In February 2011, Traverse City native David Kenneth was on the brink of realizing a dream he'd had since moving to Los Angeles in 1995: bringing his Hollywood film business – and new jobs along with it – back to his hometown.

I.E. Effects, a postproduction house specializing in visual effects, opened a Traverse City office at 315 N. Division that spring. The company hired more than a dozen artists and staff to begin working on a number of high-profile Hollywood projects, including The Green Lantern and Harry Potter and the Deathly Hallows: Part 2. In spite of looming drastic changes to the state's film incentive program – an initially uncapped amount of rebates that encouraged Kenneth to open the Traverse City office – the owner tells The Ticker he hoped to have 50 employees by the end of 2011, 100 by the end of 2012 and “250-plus within five years.”

Today, the I.E. Effects office on Division sits empty. The artists were let go over a year ago, told they'd be contacted if more work came in. Clover Roy, director of regional operations, sat alone in the office for the past several months, lobbying the state to fully restore or at least improve its film incentives package, which dropped to a $25 million cap in October 2011. Last month, with funds running low, she boxed up the company's equipment and placed it into storage after receiving an eviction notice.

So how did this once-thriving company find itself on the street in less than two years?

“It was a perfect storm of issues,” says Roy, who is now seeking other employment. “All of the projects we were counting on to keep us busy evaporated when the film incentives changed. There was a clear message sent to the film industry: Michigan can't be trusted anymore. Unfortunately, that meant no one wanted to trust us, either.”

Warner Brothers, the studio behind The Green Lantern and Harry Potter, farmed its postproduction work to I.E. Effects based on the understanding it would quality for Michigan film rebates. By the time Warner Brothers applied for the rebates, the Michigan Film Office notified the studio that any work which had already been completed was disqualified for incentives. The communication mix-up – which Kenneth says his company wasn't privy to – incensed the studio, and cost I.E. Effects a major client.

Similar confusion on rebates with another important client, Motorola, “left us with more mud on our faces,” says Kenneth. “Companies don't care if it's not your fault these incentives didn't materialize. They just know you didn't deliver.”

The film incentive cuts in Michigan not only impacted I.E. Effects' Traverse City office, but the company as a whole.

“My professional reputation...was basically shattered,” Kenneth says. “I put myself on the line waving a Michigan banner in Los Angeles, and I feel like my home state slammed the door in my face. It's heartbreaking, because my dream was to create jobs in TC and keep young talent there. To have that rug pulled out from under me is a hard pill to swallow,” he said, adding that he believes Michigan had the chance to become the “postproduction department of Hollywood” – and that the state “dropped the ball on the one-yard line.”

Kenneth, who still sees opportunities for his company to grow in sectors like overseas markets, theme parks and independent films, is optimistic I.E. Effects will eventually rebuild. He says he'd love to one day open another office in Traverse City – but that his experience here has left him weary.

“I've lost confidence in my home state,” he says simply. “I'm going to need reassurance, as will many others, that this is a place I can be successful in before I can return again.”

What is the current state of the Michigan film incentive program? Where do we compare with other states now in terms of rebates? Can film become a thriving industry in Michigan, or have we lost the trust of Hollywood? We spoke with Michigan Film Office Communications Advisor Michelle Begnoche to get her perspective on these and other questions on the Michigan film business. Check out our Q&A with her here.