Reporting

August 25, 2014 by Ed Coghlan

California film and TV tax credits heading to Hollywood ending?


Film set in downtown Los Angeles. (Photo Credit: Chris Goldberg/Flickr)

UPDATE Wednesday August 27 - California's film and tax credit program will be more than tripled in size to $330 million thanks to a deal announced by Governor Jerry Brown today. That's down from the $400 million legislators sought in the bill AB1839. But the new deal should come as a relief to advocates as the Governor has been circumspect as to whether or not he'd sign off on the expansion of the program that gives film and TV productions incentives to film in California.

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At a dinner with a four-decade executive in the entertainment industry, I asked him about the expected approval of California legislation to grant $400 million in tax credits to the TV and film industry.

“In a perfect world, we wouldn’t need them,” he said.

And while one shouldn’t ever try to make a living divining what Governor Brown is thinking, our sense is that he might agree. He’s been lukewarm on specific industry tax credits before.

The entertainment industry, which has been perceived statewide as largely a Los Angeles-based industry, will send its production anywhere, literally to all corners of the earth. That's because, as that executive said, they're "in this to make money.”

What’s different about this year’s version of the so-called “Hollywood tax credits” in California is that the lobbying campaign has not been about Hollywood at all. In the past legislators outside of Los Angeles often said these credits were a favor to one region--Hollywood. This year proponents of the tax credits made sure that it stressed the industry’s importance to California’s overall economy.

They have a point. Most California counties have their own film commissioners who work to attract movie, television and commercial production to their respective counties. The jobs that come with them (along with the hotel and restaurant revenue) are valuable.

The legislation would provide filmmakers with a tax credit of up to 25 percent of costs for specific production-related expenses, including set construction and crew salaries. Studios and producers use those credits to offset their state tax obligations. AB 1839 would also raise the amount of credit available from $100 million to $400 million.

“This is absolutely a California jobs issue,” said Ed Duffy, who is business agent for Teamsters Local 399. “I remember back in the late 1990s that San Francisco and Los Angeles were bustling feature and TV production centers.”

About then Canada, armed with its soft dollar to reduce prices, “invaded” Hollywood and began to siphon off production. Europe (especially the UK) and Asia have joined in the invasion.

So have other states. New Mexico, according to Duffy, came after production in 2002 and many others have followed suit. New York is very active in raiding what has been traditional California work, as have Georgia and Louisiana to name just three.

“For a while, drivers and location managers followed the work, meaning they had to leave their families or move their families,” Duffy remembers. “However, as more states built up their infrastructure, those below-the-line jobs didn’t travel as well.”

To give you an idea of what the entertainment folks are telling legislators, here’s how Duffy explains it: “200 jobs are created instantaneously when a production starts in California, not to mention the jobs that small vendors create like food service, florists, lumber yards and prop houses.”

That's why advocates for California film production argue it is, as Duffy says, a “California issue, a real jobs issue.”

A powerful state Senate Democrat agrees. Here’s what Sen. Kevin de León (D-Los Angeles)--soon-to-be the Speaker pro tem--told the LA Times article on the topic.

"To halt that steady outward march of jobs and creativity, California must have a robust, smart, and efficient tax incentive program of our own — a tax incentive program that guarantees job growth and economic expansion, coupled with strong accountability and transparency measures," said de León, chairman of the Senate Appropriations Committee.

Because, after all, this is about entertainment, a group of actors and advocates descended (or depending on your point of view--ascended) into Sacramento last week to make their case for the bill publicly and with a little fanfare. Here’s an account of the event in the Sacramento Bee. 

Recently, at California Forward, we asked Californians who read our blog want they think of tax incentives as drivers of economic activity in general, and they were divided on whether or not they're a good idea. Some of the commentary on our Facebook page was like the debate itself—passionate and pointed.

The film credit legislation looks like it’s going to pass. Whether the Governor will sign it, is of course up to the Governor.

As they say in the TV business, “stay tuned.”


RELATED VIDEO: Can California lure film jobs back?

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