Industry gets a break in California budget
Program to fight runaway production set to begin in 2011California finally is offering production incentives.
That surprising reality had industry and economic execs pinching themselves Thursday.
"I'm sort of floored that it did happen," said Jack Kyser, chief economist with the Los Angeles Economic Development Corp.
On Tuesday, an LAEDC forecast said runaway film and TV production would undermine industry employment during the next several years, largely because of the proliferation of film and TV tax incentives among most other states. Then came the unexpected good news out of Sacramento.
Set to take effect in 2011, a five-year program to fight runaway production was included in a new state budget passed in the early morning hours after an all-night emergency session of the Legislature. The program will provide up to $100 million per year in tax incentives for qualifying film and TV productions.
"This is going to help," Kyser said.
Gov. Arnold Schwarzenegger was expected to sign the budget today. The production incentives program, to be regulated through the California Film Commission, feature three key provisions:
-- Studio film projects shooting for less than $75 million can apply for a tax credit amounting to 20% of all "qualifying production expenses" -- essentially below-the-line costs.
-- Independent film productions of $1 million-$10 million and all TV series relocating to California will qualify for a 25% tax credit.
-- Productions must locate in the state for 75% of shooting days or spend three-fourths of a project's budget in California.
"Hopefully, this will increase our business and increase business in the surrounding areas through more productions staying in town," Culver Studios CEO James Cella said. "But this also helps florists in Culver City, the local dry cleaners, the whole economy, as the people who work on these productions spend their money locally."
Indeed, state estimates suggest that every $100 spent on production in California returns about $285 in economic output.
The state projects the program should be cost-neutral because of benefits in business retention. The LAEDC's Kyser said he believes it will actually add to state revenue.
An Ernst & Young study conducted on the effect of New York's film incentives -- passed in 2004 -- estimated that the Empire State reaps $1.09 in state revenue for each $1 in tax credits provided under the program.
Meantime, the California program isn't as big as those offered by some other states. But neither is it too small to benefit the film and TV industry, Kyser said.
"It's probably somewhere in the middle," the economist said. "It's not lavish like the ones Michigan and some other states have. But it is going to help people sleep in their own beds, because productions won't have to leave town."
Said Cella: "California won't be cheaper than New Mexico, but it will be competitive. So it will become a quality of life issue as to whether films and shows stay in California -- there will be a convenience factor."
Schwarzenegger helped guide the incentives through the legislature. Earlier in his tenure, the former actor had avoided such hands-on involvement in the fear that foes of tax credits would claim he was simply helping out Hollywood friends.
At a news conference Thursday, he said the production tax credits represented one of his "favorites" among an array of business-stimulus measures included in the state budget.
"We have incentives for movies and for TV productions, so that we can keep them in California," he said.
"Obviously this is something that's important to the governor," state Finance Department spokesman H.D. Palmer said.
The Los Angeles City Council has been talking about possible film incentives for locally based productions, but it's unclear what the prospects are for passage. If the city does enact local incentives, Fox, Paramount and indies likely would be the chief beneficiaries.
The DGA, SAG and AFTRA issued a joint statement lauding the new state incentives program.
"For the past 10 years, a united entertainment community has been telling state officials that our industry is threatened by runaway film and television production," the labor organizations said. "Film and television productions have been leaving California for tax incentives in other states and countries for years now, and like everybody else, entertainment industry workers are suffering in this economic climate. We applaud the passage of this incentive which will help make California competitive and not only save the jobs that are being lost but generate much needed revenue for the state."