California's Film and TV Incentives Generated $1.9 Billion in Spending in Last Three Years

Downtown Los Angeles Skyline Silhouette - H 2014
AP Images

Downtown Los Angeles Skyline Silhouette - H 2014

That number could be much bigger if big-budget movies and visual effects were allowed to participate in the program, according to the L.A. County Economic Development Corp.

California's tax incentives program has added roughly $4.3 billion to the economy overall in the last three years. According to a Thursday report from Los Angeles County Economic Development Corp., 109 film and TV projects that benefited from the program also generated direct spending of $1.9 billion.

But that economic benefit could have been much greater if the California incentive law included big-budget live-action feature films. "The loss of this spending in California cost the state 47,600 jobs (direct, indirect and induced) during the last fiscal year and $410 million in tax revenues to state and local governments," estimates the report.

Read the Complete Report Here

There is a bill pending in the California Assembly that for the first time would allow movies with budgets over $75 million and network TV series to be eligible for tax incentives, which bring many of the blockbuster sized projects and series to the state. That bill presently does not have an amount attached.

Backers hope to significantly increase the annual funding from the current $100 million to $400 million or more (about what New York State spends), but that will depend on the size of the state's surplus and getting enough members of the legislature and the governor to agree to an increase.

The report, which was commissioned by the Southern California Association of Governments, says that in total 113 projects received tax-credit allocations in the first three years after the program was stated in 2009, but of that 109 have been finished and received final tax credit certificates.

Those projects have created 22,300 jobs, according to the report, and income for labor of $1.6 billion. The total state and local tax revenue over the first three years is estimated at $247.7 million. The report lays out why movie and TV projects have gone elsewhere -- often because of financial incentives offered by more than 40 states and a number of foreign countries, most notably Canada and the United Kingdom.

"The economic ramification of the loss of production activity in California is significant," says the report, "as supporting industries from lighting to prop shops to visual effects houses to costumers are finding fewer opportunities, and closing up shop or relocating to other states."

Through Dec. 31, 2013, 265 projects in total have been granted tax credits worth $587 million, which is almost 98 percent of the funding the state has allocated through the end of the 2014-2015 fiscal year. That is allowed because the state can roll forward available credits. As a result, if the current law is not renewed, the funding for the state incentive program will run out a year before the program ends in June 2017.

In terms of the types of projects that have been granted tax incentives, there have been 61 feature films, 89 indie feature films, five movies of the week, 56 indie movies of the week, 45 television shows, and seven TV series that have relocated from other places, along with one indie mini-series. 

Together they have used $587 million of the available tax credits and spent $4.7 billion in the state. The greatest return on investment for funded projects are TV series. The second highest is indie feature films, followed by non-indie feature films.

The report lays out "lost opportunities," most notably the value of big-budget feature films. The report estimates if the five biggest budgeted movies had been made in California, they would have resulted in $2.3 billion in economic activity, 11,550 jobs with labor income of $857 million and tax revenues of over $100 million.

One of the biggest of the lost opportunities, according to the report, is California's failure to provide incentives to bring in visual effects work on movies and TV shows, or to hold on to what they already had.

"California is one of only a handful of locations that does not have subsidy programs specifically targeting visual effects," says the report. "As a result, even California-based companies are opening offices in Canada, the United Kingdom and in Asia to qualify for tax incentives offered in those locations."

The study by the LAEDC Economic and Policy Analysis Group was authored by Christine Cooper, vp, economic and policy analysis; Shannon Sedgwick, associate economist; and Somjita Mitra.