Spitzer's exit threatens his tax-credit plan

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UPDATED 1:25 p.m. PST, Mar. 13

NEW YORK -- The film business has seen its share of prostitution scandals, but few could've imagined that one involving a New York politico might impact the landscape of film and TV production.

Gov. Eliot Spitzer resigned Wednesday because of his connection to a call girl investigation. Now it will be up to Lt. Gov. David Paterson -- who takes over the governor's job Monday -- to step in and bridge the divide in the state Legislature over Spitzer's aggressive expansion of film and TV production tax credits.

And despite Paterson's new status as the Democrat heading the state, the scandal that ushered him in likely will benefit the Republicans.

By the end of Wednesday, both the Republican-led state Senate and Democratic-led Assembly had unveiled proposed budgets with their partisan versions of the legislation Spitzer spearheaded. The outgoing governor proposed an extension of the current 10% state tax credit on below-the-line production costs, upping it to 15% of all production costs (including above-the-line costs for actors, producers and directors). He also pushed for an incremental bump in the benefit cap from $60 million to $75 million by 2011.

The tax credits, initiated in 2004, have bipartisan support, but the Senate and Assembly have much different takes -- and price tags -- on the bill. The Assembly agrees with Spitzer's caps but wants an increase to 30% of productions cost with no above-the-line credit, taking about $100 million from the budget. The Senate agrees with Spitzer's overall 15% plan but wants to "blow the cap out" -- as proponent Sen. Martin Golden puts it -- at an estimated $300 million budget cost.

"There'll be a 'Gerald Ford lull' " for the new governor, suspects one Republican lawmaker, alluding to the succeeding president's post-Nixon impeachment tenure where Democratic legislation generally passed easily. "He'll be concentrating on healing, playing peacemaker and just trying to get things through."

Another factor giving Democrats less leverage, according to several involved, is the friendly relationship between Paterson and Senate leader Joseph Bruno, a fierce Spitzer opponent.

Democratic Assemblyman and tax credit bill proponent Joseph Lentol said the emphasis on below-the-line credits is meant to help build New York's film industry infrastructure by supporting and establishing ongoing production jobs. "It's better to give tax relief for the hiring of people who need jobs, as opposed to offering tax relief in relation to the employment of marquee actors and directors," said Derek Murphy, a spokesman for Democratic Assemblyman Joseph Morelle, who's also behind the tax credits

Republican Golden argues that the above-the-line breaks will bring in more production in the longer term and that the percentages are similar and a wash: about 50% for big-budget films and about 60%-80% for below-the-line costs on low-budget films. The Senate plan, however, does seem to place a greater emphasis on pulling in large studio productions, given their more expensive above-the-line talent than low-budget films.

Strong supporters of the tax credits such as Steiner Studios' Doug Steiner and Silvercup Studios' Stuart Match Suna said they don't expect any delays -- a belief shared by the bills' legislative leaders Golden, Lentol and Morelle -- though the state government typically misses its April 1 budget deadline even without a huge scandal on its hands.

The legislation is a response to fierce competition created by Connecticut's recent 30% above- and below-the-line tax credit. The state has siphoned away numerous film shoots, including the New York-based "Righteous Kill," starring longtime Gothamites Robert De Niro and Al Pacino. Other states taking New York business include Massachusetts, Pennsylvania and Rhode Island.

The ultimate impact of either version of the bill might be most harshly felt in New York City, the only city in the nation with production tax credits. The city tacked a 5% below-the-line tax credit on the initial legislation and this percentage will remain added to whatever new legislation the state government passes in the future, but there is concern that the resulting big boom in productions will eat through the budget cap that Spitzer and the Assembly want."

But then again, as with the last time, legislators can always go back to the budget well with another earlier-than-scheduled extension.
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