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Who better to cast as a last-action hero?
Some Sacramento Democrats hope to finally create meaty incentives for keeping film and TV productions in California, despite Gov. Arnold Schwarzenegger’s hesitancy to strong-arm recalcitrance until the legislative process has terminated. But the actor-turned-pol is considered likely to sign any such legislation reaching his desk, and two bills are circulating.
A sense of urgency on the issue runs high among those seeking to stanch the flow of runaway productions. Even as the Los Angeles area fights production flight to other locales, an amazing 32 other states have passed substantial tax credits in their own schemes to lure film and TV projects away from California.
“Incentives absolutely could be helpful,” said Ed Brown, business agent for IATSE Local 44, which represents craft workers in studio prop operations. “We’re really being affected by a loss of jobs that traditionally have been located here in Southern California but which are being exported to other states. Our members are being forced to leave their families — sometimes for months on end — to chase jobs being shifted to other states.”
Schwarzenegger lamented the Legislature’s failure to pass a film-incentives measure in its most recent session, but the governor hasn’t stipulated what sort of new measure he would be willing to back. He also has cited a need to balance Hollywood interests with concerns of his Republican base.
“It may not be the best idea to have him leading the charge, being as he’s from the entertainment industry,” said Los Angeles Democrat Karen Bass, Assembly majority leader and lead author of AB 1696, which would provide production grants to state-based films and commercials. “But I don’t view his not leading the charge as meaning he doesn’t support us.”
The Assembly on June 7 approved the bill 51-17 and forwarded it to the Senate, where a separate piece of incentives legislation, SB 740, also is circulating. The bills are expected to be reconciled in conference committee into a single piece of legislation.
In the absence of a funding rider, the still-unfunded AB 1696 would require Schwarzenegger to include a set-aside provision in his next state budget to pay for its grants program, which would be administered by the state film commission. That would give him control of the bill’s cost impact, but it also would force the governor to quantify his commitment to incentives, even as any number of other constituencies vie for his limited largesse.
Assemblyman Paul Krekorian, a Burbank Democrat who led floor debate on AB 1696, agreed with Bass’ assessment that the bill might morph into some other form of incentives program as it navigates the Senate.
“I want to look at any way that we can make California more cost-competitve with the other states who have already enacted incentives,” Krekorian said. “I’m not wed to any particular kind of incentive. I want to make sure that California is in the game.”
As head of the Assembly’s recently formed Select Committee on Preservation of California’s Entertainment Industry, Krekorian expects to hold hearings in the fall on an array of Hollywood-oriented issues, including runaway production.
“We’ll be conducting hearings on a wide variety of ways that California can be a better partner of the entertainment industry and ways in which we can help keep these important jobs here,” he said.
Some believe the only way AB 1696 will get to the governor would be if SB 740, featuring substantial tax credits for state-based productions, fails to get out of the Senate. But many also suggest that leadership in the Senate — which, like the Assembly, is currently controlled by Democrats — might find a carefully constructed Hollywood tax-credit bill more palatable than has proven true in previous legislative sessions.
SB 740 provides tax credits for California-based film projects budgeted at up to $75 million, with the tax credits tied to productions’ likely contributions to state income- and sales-tax coffers. TV shows and commercials shoots also would qualify for credits.
For independent features and projects relocating from out-of-state locales, credits would be boosted to 125% of productions’ projected tax contributions. Currently, the only assistance provided to California-based productions comes in the form of sales tax waivers for certain services and for the purchase of postproduction equipment.
Sen. Ronald Calderon, D-Montebello, author of SB 740, also considers his bill a work-in-progress. But he expects the reconciling of the Assembly and Senate bills to preserve the concept of tax credits based on projected tax contributions.
“The distinction between this bill and others we have attempted to pass in the past is that this is based on taxes already (projected to be) paid in by the movie industry,” Calderon said. “We have a different twist on it this year, and it’s going to be received a lot better.”
The program would hardly be cost-neutral, but its impact on the state budget would be less than might be true for other approaches, the senator suggested.
“It’s not a whole lot of money that we’re going to be offering as a tax credit, but it will be enough to keep productions in California, and that’s what we’re after,” Calderon said.
Specific cost projections will be worked up before any bill is forwarded to the governor. Calderon predicted that Schwarzenegger will be delivered a tax-credits bill to consider by mid-September, despite any legislative interruption caused by the monthlong summer hiatus starting July 20.
Schwarzenegger supports film incentives in concept but will decline comment on individual bills until passage by both legislative branches and final cost analysis, a spokesman said.
“Above and beyond where it is in the legislative process, there is the question of what the price tag will be,” said H.D. Palmer, deputy director for the governor’s department of finance.
Schwarzenegger’s personal commitment to fighting runaway production should be beyond question, Palmer added, ever since he accepted a chop to his usual talent fee to keep costs down on “Terminator 3: Rise of the Machines” and prevent the production from relocating in Canada.
As a second-term governor, Schwarzenegger can wield more behind-the-scenes influence on film incentives than was the case during the doomed fight for AB 777 last session, Bass said.
“In the world of politics, the landscape from last year can change dramatically,” she said. “We are in an entirely different political environment this year, and I think we absolutely can get something done.”
Some would say it’s about time. IATSE’s Brown testified before an Assembly committee on arts and entertainment in March about runaway production and the need for state production incentives .
“I told them other states are aggressively pursuing our tax dollars by going after our productions,” he said. “In effect, they’re stealing our money.”
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