Study: California Production Incentives a Success

Body of Proof - TV Still: Episode Broken Homes - 2011

The program has generated more than 20,000 jobs and $200 million in tax revenues, as well as lured productions like "Body of Proof" back to the state.

The California Film and Television Tax Credit Program, first passed in 2009, has generated $3.8 billion in economic activity statewide and created more than 20,000 jobs and over $200 million in tax revenues in two years, according to a study released Tuesday by the Los Angeles Economic Development Corporation.

The program was created to stem the tide of runaway production that has accelerated over the past decade, shrinking the state's share of film and TV production activity.

"With this report we have unquestionable proof of the success of this incentive in terms of fiscal impact," says L.A. City Council member Paul Krekoian, who as a member of the state legislature was one of the original architects of the program.

"The report demonstrates for every dollar we are spending on the incentives were generating more than a dollar of state and local tax incentives," adds Krekorian. "So this is a program that is not only cost neutral, but actually generates revenue. It provides an additional $20 million in economic impact and supports over 20,000 jobs that are impacted."

The report was released at a press conference on the set of the TV show Body of Proof at the Disney studio in Burbank. That was chosen because the show actually returned to California after being shot outside the state, specifically because of the incentives offered. The program does not include any network TV series except those that are lured back to the state.

That speaks to how the incentives were first passed. It came about after years of efforts when the TV show Ugly Betty moved to New York because of their incentive program. That finally got the legislature to act, and the bill was signed into law by then Governor Arnold Schwarzenegger, who as a former actor clearly understood the need for incentives.

California Assemblyman Felipe Fuentes currently is leading the effort to extend the current program which expires in less than two years for five more years on the same terms. He says it is important to provide a level of comfort to the industry that the program will not go away and avoid any disruption. "That certainty is tremendously important," Fuentes told The Hollywood Reporter.

Although California provides $100 million a year in incentives and those can roll into future years if needed, that money is all spent very quickly each year. As a result, Fuentes says the industry has asked for an even bigger program, but that just isn't possible right now.

"Given the difficult economic times California finds itself in were hoping to continue what has worked," says Fuentes, "and ideally garner additional information and support for that expansion option at a later date. Right now we just want to keep what we've got."

California's current Governor Jerry Brown has neither endorsed the incentive extension nor said he would veto it. Brown has been under a lot of pressure to make cuts in the state budget due to economic conditions. Fuentes is hopeful that the state budget will get passed as soon as this week, and that will set the stage to do longer term planning which will include the incentive program.

"What we should be asking ourselves as Californians is not just if this program is good but what more do we need to do to remain competitive. The competition is fierce. New York would not give up its premiere industry, which is Wall Street, and California cannot give up its premiere industry which is film and television."

If anything, says Fuentes, the report doesn't include all of the impact of movies and TV. For instance, tourism is a huge industry that depends on Hollywood remaining the capital of the show business world, and none of that economic impact is even covered in the study.



This study "illustrates why 40 states around the country compete for film and television productions: because they are a proven job creator and economic stimulus," said Senator Chris Dodd, Chairman and CEO of the Motion Picture Association of America. "The motion picture and television industry is overwhelmingly comprised of middle-class workers earning a living wage, and since it was enacted in 2009, California's production tax incentive has been an important driver in a challenging economy."

"There's no question that the California production incentive makes a real and measurable impact on the lives of many thousands of people - both those who work directly on film and television productions and those for whom the economic impact of such productions reverberates around the state economy," said Paris Barclay, director and first vice president of the Directors Guild of America.

"This report shows the wisdom of the legislature when the Film and Television Tax Credit was created in. This program, as shown in the report, shows that California has added thousands of jobs, and has created additional revenue through the Production Tax Credit program," said Thom Davis, Business Manager for I.A.T.S.E. Local 80. "

Here are some other highlights of the study:
•    Production spending in California of productions approved for incentives between 2009 and 2011 is $1.53 billion directly and $3.8 billion in terms of total economic impact.
•    That economic activity supports 20,040 jobs with labor income of $1.4 billion.
•    Production oriented tax revenues, including income taxes, property taxes, social insurance taxes, sales taxes and permits and fees are estimated to be $201 million.
•    Almost 92% of all goods and services purchases by the industry are sourced within the state. The value of these purchases in 2009 total more than $15.4 billion, and includes everything from employment of independent artists, writers and performers to banking, insurance and software services.
•    Under the program 34 feature films have been approved which spent $758.7 million; 22-indie feature films have been approved which spent $67.8 million; six new TV series have been approved for incentives which have spent $96.9 million.
•    In terms of the budget range of approved projects, the largest number fall between $20 million and $40 million which represent just over 42% of the total.
•    For every $1 million in qualifying expenditures by production, it generates $3.9 million in economic output and supports 21 jobs with labor income of $1.4 million. Each $1 million of qualifying expenditures results in $207,100 in state and local taxes.