerns to the government officials, which she did. We left feeling like the meeting was a ‘mission accomplished’ and we believed that it would only be a matter of time before they would alter the reinterpretation and allow us to be competitive with other regions in Canada again.

A month passed. A long month, a month where more talent left the province, where more opportunities to land projects came and went to regions with better tax credits. Ironically Nova Scotia was set to celebrate it’s film and television industry with the annual Atlantic Film Festival, media interest in the industry was high, and because of that DANS was approached to do a CBC radio interview to discuss the issues facing the animation industry. This radio interview was soon followed by a lengthy piece in the Chronicle Herald (posted here on C.A.R.) which itself was followed by a second Herald article that was essentially a government response/rebuttal which saw one government organization in Film Nova Scotia admit that the animation industry faced a huge problem, while in the same article another government representative, the Finance Minister Graham Steele, suggests contradictorily that this is an isolated incident affecting only one production. Without a doubt, and with little preparation, DANS found itself unwillingly managing a media campaign that was starting to generate some real public interest and some ire from the government. The capper was an article written in All Nova Scotia, the article outlined our plight but what was most illuminating was the various government responses or comments that All Nova Scotia was able to get. These comments demonstrated some actual ignorance to the issue at hand (despite our supposedly successful education meeting) as well as some anger directed specifically at Paul Rigg from the Finance Minister. The Finance Minister blamed Paul for the issue, and cited him and his pressure as the single worst experience of his term. Imagine that, a provincial Finance Minister that sat while Nova Scotia lost the bulk of it’s potential offshore oil revenue pointing to a lone individual in a dying and largely insignificant industry as the source of his greatest pain… reminiscent of the Princess and the Pea.

The government expressed it’s displeasure at DANS for going public in a variety of ways. At this point DANS decided to stop all media contact, and Paul even reached out personally to the Finance Minister and writes him a letter with a plea to get together in person to discuss the issue. As far as I am aware this request was ignored, and we were seeing the middle of October looming, and we felt that there was little to no chance of this turning in our favour. Our inside contacts in the government were telling us that the Minister of Finance was angry, and that he’s not even hearing the issue in any capacity, we attempted to reboot our MLAs and try to keep the issue in the forefront, but if the people responsible for altering the legislation were not even listening anymore we were essentially dead in the water.

Then, in late October and early November a number of circumstances occur which gave us a glimmer of hope. First, the Deputy Minister of Finance leaves her post, this individual has a long rumoured history of opposing tax credit style industry assistance and has long been seen as the biggest single opposition to the industry in the Finance Department. Deputy Ministers are not elected, so this departure of an industry foe is critical as this individual would have shaped policy for years, including the reinterpretation in question. At this Point Film Nova Scotia is pushing very hard on our behalf knowing that any decision in altering the tax credit cannot wait until the new year as that choice would cost a few projects that are on the bubble as well as send a message to the remaining artists to leave the province in order to make themselves eligible in other regions before December 31st. Our hardcore MLAs keep pressing the issue and a few related media articles (one on the closure of Power Post, a large local post production facility where they specifically cite the lack of animation production as a key reason for their closure, and a blow job article about the amazing awesomeness of the BC animation industry thanks to tax credits) round out the pressure.

I’m not sure what the final break was, or how it came about, but suffice it to say we were shocked when we received a terse little e-mail from Film Nova Scotia indicating that the cap issue had been resolved. DANS was unaware of any critical meetings taking place, we were completely blindsided by the overwhelmingly good news. A week ago, on December 6th the government officially announced the change and the Premier of the province made the announcement no less.

What does this mean for the future of the Nova Scotia animation industry? It means we are finally competitive financially with the major regions in Canada, and it means we have a lot of work on our hands to rebuild the local industry. The government gave us a big leg up with the rebuilding effort by allowing us to deem talent eligible when they move to the province. This means we can hire talent from any region in Canada without having to wait for them to be eligible or without having to get them here before December 31st of the year prior to production. This will allow us to rebuild the talent infrastructure quickly as there are many artists who didn’t want to leave this beautiful and friendly province. This also allows us to hire a lot of talented graduates from the various schools across the country when they graduate in April, and that talent will be tax credit eligible as soon as they move.

The main thing this experience did for the industry in Nova Scotia is it demonstrated the value of working as a group towards a common goal. DANS has vowed to continue operating and we want to create a community around the idea of improving the industry for all animators in Nova Scotia. Studios that would normally not work together worked together to solve a common issue, this strengthened the region in ways that cannot be easily measured, and our continued commitment to create a community of artists and studios can be a positive legacy derived from what was at times a difficult situation that threatened our local industry. Thanks again to Paul and Juan at Copernicus for leading the charge, and to all the animators in Nova Scotia who mailed their MLAs, thanks again to Pam Birdsall and Lenore Zann for championing our cause, and thanks to Canadian Animation Resources for being a venue for the dissemination of this type of information and the outpouring of support from animators across the country.

~M